Chapters 9 and 10

Chapters 9 and 109 and 10Trading-Area Analysis and

Site Selection

RETAIL MANAGEMENT:

A STRATEGICAPPROACH

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

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

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

Location, Location, LocationCriteria 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

The Segments of a Trading Area (Fig 9.5)

Trading Area:A geographic area containing the customers of a particular firm or group of firms for specific goods or services

50-80%

15-25%

The rest

The Trading Areas of Current and Proposed Outlets (Fig. 9.2 )

Trading area overlap Why would a retailer pursue such a strategy?

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’

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 the trading area of each can be determined

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 A

City B

Point of Indifference

Pop=90,000Pop=10,000

30 km10 km

Huff’s Law

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.

Huff’s law of shopper attraction is another gravity model. It determines the probability of a shopper visiting a location.

Huff’s law of shopper attraction is another gravity model. It determines the probability of a shopper visiting a location.

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.

Swiss Chalet Case StudySOLUTION: 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

GIS Solutions:Resources and Case Studies http://www.environicsanalytics.ca/services.aspx?item=trade_

area_analysis_site_modelling http://www.environicsanalytics.ca/tradearea.aspx http://www.environicsanalytics.ca/case_swiss_chalet.aspx

http://www.mappinganalytics.com/trade-area-analysis/trade-area-analysis.html

http://www.directionsmag.com/articles/retail-trade-area-analysis-using-the-huff-model/123411

http://www.esri.ca/en_resources/files/EC1_0057_1201_1B_Rona.pdf

http://www.pbinsight.com/files/case-studies/case-study-files/24HourFitnessCSweb.pdf

3 Types of Locations

IsolatedStore

IsolatedStore

PlannedShopping

Centre

PlannedShopping

Centre

UnplannedBusinessDistrict

UnplannedBusinessDistrict

Choice will depend partly upon whether the retailer is a destination or parasite store

CBD Revitalization in Canada

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)

Planned Shopping Centres in Canada:Fast Facts

There are about 4400 shopping centres in Canada (www.icsc.org)

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.

Canadian Shopping Centre TrendsBUT… 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

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)

Megamalls The West Edmonton Mall was the first

megamall in North America and remains the continent's largest today.

West Edmonton Mall Trivia

http://www.westedmall.com/about/default.asp

Life-Style Centres in Canada

Park Place, Barrie, ON

The Village in West Vancouver

The Shops at Don Mills

Dartmouth Crossing

Mixed Use CentresQuestions:

1. Do you think it possible for an “open-air” concept of shopping to be successful in Canada?

2. When making a site selection decision for a lifestyle centre, what criteria should be considered?

3. What types of retailers would be appropriate to such a development? Explain.

Can a lifestyle centre work in Atlantic Canada?

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