Retail Zoning: Overview
Zoning is the standard method of measuring the value of retail premises that is calculated based on distance from the window. Zones may also refer to the general physical location of buildings within communities. All these factors determine the product that can be sold.
overview of retail zoning
- Zoning is the standard method of measuring the value of retail premises. This entails dividing the area into three zones (zone A, B, and C) to a depth of 6.1 meters (20 feet).
- Zone A is the area that is by the window, 20 feet long, and is the most valuable. Zone B is the next 20 feet from zone A, and zone C is any other area left after that.
- Zone B is considered to be half the value per square foot of zone A and zone C, half the value of zone B.
rules and regulations
- According to the Harper review, zoning and various laws can create a buffer that restricts healthy competition, preventing entry of some businesses into a market. However, these laws had the potential to do the opposite.
- Victoria, Australia made a few changes in their regulations by reducing the number of zones from five to two. This opened up business premises to diversity in their activities.
- These regulations do not only define how shops are sold in a vicinity, but also how the buildings are designed and constructed. It defines the dimensions of the individual stores, and indirectly, the kind of businesses in those stores.
- Zoning also refers to physical location divisions such as districts. Each zone has its point of focus such as agricultural, residential, industrial, or commercial. Each of these zones will have restrictions, which need to be adhered to when opening a business. This refers to what can and cannot be sold in that area.
- Below is an overview of the rules and regulations that govern these decisions.
- The first point of concern is the zone in terms of location of the building such as residential or commercial areas, and whether that specific business type is allowed in that zone.
- Secondly, the various business requirements need to be fulfilled such as building codes, permits, and the basic requirements for disability accessibility.
- Signage is dependent on the building, whether it is a historic building or a modern building. The signage requirements or regulations will vary accordingly.
- According to a study done by professors K. Sudhir and Sumon Datta from Yale and Purdue Universities respectively, zoning affects the types of shops that would be available, and may significantly impact diversity and may hinder market entry.
- Retailers may choose to make some adjustments to their stores in order to meet requirements in different locations. One example is Walmart which has six different types of stores. Another example is Nordstrom which opened a branch in New York which was significantly smaller store than their average size.
- Another approach of zoning is divided into three categories: centralized, neighborhood, and outskirts. Centralized zones tend to have a huge variety of products, while the outskirts zones tend to have homogeneity.
2-3 examples describing the implementation process from different countries.
- The Dubai Mall, Dubai
- In the Dubai Mall zoning in retail was implemented
- For instance, the mall had “Fashion Avenue,” a zone dedicated to luxury brands and services that are tailored to the upscale customer, including a separate outside entrance and parking area.
- It also successfully used large-scale zoning that featured culturally-designed settings such as “The Village” and "The Souk."
- CentralWord mall in Bangkok
- As per the zoning done in this retail location, home decor is on the fifth level, technology on the fourth, and fashion apparel on first to third floor, ensuring that customers don’t get lost inside the ever-increasing square footage of the seven-story mall.
- Ibn Battuta Mall in Dubai
- Ibn Battuta Mall in Dubai is home to over 270 shops in Dubai. Retail Zoning here ensures that the shopping xperience remains delightful. The mall, as per the zoning, is divided into four sections such as Family & Convenience, Up-Market Brands & Lifestyles, Entertainment & Leisure and Major Department Stores.
To find out the information as asked for in the request, we started our search looking into sources that included two major stakeholders in the zoning process. One was the sources that included surveyors who looked into whether they did proper zoning. These sources included sources such as RICS or Society of Chartered Surveyors. Another type of source included the beneficiary of retail zoning, which is retail and small business. From these sources, we got details on the overview and the impact of zoning rules and regulations. However, the examples cited were mostly fictitious examples devised to make understanding simple and logic-bound.
For further deep-dive, we also looked into reports published by companies are into property management including retail, such as JLL Newmark Knight Frank, Cushman & Wakefield, Colliers International, and reports on retail properties and asset classes published by reputed consultancies such as McKinsey, PWC, Deloitte et. Some of these sources, such as McKinsey, have details on real-life examples of retail zoning. We have presented these findings.
We also looked into sources that were academic and contained studies on Retail Zoning. These sources included sites such as Academia, Researchgate, Yale University report. However, these sources contained information mostly on the impact of zoning rules and regulations on the operational profitability and sustainability of retail businesses.
We also looked at companies such as DPD which built zoned retail facilities such as The Dubai Mall.
When presenting our two to three case studies, we could not find adequate information. To combat this limitation, we deployed the following three strategies.
In the Middle East region, cities like Dubai and Abu Dhabi big malls acted as the most prominent retail areas. We looked into the zoning implementation procedures of these malls, such as The Dubai Mall or the Ibn Battuta Mall. Although information was partly available on the existing zoning deployments, the studies were not detailed enough. However, since this was the maximum information that could be availed we provided the relevant segments in the findings. The reason behind the unavailability of data, as understood from the research, was that effective zoning in these malls equaled their competitive advantage. Understandably, the businesses were not keen to divulge them entirely.
This included academic reports from Yale or Harper, retail property management cases studies published in JLL Newmark Knight Frank, Cushman & Wakefield, Colliers International. Property and retail businesses related news in local news agencies such as Khaleej Times and consultancy reports on effective retail management by McKinsey, PWC, Deloitte. However, because of the reason mentioned above detail cases of implementation were not publicly available.
BROADENING THE CRITERIA
Upon broadening the criteria, we found examples for India, Thailand, and Australia. However, these were short descriptions of the prevailing zoning and opinions, and not based on any quantifiable metric. However, in the absence of further detailed information, we included these in our findings.