1. Trading-Area Analysis and Site Selection
Chapters 9 and 10
Trading-Area Analysis and
Site Selection
RETAIL
MANAGEMENT:
A STRATEGIC
APPROACH

2. Administrative Items Midterm – Feb. 16th in class Next Class:
Midterm format details
Retail Institutions assignment questions
Dr. Morgan’s presentation, “Toward Creative Practice in Social Enterprise”
Schwartz AUDITORIUM, 3:30-4:30 pm, Feb. 8th
Syncrude Recruitment
February 9, 11:15 am – 1:00 pm SCHW190

3. Agenda
Introduce Trade Area Analysis and Site Selection concepts for application to your Retail Institutions Assignments
Appreciate the importance of location decisions
Understand trade areas and how they are delineated
Overview three different types of site locations
Consider Canada’s newest type of retail site location – the lifestyle centre

4. The Importance of Location
Location is one of the most important decisions a retailer can make
“A retailer with a mediocre strategy mix can succeed with a great location whereas a good retailer may struggle in a poor location.”
Parasite v. Destination
Location can be changed, BUT
Location is the least flexible part of the strategy mix
Major financial commitment
Long term decision
Considerations of lease agreements
Considerations of location ownership
Impact of location change on bottom line (increased promotional dollars (awareness campaign))
Impact of location change on loyal clientele – confusion, ill-will
Goal = “one-hundred percent location”, p. 242
Considerations of location change in lease agreements
Some are 5, 10 or even 30yrs
Inability to sublet
Responsible for financial loss if lease broken
Non-compete agreements
Considerations of location change in ownership situation
Potential loss in sale situation
May require a long time
May require financing the purchaser
One hundred percent location = the optimal location for a particular store
The 100% location for one store may not be the same for another.

5. Location, Location, Location
Criteria to consider include:
Population
Density
Demographics
Economics
major industry characteristics
employment rates
availability of labour
Neighbours
nature of nearby stores
competition
Availability
availability of locations
legal restrictions
property costs
length of agreement
Accessibility
transportation access
parking availability
proximity to supplies
Trade Area Analysis
Site Selection

6. The Segments of a Trading Area (Fig 9.5)
50-80%
Trading Area:
A geographic area containing the customers of a particular firm or group of firms for specific goods or services
15-25%
The rest

7. The Trading Areas of Current and Proposed Outlets (Fig. 9.2 )
Trading area overlap  Why would a retailer pursue such a strategy?

8. How to delineate trading areas
Analogue models (Simplest)
Estimates sales based upon similar stores in area, estimated market share, competition and population size and density
Regression models
Use a series of mathematical equations to show associations between potential sales and a number of independent variables
Gravity models
People drawn to stores that are closer and more attractive than competitors’

9. Reilly’s Law
Reilly’s law of retail gravitation, a traditional means of trading-area delineation, establishes a point of indifference between two cities or communities, so the trading area of each can be determined
Uses population and distance between areas as measures
Good because:
Reasonably reliable method
Less costly to determine (two indicators)
Easy
Limitations:
Distance is only measured by major thoroughfares; some people will travel shorter distances along cross streets
Distance travelled does not reflect travel time and actual distance may not correspond with perceptions of distance
Assumes equal retailer efficiency
City B
City A
10 km
30 km
Pop=10,000
Pop=90,000
Point of Indifference

10. Huff’s Law Huff’s law delineates trading areas on the basis of:
Huff’s law of shopper attraction is another gravity model. It determines the probability of a shopper visiting a location.
Huff’s law delineates trading areas on the basis of:
product assortment
travel times and
the sensitivity of the kind of shopping to travel time.

11. Swiss Chalet Case Study
CLIENT:
Swiss Chalet is one of five restaurant chains owned by Cara.
Other brands include Harvey’s, Milestones, Montana’s, Kelsey’s;
presence in every province.
CHALLENGE:
To easily evaluate the potential for Swiss Chalet delivery and takeout for any market in the country to help determine how many new restaurants could be added to a market.
To communicate the delivery areas to the Call Centre staff so that customer orders could be efficiently routed and guaranteed delivery times could be met.

12. Swiss Chalet Case Study
SOLUTION:
Used HouseholdSpend data to provide a template for mapping
Showed:
key demographics
current Swiss Chalet delivery sales
total expenditures for food away from home
current market share of restaurant expenditures
Also provided (not shown):
Demographic Estimates and Projections data
Also provided:
Demographic Estimates and Projections data to determine which areas were growing fast enough to either expand current kitchen capacity or to add another restaurant within the local market.
RESULTS:
SC used maps to:
modify the boundaries of its delivery areas to improve delivery times to its current customers
to add new restaurants in locations that were being under-served.
EA also built custom applications allowing the Swiss Chalet Call Centre to identify which restaurant should deliver take-out food to new customers

13. Two data sets were used in this example: shopping centers with their characteristics, and small census units with some related data. The purpose of this example was to create a market profile for a single mall. The Gross Leasable Area (GLA) was used as an attractiveness variable. The patronage probability surface (a grid) was created for a selected mall (Figure 1). A potential customer is assumed to be located at every grid cell. The probability of a customer patronizing a selected mall is positively related (directly proportional) to the attractiveness of the mall and negatively related (inversely proportional) to the distance between the mall and the customer, given the presence of all competing malls.

14. Trade area analysis for a single site using multiple variables for site attractiveness The difference between Examples 1 and 2 is that in Example 2 more than one variable was used as an attractiveness index. “The value of the model depends on the ability to incorporate a number of different measures of store attractiveness” (Jones, Simmons 1993, p.345). If more variables are included, it is easier to understand a variation in patronage patterns. In addition to the GLA, in this example the number of stores in each mall and the number of parking spaces were also considered as the attractiveness attributes. These three variables were converted to z-values and added together to make up an attractiveness index. Some of the attractiveness index values were negative and software could not calculate a surface. To alleviate this problem, the minimum negative z-value was added to all attractiveness values in order to create positive numbers, so that software would be able to handle the task. Figure 2 shows the probability surface created for the same mall using an attractiveness index composed of three, instead of one, characteristics. These three variables are correlated to some degree. Comparison of maps in Figures 1 and 2 indicates that considering more attractiveness variables increases the drawing power of the analyzed mall. The extent of isolines has changed (for an example see isoline labeled with the value of 0.3).  

15. GIS Solutions: Resources and Case Studies

16. 3 Types of Locations Planned Isolated Shopping Store Centre Unplanned
Business
District
Isolated Store – a freestanding retail store on either a highway or a street. There are no adjacent stores with which the isolated store shares traffic.
Advantages – lower costs (rental, some delivery), no competition, road visibility, ease of parking, flexibility (no group rules, facility adaptation)
Disadvantages – advertising costs; no shared ops costs; first attracting customers difficult; often required to buy/build; customers like convenience and variety; zoning laws
Unplanned Business District – two or more stores located together (or in close proximity) that are not the result of planned tenancy
Four kinds - CBDs, SBDs, NBDs and strings
Planned Shopping Centres – centrally owned and managed; balanced tenancy; non-compete agreements
Advantages – shared cost of operations; lower rent than CBDs; foot traffic; parking provision
Disadvantages – no road visibility; little flexibility; aging facilities; domination of anchors (or loss of anchor!); loss of interest in shopping
Choice will depend partly upon whether the retailer is a destination or parasite store

17. CBD Revitalization in Canada
Calgary’s Inglewood:
Kitchener example
It has been said that Canadian cities are not in as much need of CBD revitalization as some US areas because we didn't have urban flight in the 60's
However, many CBDs did experience a decline in the quality and quantity of their retailing.
Consider Winnipeg
Some recent revitalization projects include:
Toronto, Victoria, Ottawa and Calgary (Talbot Consultants)

18. Planned Shopping Centres in Canada: Fast Facts
There are about 4400 shopping centres in Canada (
About 1.2 million Canadians work in shopping centres
There are 14 square feet of shopping centre space per capita in Canada (23 in US)
Shopping Centre sales = $528/ft2 in Canada ($309/ft2 in US) – Colliers Canada, 2011
Ninety-two percent of Canadians over age 12 visit some type of centre in an average month.

19. Canadian Shopping Centre Trends
BUT…
Sales at traditional enclosed malls in both Canada and the US have been on the decline.
Development has been slow
Vaughan Mills (opened Oct. 2004) was the first new mall construction after a decade of stalled development; encountered many difficulties
CrossIron Mills (opened August 2009 in Rocky View Alberta) was the first enclosed shopping centre development in Western Canada in over 20 years but had to reinvent traditional leasing with “Swing Shops”
“Most Canadian malls are mediocre emporiums peddling overpriced goods, barely superior to malls in the Third World.” - Paco Underhill

20. Factors Contributing to Mall Decline
Mall merchandise is predominantly fashion; growth in other categories
Mall fashion stores appeal to teens yet few malls in Canada have done much to attract a teen market.
Many large retailers are moving "off-mall". (e.g. - The Sony Store, Bombay Company, Sears Canada)
Shoppers becoming more time sensitive and prefer frequenting one-stop shops
Shopper boredom with ‘chore shopping’ orientation of mall retailers (Talbot Consultants)

21. Megamalls
The West Edmonton Mall was the first megamall in North America and remains the continent's largest today.
West Edmonton Mall Trivia

22. Life-Style Centres in Canada
Park Place, Barrie, ON
The Village in West Vancouver
The Shops at Don Mills
Dartmouth Crossing

23. Mixed Use Centres Questions:
Do you think it possible for an “open-air” concept of shopping to be successful in Canada?
When making a site selection decision for a lifestyle centre, what criteria should be considered?
What types of retailers would be appropriate to such a development? Explain.

24. Can a lifestyle centre work in Atlantic Canada?

25. Takeaways
Location is one of the most important decisions a retailer can make (inflexibility)
There are a variety of considerations in making the right decision (population, economic base, competitive environment, accessibility, availability)
The right decision depends on the type of retailer, its target customer, its image and overall strategy
When locations change the retailer needs to be able to adapt