It’s no secret that there is something that every retailer wants more of - customers. Of course, there are specific actions you need to take to secure more business. Some include implementing the right strategies and accurately choosing your products. Besides that though, there is also another action you can take: you can set up shop next to an anchor store.
What is an anchor store [and why do shopping malls need them]?
Before we can explain why you’d benefit from locating your shop next door to an anchor store, we first need to define what it is exactly. As soon as you find out its definition, the benefits should be apparent.
In simple terms, an anchor store is the dominant retail store that you’d find in a shopping mall. Think Checkers, Pick n Pay, or Woolworths. They’re also one of the first few stores that mall management would want to sign on as tenants during the planning stages of a new shopping complex. That’s because besides being big money makers themselves, they act as a magnet to draw in other tenants.
As Diana Simona Damian points out in her thesis, titled The Impact of The Anchor Store on the Performance of a Commercial Centre, there is empirical evidence that shows that rent for anchor stores is significantly discounted to ensure that it’s easier to get their buy-in. This is done to create what she terms “a positive externality for the mall’s retail stores.”
Of course, a shopping mall isn’t limited to only one anchor store. The larger the complex, the more anchor stores you’re likely to find. Even for smaller shopping complexes, it’s advisable to have a few anchor stores since it allows management to spread risk in case something happens.
Just to note, if there are two competing supermarkets, which also act as anchor stores, you’ll likely find them on opposite sides of a mall, if it’s large enough.
That said, shopping malls need anchor stores, not only to survive but to be successful too.
You only need to look at what happens to a mall if they don’t have such a store, or if their anchor store closes down. Large empty spaces in shopping malls can act as deterrents to customers and create uncomfortable shopping experiences. More importantly, if there is a space that shouldn’t be empty, customers could quite easily believe that the mall isn’t doing well and thus stop shopping there.
Why is it good for business to be beside an anchor store?
As we’ve already mentioned, for a shopping mall to be successful, it needs one or more anchor stores. That said, they are not just there for the sake of making more money for shopping malls. Having a supermarket or department store nearby is also good for your business if you’re a small retailer looking to make ends meet.
Even if you’re a medium-sized or large retailer, having such a store next door is massively beneficial. Here’s why:
1. Increased foot traffic
The purpose of having an anchor store in a shopping mall is to draw traffic. We’ve established that. It’s the “attraction” that pulls in shoppers. And, while these shoppers are most likely in the mall to visit this particular store, they’ll walk past your business too.
Let’s use a family-run restaurant as an example to illustrate our point.
Considering your restaurant is independently run and it's hard to gain customer loyalty in this industry where competition is high, you carry very little market presence. However, you’ve decided to open up next to a large, well-known grocery store in your local shopping mall. Every day shoppers visit the grocery store. To get to the store, they walk past your restaurant, and they notice that you’re open every day.
Slowly but surely, more people will see your restaurant, and as they do, some will stop and have a meal. Since you’re next door, they could even view your restaurant as convenient, since they can leave the family there while they shop for groceries. Before you know it, more families will do the same, and you will have customers who visit the mall just to eat at your restaurant.
You can apply the same to any other retail business whether you sell jewelry, electronics, or clothes. As more shoppers notice you’re open, more will walk in and shop at your store, thus leading to increased foot traffic. Also, it’s worth noting that because anchor stores tend to be busy, more shoppers might view your store as more convenient. That also allows you to build customer loyalty.
If you’ve given these shoppers a good experience, they’ll remember to stop at your store the next time they go for their weekly grocery shop.
2. Their customers fit your customer profile
In a previous article, we made a note of the fact that increased foot traffic doesn’t automatically lead to more sales.
That’s why when choosing to position your store next to an anchor store, you must ensure that their customers also fit your customer profile. In short, ask yourself this: would their customers shop at your store too? If the answer is ‘no’, you’d be better off positioning your store elsewhere.
Just to note, answering ‘yes’ shouldn’t mean you can then position yourself next door. A majority of their customers must first shop your store, and consistently so before you can consider your location. Understanding who your customers are and what they want will help you here.
Let’s say your target market is low LSM. The anchor store next door would thus need to meet the needs of that target market first. The same can be said if you’re targeting a specific LSM market. That includes the right pricing and product assortment. That’s precisely why a localized assortment plan is so critical to the success of your store, as is the right pricing strategy.
You’d only need to look at what works and what doesn’t. For example, in a high LSM environment where there is a Woolworths, Wakaberry, which is relatively expensive, would have more success than a fast food restaurant aimed at a low LSM market.
The other benefit of having customers that fit your shopper profile is when the anchor stores either become too busy to shop or when a shopper is in a rush. If they are on their way home and they know that it will be quicker to shop at your store, they’ll do that.
3. You can cut your marketing spend
The fact that anchor stores are usually part of a chain of stores means that they have deep pockets. It also means that they’ll do the majority of the work when it comes to advertising. This is over, and above the work, they do by simply setting up shop in a mall.
The obvious benefactor is your store as well as anyone else in the near vicinity since you don’t have to spend as much money on advertising your stores and products. You might not even need a marketing budget.
You only need to consider the stores around your average supermarket in a shopping mall to see that. For example, there could be a nail salon, a furniture store, and then a few other stores that sell odds and ends. While the supermarket is always busy, every time you go shopping there, you’ll notice that it’s also busy at the nail salon and the furniture store. All they needed to do was set up in the right location.
The bonus in cutting your marketing spend is that you can place the money you’ve saved into other important aspects. That includes deals with your suppliers, staff salaries, and the general upkeep of your store.
Just to note, if you are placed near an anchor store, your rent will most likely be on the higher side. Knowing that, you need to focus on offering the right products for your target market.
Fortunately, there is a solution such as category management that can help you.
With category management, you can implement better merchandising strategies, range the correct products for your region and target market, and create a better overall shopping experience.
Of course, there is an argument that category management software is expensive. From one angle, that’s true. However, that doesn’t take into consideration the outputs or benefits of employing it in-store. When appropriately implemented, the software pays for itself. There are also different packages to fit your specific budget and retail goals.
