What do Dollar General, Harbor Freight, and Planet Fitness have in common?
They’ve built massive growth strategies by opening stores in places most investors overlook—mid-sized cities, rural hubs, and suburban markets just beyond the spotlight. These aren’t backup plans. They’re deliberate plays for long-term profitability in communities where demand is strong, competition is light, and customers are loyal.
For investors and property managers, this decision-making process is a goldmine of insight. Understanding how and why a retailer chooses a location can help you spot strong assets, improve underperforming properties, and create spaces that rising brands compete to get into.
At its core, the relationship between a retailer and a property is like a partnership between a performer and a stage. The store is the star, sure, but the center, the co-tenants, the lighting, and the audience (a.k.a. foot traffic) all determine whether the show is a hit or a flop.
Retailers aren’t moving into secondary and tertiary markets by accident. This shift is largely strategic, driven by a combination of economic pressure, consumer behavior, and the pursuit of long-term growth.
Rents and build-out costs in primary markets have surged over the past decade, impacting even established brands. Additionally, customer acquisition costs in urban areas are increasing as retailers compete in saturated markets.
Secondary and tertiary markets offer advantages for businesses. While they may have lower customer traffic, the return on investment can be higher due to reduced overhead and greater community loyalty. A well-placed store in a smaller market can often outperform a location in a big city with higher rent and thinner profit margins.
Retailers use a variety of factors to evaluate whether a smaller market is right for expansion. Their approach blends hard data with on-the-ground insights to assess both current conditions and future potential.
Retailers are drawn to areas where the population is growing or holding steady. Even small gains in new households can signal opportunity, especially when the community is underserved.
Retailers will look at census data, housing starts, and local economic development plans to determine if a market is growing sustainably. If an area is seeing new home construction or school expansion, those are positive indicators.
In many tertiary markets, the most compelling factor isn’t what’s present—it’s what’s missing. A town with no discount apparel store, no pet supply chain, or no gym presents a wide-open lane for the right concept.
Rather than fighting for market share, retailers can enter these markets and often become the go-to destination for their category.
Example: When a brand like Harbor Freight opens in a tertiary market without another specialty hardware store nearby, they capture nearly all category demand immediately.
Retailers don’t just look at how many people live in an area. They also care about who those people are and how they spend. A smaller market with a major employer, such as a hospital, college, or manufacturing plant, can generate strong and stable foot traffic.
Median income, unemployment rates, and retail spending per household all play a role in the decision. Retailers also evaluate whether spending is concentrated or seasonal, such as in tourist-heavy markets.
When it comes to the nitty-gritty details, a lot of research is involved. Retailers utilize both quantitative data and local intelligence to inform their expansion decisions. Many work with specialized site selection consultants or internal teams that use the following tools:
Retailers also analyze what’s working in comparable cities. If a new Planet Fitness in Monroe, Louisiana, outperforms expectations, that data may help justify expansion into similarly sized markets in Mississippi or Arkansas.
They also rely on local brokers and developers to provide context that doesn’t show up on spreadsheets. Are there zoning hurdles? Is there a major road widening project coming? What do the locals want that they don’t have today? These are the kinds of insights that shape confident expansion plans.
Pro tip for investors: Building relationships with retail brokers, city officials, and business leaders can help you stay one step ahead of where retail is heading next.
Once a market looks promising, the focus shifts to site selection, where real estate owners and developers come into play. Retailers are selective. Here’s what they’re evaluating at the property level:
If customers can’t easily see or reach the store, it’s a no-go. Retailers often prefer properties with frontage on high-traffic roads, multiple access points, and ample signage opportunities. Being tucked away behind another building is like opening a restaurant in an alley: no matter how good the product, no one will find it.
Big-box or essential retailers act as magnets. They pull customers into the center and boost visibility for everyone else. A well-known grocer, for instance, could attract daily shoppers, a big plus for a nearby coffee shop or fitness studio.
A strong anchor tenant (like a supermarket, discount retailer, or gym) increases a property's appeal significantly. These tenants draw consistent traffic, improving the performance of surrounding stores.
Is the center well-maintained? Is parking adequate? Does the space allow for a standard store layout? A retail space that checks these boxes moves up the list quickly.
They also look for flexibility. In smaller markets, store footprints may need to adjust slightly to fit available space. Property owners who offer creative build-out options or allow for additional signage tend to move to the top of the list.
Understanding how retailers choose locations can significantly influence your investment decisions. Properties that meet retailer expectations are often better leased, more resilient during economic shifts, and more likely to attract long-term, stable tenants.
From an investment perspective, this knowledge helps you:
A national brand signing a lease doesn’t just bring rent. It often boosts the profile of the entire center, attracting complementary tenants, driving traffic, and increasing the property's overall value.
Retail site selection may seem like a behind-the-scenes process, but for shopping center investors, it’s front and center. When you understand how and why retailers choose their locations, you can start to evaluate your properties with a sharper lens. You’ll see what retailers see, and that gives you a distinct advantage.
A successful shopping center is more than square footage. It’s a carefully designed environment where businesses thrive, shoppers return, and tenants stay for the long haul. When your property becomes the kind of place where retailers want to be, you’re not just investing in real estate. You’re investing in long-term success.
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