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Chapter 9 Trading Area Analysis (4 Steps Choose a Store Location (Step 1…
Chapter 9
Trading Area Analysis
Criteria to
Consider
population size & traits
competition
transportation access
parking availability
nature of nearby stores
property costs
length of agreement
legal restrictions
4 Steps Choose a
Store Location
Step 1: Evaluate alternate geographic ( trading ) areas in terms of residents & existing retailers
Step 2: Determine whether to locate as an isolated store / in a planned shopping center
Step 3: Select the location type
Step 4: Analyze alternate sites contained in the specific retail location type
Trading- Area
Analysis
is a geographic area containing the customers of a particular firm / group of firms for specific goods/ services
Benefit
Discovery of consumer demographics & socioeconomic characteristics
Opportunity to determine focus of promotional activities
Opportunity to view media coverage patterns
Assessment of effects of trading area overlap
Ascertain whether chain's competitors will open nearby
Discovery of ideal number of outlets, geographic weaknesses
The Use of Geographic
Information Systems in Trading-
Area Delineation & Analysis
which combines digitized mapping with key location-specific data used to graphically depict trading-area characteristics such as:
population demographics
data on customer purchases
listings of current, proposed & competitor locationd
Size & Shape of
Trading-Areas
Each trading area
has 3 parts
Primary trading area
50-80% of a store's customers
2 Secondary trading area
15-25% of a store's customers
Fringe trading-area
all remaining customers
Trading area size & shape are influenced by as store type, store size, the location of competitors, housing patterns, travel time & traffic barriers
Destination store
have a better assortment, promotion & image
they generate trading-areas much larger than competitors
Parasite Store
do not create their own traffic & have no real trading-area of their own
These stores depend on people who are drawn to area for other reasons
magazine stand in office building
Delineating Trading-Area
of an Existing Store
store records (secondary data) / a special research study (primary data) can measure the trading area.
Delineating Trading-Area
of an a New Store
normally be evaluated in terms of opportunities rather than current patronage & traffic patterns such as trend analysis, consumer surveys, computerized trading-area analysis models
Computerized Trading-Area
Analysis Models
Analog Model
simplest & most popular trading-area analysis tool.
potential sales for a new store are estimated on the basis of revenues for similar store in existing areas, the competition at a prospective location, the new store's expected market share at that location, & size & density of the location's primary trading area
Regression Model
uses a series of mathematical equations showing the association between potential store sales & several independent variables at each location such as population size, average income, the number of households, nearby competitors, transportation barriers & traffic patterns
Gravity Model
based on the premise that people drawn to stores that are closer & more attractive than competitor's stores.
the distance between consumers & competitors, the distance from consumers to a given site & store image can be included in this model
Elements of Trading-Area
Selection
Population Characteristics
Economic Base Characteristics
Nature & Saturation of Competition