9-1 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall Trading- Area Analysis RETAIL MANAGEMENT: A STRATEGIC APPROACH 11th Edition 11th Edition BERMAN EVANS 1
Jan 13, 2016
9-1 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Trading-Area Analysis
RETAIL MANAGEMENT:A STRATEGICAPPROACH11th Edition11th Edition
BERMAN EVANS
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9-2 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Chapter ObjectivesTo demonstrate the importance of store
location for a retailer and to outline the process of choosing a store location
To discuss the concept of a trading-area and its related components
To show how trading-areas may be delineated for existing and new stores
To examine three major factors: population characteristics, economic base characteristics, and competition/level of saturation
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9-3 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Location, Location, Location Criteria to consider Criteria to consider
includeinclude population size and traits competition transportation access parking availability nature of nearby stores property costs length of agreement legal restrictions
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9-4 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-1: Location and Nine West
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9-5 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Step 1: Evaluate alternate geographic (trading)Step 1: Evaluate alternate geographic (trading)areas in terms of residents and existing retailersareas in terms of residents and existing retailers
Step 3: Select the location typeStep 3: Select the location type
Step 2: Determine whether to locate as anStep 2: Determine whether to locate as anisolated store or in a planned shopping centerisolated store or in a planned shopping center
Step 4: Analyze alternate sites contained in the Step 4: Analyze alternate sites contained in the specific retail location typespecific retail location type
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9-6 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Trading-Area Analysis
A trading-area is a A trading-area is a geographic area geographic area
containing the customers containing the customers of a particular firm or of a particular firm or
group of firms for specific group of firms for specific goods or services.goods or services.
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9-7 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Benefits of Trading-Area AnalysisBenefits of Trading-Area Analysis
Discovery of consumer demographics and 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
Review of other issues (e.g. transportation)
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9-8 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-2: The Trading-Areas of Current and Proposed Outlets
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9-9 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
GIS SoftwareGIS Software
Geographic Information SystemsDigitized 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, and
competitor locations
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9-10 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-3(A): GIS Software in Action
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9-11 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-3(B): GIS Software in Action
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9-12 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-3(C): GIS Software in Action
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9-13 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-3(D): GIS Software in Action
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9-14 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-4: The Segments of a Trading-Area
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9-15 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-5: Delineating Trading-Area Segments
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9-16 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
The Size and Shape of Trading-AreasThe Size and Shape of Trading-Areas
Primary trading-area 50-80% of a store’s customers
Secondary trading-area 15-25% of a store’s customers
Fringe trading-area all remaining customers
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9-17 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Destination Versus Parasite StoresDestination Versus Parasite Stores
Destination storesDestination stores have a better assortment, promotion, and image.
They generate trading-areas much larger than competitors.
Dunkin’ Donuts: “It’s worth the trip!”
Parasite storesParasite stores do not create their own traffic and have no real trading-area of their own.
These stores depend on people who are drawn to area for other reasons.
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9-18 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Largest
TRADINGTRADINGAREASAREAS
Smallest
Department stores
Supermarkets
Apparel stores
Gift stores
Convenience stores
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9-19 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
The Trading-Area of a New StoreThe Trading-Area of a New Store
Different tools must be used when an area is evaluated in terms of opportunities rather than current patronage and traffic patterns:Trend analysisConsumer surveysComputerized trading-area analysis models
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9-20 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Computerized Trading-Area Analysis ModelsComputerized Trading-Area Analysis Models
Analog Model
Regression Model
Gravity Model
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9-21 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Reilly’s LawReilly’s Law
Reilly’s lawReilly’s law of retail gravitation—a traditional means of trading-area delineation—establishes a point of indifference between two cities or communities so that the trading-area of each can be determined.
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9-22 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Limitations of Reilly’s LawLimitations of Reilly’s Law
Distance is only measured by major thoroughfares; some people will travel shorter distances along cross streets.
Travel time does not reflect distance traveled. Many people are more concerned with time traveled than with distance.
Actual distance may not correspond with perceptions of distance.
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9-23 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Huff’s LawHuff’s Law
Huff’s lawHuff’s law of shopper attraction delineates trading-areas on the basis of product assortment at
various shopping locations, travel times from the shopper’s home to alternative locations,
and the sensitivity of the kind of shopping to travel time.
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9-24 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 9-1a: Chief Factors to Consider in Evaluating Retail Trading-Areas
Total size and density
Age distributionAverage
educational levelPercentage of
residents owning homes
Total disposable income
Per-capita disposable income
Occupation distribution
Trends
Population Size and Characteristics
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9-25 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 9-1b: Chief Factors to Consider in Evaluating Retail Trading-Areas
ManagementManagement trainees
Clerical
Availability of Labor
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9-26 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 9-1c: Chief Factors to Consider in Evaluating Retail Trading-Areas
Delivery costsTimelinessNumber of
manufacturers
Number of wholesalers
Availability of product lines
Reliability of product lines
Closeness to Sources of Supply
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9-27 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 9-1d: Chief Factors to Consider in Evaluating Retail Trading-Areas
Dominant industry
Extent of diversification
Growth projections
Freedom from economic and seasonal fluctuations
Availability of credit and financial facilities
Economic Base
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9-28 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 9-1e: Chief Factors to Consider in Evaluating Retail Trading-Areas
Number and size of existing competition
Evaluation of competitor strengths and weaknesses
Short- and long-run outlook
Level of saturation
Competitive Situation
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9-29 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 9-1f: Chief Factors to Consider in Evaluating Retail Trading-Areas
Number and type of store locations
Access to transportation
Owning versus leasing opportunities
Zoning restrictionsCosts
Availability of Store Locations
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9-30 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 9-1g: Chief Factors to Consider in Evaluating Retail Trading-Areas
TaxesLicensingOperations
Minimum wagesZoning
Regulations
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9-31 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Elements in Trading-Area SelectionElements in Trading-Area Selection
Population Characteristics
Economic BaseCharacteristics
Nature and Saturationof Competition
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9-32 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Figure 9-9: The Census Tracts of Long Beach, NY
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9-33 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Table 9-3: Selected Population Statistics for Trading Areas A and B
Characteristics Area A Area B
Total population, 2000 13,732 15,499
Population change, 1990-2000 +8.2 +2.5
College graduates, 25 +, 2000 (%) 41.4 39.2
Median household income, 2000 $61,236 $61,242
Managerial and professional occupations (%), 2000
45.3 45.0
9-34 Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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