Leakage & Retention Analysis Trade Area Analysis Arthur C. Nelson, Ph.D., FAICP Presidential Professor & Director Metropolitan Research Center University of Utah February 2010
Jan 03, 2016
Leakage & Retention AnalysisTrade Area Analysis
Arthur C. Nelson, Ph.D., FAICPPresidential Professor & DirectorMetropolitan Research CenterUniversity of Utah
February 2010
Trade Area Sales AnalysisProvides an estimate of the number of people
drawn to a community for retail purchases of a particular good
Assumptions Local people will buy goods at the same rate as
the state/metro/other regional average Income causes a variation in spending
Drawback: Easy to measure capture for major retail groups but not specialized ones.
Trade Area Sales Analysis
Commonly called a “Capture” and “Leakage Study”
Shows whether a community is capturing its full sales potential or whether that money is leaking out to other communities
Potential Sales
Income Capita Per State
Income Capita Per Local
Population State
Sales StatePopulation
AreaTrade Sales Potential
Sales and sales tax data from Department of Taxation: http://tax.utah.gov/esu/sales/calendaryear/index.htmlPer capita income from Regional Economic Information System:http://www.bea.gov/regional/bearfacts/action.cfm?fips=49045&areatype=49045http://www.governor.utah.gov/dea/State Population from Census estimates: http://www.governor.utah.gov/dea/
Potential Sales AnalysisBox Elder County – Furniture
Data:2008 Box Elder County Population: 49,0152008 Box Elder County Furniture Sales: $6,409,744 2008 Utah Furniture Sales: $1,700,318,619 2008 Utah Population: 2,736,424 2008 Box Elder County Per Capita Income: $26,5022008 Utah Per Capita Income: $28,196
Potential Sales
State per capita sales average = $621County per capital sales average = $131
Economic Development Implications?
Potential Sales = [(49.015) x ($1,700,318,619/ 2,736,424) x (26,502/28,196)]
= $28,626,422
Actual Sales = $6,409,744 Capture (Leakage) = ($22,216,678)
Reilly’s Law of Retail Gravitation
Provides estimate of maximum distance customers will travel to shop for a specific good or servicePremise is that people are attracted to larger places to shop, but time and distance influence these decisionsThe town being analyzed should be the largest in the analysisWorks best for goods and services where quality, price, etc., are factors influencing purchases
Reilly’s Law
(Y)Community Small of Population(X)Community Larger of Population
1
City Y and XCity Between Distance
Distance from
Smaller Community (Y)
Distance data can be obtained from Internet mapping sites such as MapQuest, Yahoo, etc.: http://www.mapquest.com
State Population by Place from Census estimates: http://www.census.gov/main/www/cen2000.html
Price Trade Area
Helper will draw residents from 1.79 miles toward PriceWellington will draw residents from 1.54 miles toward
PrioceWhat does this mean in practical terms?
Helper:Distance = (5.50 miles) / (1+ 8,039/1,876) = 1.79 miles
Wellington:Distance = (5.00 miles) / (1+ 8,039/1,571) = 1.54 miles
Reilly’s Law LimitationsAssumes homogeneous populationOnly use for independent communities
surrounded by countrysideShould only be used for similar sized
communitiesAssumes everyone shops locally –
overestimates shopping populationEstimate average trade boundary;
individual goods or services will have different boundaries
Sources
Hustedde, Ronald J., Ron Shaffer, and Glen Pulver. Community Economic Analysis: A How To Manual. North Central Regional Center for Rural Development. Ames, IA. November 2001.
Kathy Tweeten, North Dakota State University; Alan Barefield, Southern Rural Development Center; Randy Reynolds Piedmont Community College “Community Economic Analysis” nd.