Businesses must be where customers are, September 14, 2006, 2D.

Location, location, location.  When choosing where to set up shop, this old adage still holds true.  Because organizational survival depends upon regular and profitable exchanges with consumers, it is critically important that they locate where their consumers are.  Selecting a proper location, as it will be discussed here, is more complex than simply finding a storefront on a busy street.

It is critical that organizations offer their goods and services where consumers want and expect to find them.  A manufacturing business can be located in a relatively remote area as long as its goods are offered in locations where its consumers shop.  Things to consider when choosing a proper location for a manufacturing facility include access to raw materials and a skilled workforce and the ability to quickly and efficiently distribute completed goods to consumers.

Restaurants, retail stores, and other organizations that depend on drop-in customers need to locate in high-traffic areas, like a mall, which are also typically some of the most expensive locations in which to operate a business.  A benefit of a highly visible location is a reduced need to advertise the company’s location to area consumers.  Conversely, organizations that locate away from high-visibility areas need to spend more money on advertising to make consumers aware of their presence.

A company’s facility requirements are as important as its geographic location.  A specialty apparel shop requires different facilities than a factory, a tanning salon, or a veterinary office.   An ideal geographic location might be undesirable if the proper facilities are not available.  Building from scratch or remodeling existing structures might be needed to make a location ideal.

For companies that engage in e-commerce, location is also very important.  Because much e-commerce involves customers ordering products and companies shipping products, ideal physical locations for e-commerce businesses are ones near shipping, delivery, and distribution centers.  The challenge for e-commerce companies is to make consumers on the web aware of their websites and offerings.  Potential customers do not regularly “drive by” and notice sites on the web like they do in a town with bricks-and-mortar businesses.  On the web, it is highly unlikely that a significant stream of interested customers would stumble into a stand-alone company’s e-commerce website without significant effort given to marketing and advertising—as with bricks-and-mortar companies that locate away from high-traffic areas.

The e-commerce equivalent of locating in a shopping mall is to locate on high-traffic websites.  Amazon.com and Ebay are some of the most visited e-commerce sites on the web and both offer businesses opportunities to establish merchant accounts and sell products to the website’s shoppers.  For that opportunity, merchants typically pay fees to establish and maintain their “shops” within the websites and fees on each item sold.  In many cases, the fees paid by companies to establish and maintain e-commerce merchant accounts through high-traffic websites are more advantageous than incurring the costs of establishing and promoting stand-alone e-commerce websites.

Just as the old adage states, proper location is critically important for business success—traditional and e-commerce.

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