Retail Trade Locations

The questions are from two dimensions Where is the best location to put a new store? Is the location of my present store(s) most effective?

Evaluating an existing store

Local store marketing plan versus local geography What is the trade area? What are my distribution networks? Where are my competitors? Are there any new competitors? Is my store local service or traffic oriented or both What are my forecasting models? Demographic data changing population Traffic count data Drive times to the store

Processes

Simple maps of trade areas 1 mile radius Locate all competitors Evaluate locations of growth in the local markets What more could they do?

Travel distances to all stores including competitors Location of potential special incentive programs - schools etc.

Video Store Chain Case Study

Objective: Create a site evaluation & performance prediction system . Secondary was a direct mailing system Database per store unit

Unit sales Location of competitors 1 mile socioeconomic/demographic data set 2 mile socioeconomic/demographic data set Traffic counts mapped and weighted on the street Distribution of 80 % of total sales Customer locations (latitude/longitude)

Video Stores (cont)

Analysis using multiple regression .. Good old business statistics ?!?!

Do you remember multiple regression?

Predicting one variable using two or more other variables Sales per store

What were they predicting?

Video Stores (cont)

Predictors

Change in households 1985-1990 Population under 15 years old Weighted traffic counts Average household income Visibility of the store Weighted competition The importance of each indicator How correlated the indicators are to each other What factors are the most important in predicting store sales.

What does the regression tell us?

Video Stores (cont)

Direct mail problem

Geocoding of all customers first Computed the distance to each customer Calculated the contribution of the customer to the store Drew a boundary that represented 80% of store sales Thus the primary market area (PMA) was defined Overlay of zip codes to the PMA to define the mailing per store

Branch Location Analysis

Objective to provide dynamic equilibrium for demand and supply of products & services over space There is a geographically uneven demand for products & services .. High demand in one place low in another Can you given an example? Processes

Select new sites and close others Defining merchandise mix Targeted customer groups Analysis of the competition Advertising & distribution

Branch Location Analysis (cont)

Processes (cont)

Catchment or market area definition - primary, secondary & tertiary Travel time analysis

Straight line distance simple circles Travel time distance isochrones

The Order of Goods

Varying demands for products Low to high order continuum Low order low price frequent purchases High order high prices infrequent purchases Pharmacy: Bubble gum to prescription medicine Automobile dealer: Sales to service

The Order of Goods

Low order good trade areas? High order good trade areas? Pharmacy

Low order goods local unplanned purchases? High order goods regional demand planned purchases

General Processes

Customer Market Analysis

Defined by distance customers travel to stores Calculate market penetration Locate untapped markets Assumes you know the location of your customers Create profiles of existing customers Then look for areas with similar profiles

Customer Prospecting

General Processes (cont)

Store Market Analysis

Assumes you do not know where the customers live Store-based trade areas

Simple rings Data driven rings Equal competition areas (Thiessen polygons) Drive time areas along street networks

Store Prospecting

Searching for new sites for your business Define store-based trade areas for a new store

Retail Trade Part 3

Locational questions

Do my customers live, work or play near my site? Which customer segments are driving my business? How far are my customers willing to travel to shop? Is my site well placed to defend or dominate a market? How can we increase trade area traffic? What is the best venue/store mix for a site? Where should we locate a site relative to existing locations?

Retail Trade Part 3

Early tools gravity models and venue attractiveness. Recent techniques add traffic counts, demographics and statistical techniques to the process

Trade Area Types

Rings Customer Penetration polygon Drive-time polygons

Retail Trade Part 3

Simple rings

Defines primary, secondary and tertiary rings Used as an initial screening device Primary ring nearest source of customers Secondary ring .. Residential neighborhoods where customers live Tertiary ring far flung customers A subjective definition of distance based on past experience.

Trade Area Definition

Customer Penetration Polygons

Address geocoding of the customer locations Drawing design lines not completely necessary Define a polygon based on a percentage of the customers 80-90% An irregular shaped trade area is defined. Penetration polygons defined by overlapping polygon arcs Illustrates store coverage relative to street networks, physical features, access barriers Assumes what?

Retail Trade Part 3

Drive-time or drive distance Polygons

How far will the customer travel? What is used? A connected street network Each line segment from intersection to intersection has a length It may not have a speed limit or traffic volume measure Problem defining the time through an arc Problem of defining temporal travel through the net How is the resulting polygon shaped?

Dynamic Trade Areas

What has to be added to the standard trade area models? Measures of price, quality, image subjective measures Location, location, location Location in addition to location quality

Summary

Analysis of existing markets Analysis of potential markets Strategies for increased market share