1. Site Location

2. Three Levels of Analysis

3. Trade Area Issues
Which Trade Areas Are Most Attractive for Locating Retail Outlets?
How Many Outlets to Locate in a Trade Area?
More Stores Increases Economies of Scale and Reduces Costs
More Stores also Results in More Cannibalization and Less Sales per Store

4. Factors Affecting the Attractiveness of a Site
How Attractive Is the Site to the Retailer’s Target Market?
Match Between Trade Area Demographics and Retailer’s Target Market
Likelihood of Customers Coming to Location
Convenience
Other Attractive Retailers At Location
Principle of cumulative attraction - a cluster of similar and complementary retailing activities will have greater drawing power.

5. Convenience of Going to Site
Accessibility
Road pattern and condition
Natural and artificial barriers
Visibility
Traffic flow
Parking
Congestion
Ingress/egress

6. Location Within a Center
In High Traffic Areas
Center of Shopping Area
Near Stores Selling Complementary Merchandise
Clustering Specialty Stores Appealing to Teenagers
Better locations cost more

7. Estimating Demand for a New Location
Definition of the Trade Area
Primary, Secondary, Tertiary Zones
Approaches for Estimating Demand
Analog Approach
Regression Approach
Huff Gravity Model

8. Trade Area Primary zone - 60 to 65 percent of its customers
Secondary zone - 20 percent of a store’s sales
Tertiary zone - customers who occasionally shop at the store or shopping center

9. Factors Defining Trade Areas
Accessibility
Natural & Physical Barriers
Type of Shopping Area
Type of Store
Competition
Parasite Stores

10. Sources of Information
Customer Spotting
Census Data
Geodemographic Information Systems
Information on Competition
Yellow Pages

11. Customer Spotting
Purpose: to spot, or locate, the residences of customers for a store or shopping center.
How to obtain data:
credit card or checks
customer loyalty programs
manually as part of the checkout process
automobile license plates

12. Census Data of the U.S. Only once in 10 years.
Each household in the country is counted to determine the number of persons per household, household relationships, sex, race age and marital status. .

13. Geodemographic Information Systems
Demographic data vendors specialize in repackaging and updating census-type data.
Geographic Information System (GIS) is a computer system that enables analysts to visualize information about their customers’ demographics, buying behavior, and other data in a map format.
GIS is a spatial database that stores the location and shape of information.
Analysts can identify the boundaries of a trade area and isolate target customer groups

14. Indices for Assessing Sales Potential
Market Potential Index (MPI)
Number of Households Purchasing a Product or Service in a Trade Area
Spending Potential Index (SPI)
Average Amount Spent on a Product or Service by a Household in a Trade Area

15. Sources for Measuring Competition
The Internet - lists current locations and future sites.
Yellow Pages
Other Sources: Directories published by trade associations, chambers of commerce, Chain Store Guide, International Council of Shopping Centers, Urban Land Institute, local newspaper advertising departments, municipal and county governments, specialized trade magazines, list brokers

16. Measuring Competition
Calculate total square footage of retail space devoted to a type of store per household
Higher ratios will indicate higher levels of competition

17. Competitive Analysis for
Edward Breiner

18. Methods for Estimating Demand
Analog Approach
Multiple Regression Analysis
Huff’s Model

19. The Analog Approach 3 Steps:
1. Current trade area is determined by using the customer spotting technique.
2. Based on the density of customers from the store, the primary, secondary and tertiary trade area zones are defined.
3. Match the characteristics of our current store with the potential new stores’ locations to determine the best site.

20. Income Distribution of Three-Mile Ring Surrounding Edward Breiner Optical

21. Demographic Trends for Three-Mile Ring Surrounding Edward Breiner Optical

22. ACORN Neighborhood Lifestyle Clusters for Three-Mile Ring
Breiner Optical
ACORN Neighborhood Lifestyle Clusters for Three-Mile Ring

23. Descriptions of Largest PRIZM Clusters Surrounding Edward Breiner Optical

24. Description of Largest PRIZM Clusters Surrounding Edward Breiner Optical

25. Description of Largest PRIZM Clusters Surrounding Edward Breiner Optical

26. Description of Largest PRIZM Clusters Surrounding Edward Breiner Optical

27. Descriptions of Edward Breiner Optical and Four Potential Locations’ Trade Areas

28. Multiple Regression Analysis
Need to define the retail trade area potential for retail chains with greater than 20 stores.
Similar to the analog approach, it uses statistics rather than judgement to predict sales for a new store.

29. Multiple Regression Steps
Current trade areas are determined by using the customer spotting technique
Primary, secondary, and tertiary zones are determined by plotting customers on a map
Select appropriate measures of performance, such as per capita sales or market share.
Select a set of variables that may be useful in predicting performance.
Solve the regression equation and use it to project performance for future sites.

30. Yearly Sales, Population, and Income for 10 Home Improvement Centers

31. Regression of Population on Sales

32. Huff’s Gravity Model
Based on the premise that the probability that a given customer will shop in a particular store or shopping center becomes larger as the size of store or center grows and distance or travel time from customer shrinks