1. Module 6: Trade-Area Analysis and Site Selection
Retail Management
Module 6: Trade-Area Analysis and Site Selection

2. Selecting a Store Location

3. Environmental Analysis
Steakhouse example:
Economic factors: can a location afford the prices charged? Research income levels, house prices, education levels, etc. to see if it will be a good fit
Demographic and social factors: ages of those in community and shopping habits are helpful
Brand Profusion: what other restaurants are in the area? If there are similar businesses it might be difficult to create market share
Four ”P’s” of retail sales:
Place, product, price, promotion

4. Data Analysis for Location Selection
Moving business is expensive, so analyzing location choice is highly important
Retailer with excellent location has strategic advantage
Want to evaluate: alternative geographic trading areas, determine type of location (population, density)
What is literacy level and educational level of populations? What languages are spoken?
Are there other similar stores? What do they stock and what is their reputation?
Can people get to you? Is there parking? Is it safe?
Are you planning to be open when people want to shop? Do you do deliveries, online ordering, accept credit cards?

5. Location Effects on Planning
Knowing demographic of location is important
if the area is a college town with many year-olds, locating a coffee shop near campus may be great idea
if the area has young families moving in and out, opening a daycare center would benefit long-term business
Being able to ebb and flow with demographic changes is another planning option
Looking at history of planned location can tell a story
Having ability to grow or change with the community will be important component

6. Retail Trading Area

7. U.S. Census Bureau and Demographic Data
U.S. Census Bureau data includes
Number of people in household
Household relationships
Age, sex, race
Number household units
Status of plumbing facilities
Owner occupied or rental
Value of home and vacancy status
Census data can be out of date but is a good place to start research after choosing general area
Using Quickstart: variety of topics (population, age and sex, race, etc.)

8. GIS and Location Decisions
Geographic information system (GIS): system that can store, retrieve, map, & analyze geographic data
GIS helps visualize information about customer buying behaviors and demographics
GIS has a fee, but is updated frequently
Nielsen is company that offers wide range of useful tools

9. Factors in Analyzing Trading Area
Primary trading area: where store is exactly located
Secondary trading area: area where store is located
Fringe trading area: city or town where store is located
Make sure that area surrounding location has
Enough customers
Enough money to spend
Need for product or service you are bringing
Competition in trading area
Even with analysis, there is a possibility a business may not work

10. Available Retail Locations

11. Comparing Location Benefits
Unplanned shopping areas: spaces that developed over time
Downtown areas, strip malls
Planned shopping areas:
Omnicenters: large planned centers with variety of retail formats
Lifestyle centers: located in upscale areas with specialty chain stores, restaurants, and theatres
Outlet centers: place that sells damage, discontinued, or surplus merchandise
Mixed use developments: shopping, restaurants, hotels, residential spaces
Unplanned shopping areas: These were not intentionally create as areas for retail to be located, but have morphed and developed into shopping spaces. These unplanned shopping spaces may be freestanding , isolated stores in rural locations too. Unplanned shopping areas have their pros and cons. Typically, they have developed out of need. They may have high pedestrian traffic or be located near public transportation. Unfortunately they also have parking issues, security issues (each business would need their own) and a potentially high shoplifting rate.
Planned shopping areas: Typically, these places are owned by a property development firm, with many tenants, shared common spaces. These planned spaces typically have high visibility and customer traffic. 

12. Site Selection Decisions

13. Evaluating Site Characteristics
Style of operation (must match area)
Demographics (who are your customers)
Foot traffic (can people get to the door)
Accessibility and parking (make sure target market can easily get to you)
Competition (healthy and unhealthy)
Proximity to other businesses (can enhance or damage business)
Image and history of site (how many businesses previously)
Ordinances (check with town or city of location)
Condition of building
Other costs (utilities, janitorial service, etc.)

14. Influence of Societal Views
Using data from U.S. Census Bureau and GIS analysis to determine if space you are thinking of is a good decision)
Societal environment is another component of a successful business location
Make sure to do your location and find space that has right population to help business grow

15. Huff Gravity Model
The trading area is area where business will be pulling customers from
Primary, secondary, and fringe trading areas to review
Huff’s model is mathematical model that recognizes correlation between patronage and distance from location to store
The further a consumer is from location, the less likely they will be to shop there
Doesn’t account for factors that would affect a customer patronizing the store
Can help determine areas with high and low sales

16. Common Lease Types
Percentage (retail business, mall): base rent plus percentage of sales
Net (any commercial lease): pay some or all property taxes, insurance, maintenance
Double net (any commercial lease): pay rent, taxes, and insurance
Triple net (any commercial lease): pay rent, taxes, insurance, AND maintenance
Fully serviced (offices, industrial, and retail leases): landlord pays most costs but are built into rent

17. Quick Review
Location, demographics of the population, how many people live within trading area, etc. need to be evaluated
So many different facets to retail operations and location chosen to open business is most important
Knowing your competition and businesses that may help your business thrive are important as well
U.S. Census is good place to start, but you may need more current and detailed information obtained through GIS
Building new business is tough, so use all available resources to help find perfect location and customers