Market Selection and Retail Location Analysis

Monday, 22nd of September 2013

Selecting a Target Market

Successful determinants for Retailers: 1.Selecting a target market 2. Evaluating alternative ways to reach this target market The internet is becoming a major force in retailing . The equivalent of a store on the internet is a retailers site on the World wide web (WWW). When stopping at an e-tailers visitors firs view the firms: Home page
Is the introductory or first material viewers see when the access a retailers internet site. It is the equivalent of the retailers store front in physical world.

Virtual store
Is the total collection of all the pages of information on the retailers internet site.

Ease of access
Refers to the consumers ability to easily and quickly find a retailers web site in cyberspace.

Market Segmentation
Dividing of a heterogeneous consumer population into smaller, more homogenous groups based on their characteristics.
Market segment should be measurable. Market should be accessible. Market should be substantial enough to be profitable.

Target Market
Is the group of customers that the retailer is seeking to serve. It is not easy to reach every target market, because each target market is different from the other. Pakistani example???//

Identifying a target market

1. Measure or describe the selected market segment using objective measures on which data is available, such as age, gender, income, education, ethnic group, religion, and so on. 2. Accessibility- the degree to which the retailer can target its promotional or distribution efforts to a particular market segments. 3. Segment be substantial enough to be profitable for the retailer.

Retail Formats for Accessing a Target Market

Retail Formats

Store-Based
Business District Freestanding Shopping Centers/Malls

Nonstore-Based

Nontraditional

Street Peddling
Direct Selling

Mail-Order

Automated Merchandising Systems

Interactive TV

Internet

Reaching Your Target Market

1. Store-base retailers: Operate from a fixed store location that requires customers to travel to the store to view and select merchandise or services 2.Non-store based retailers: Intercept customer at home, at work, or at a place other than a store where they might be susceptible to purchasing.

1.Store Based
Central Business District (CBD): Unplanned shopping area around the geographic point at which all public transportation systems converge; it is usually in the center of the city and often where the city originate historically. Secondary Business District (SBD) shopping area smaller than the CBD and that revolves around at least one department or variety store at a major street intersections. Neighborhood Business District (NBD) -shopping area that evolves to satisfy the convenience-oriented shopping needs of a neighborhood, generally contains several small stores ( with the major retailer being a supermarket or a variety store), and is located on a major artery of a residential area.

Shopping Center (or Mall) Is a centrally owned or manage shopping district that is planned, has balanced tenancy (the store complement each other in merchandise offerings), and is surrounded by parking facilities. Anchor store Are the store in the shopping center that are the most dominant and are expected to draw customers to the shopping center. Freestanding location Generally locates along major traffic arteries and does not have any adjacent retailers to share traffic. Non traditional location [retailer are identifying non traditional locations that offers great convenience]

Location of Store-Based Retailers

Central business district (CBD) An unplanned shopping area around the geographic point where all public transportation systems converge; it is usually in the center of the city and often where the city originated historically. Advantages Easy access to public transportation. Wide product assortment. Variety in images, prices, and services. Proximity to commercial activities. Disadvantages Inadequate and usually expensive parking. Older stores. High rents and taxes. Traffic and delivery congestion. Potentially high crime rate. Decaying conditions of inner cities.

LO 2

2.Non-store Based Retail Formats

Direct Selling Street Peddling Interactive TV Mail-Order Internet Automated Merchandising Systems

GEOGRAPHIC INFORMATION SYSTEMS

Is a computerized system that combines physical geography with cultural geography. Culture Is the buffer that people have created between themselves and the raw physical environment and include the characteristic of the population humanly created objects, and mobile physical structures. Thematic maps Use visual techniques such as colors, shading ,and lines to display cultural characteristics of the physical space.

Uses of GIS
I. Market selection II. Site analysis III. Trade area definition IV. New store cannibalization V. Advertising management VI. Merchandise management VII. Evaluation of store managers

GIS components
Physical Geography
Latitude/Longitude Land/Water Terrain Rainfall/Snow Temperature Data Inputs

Cultural Geography
Demographics Manmade Structures Consumption Patterns Work Patterns Leisure Behavior Deviant Behavior

GIS (Data Aggregation and Analysis via Computer) Output Maps and Other Displays of Information

Selecting a Retail Location

LO 4: Exhibit 7.5

Identify the most attractive markets in which to operate

Identify the most attractive sites that are available within each market Select the best site(s) available
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 Trading Area is the geographic area from which a retailer, or group of retailer, or community draws its customer. Retail gravity theory Underlying consistencies in shopping behavior that yield to mathematical analysis and prediction based on the nation or concept of gravity. Reillys law of retail gravitation Explain how large urbanized areas attract customers from smaller rural communities.

1.Retail Location Theory

2.SATURATION THEORY
Retail store saturation :Enough store facilities for a given type of store to efficiently and satisfactorily serve the population yield a fair profit to the owners. Understored :Community where the number of stores in relation to households is relatively low so that engaging in retailing is an attractive economic endeavor. Overstored: Community where the number of store in relation to household is so large that engaging in retailing is usually unprofitable or marginally profitable .

MARKET DEMAND POTENTIAL

Major components are:
Population characteristics Buyer behavior characteristics Household income Household age profile Household composition Community life cycle Population density Mobility

Market Supply Factors

In deciding to enter a new market, the successful
retailer will spend time analyzing the competition. The retailer should consider : Square Feet Per Store Square Feet Per Employee Growth in Stores Quality of Competition

Site Analysis

Is the evaluation of the density of demand and supply within each market with the goal of identifying the best retail site(s). Size of Trading Areas Description of Trading Area Demand Density Supply Density Site Availability

Customer Spotting Map for a Supermarket LO 5: Exhibit 7.8

City Limits

Store

21

4 miles from store

3 miles from store

2 miles from store 1 mile from store

Demand Density

is the extent to which the potential demand for the retailers goods and services is concentrated in certain census tracts, ZIP code areas, or parts of the community. To determine the extent of demand density, retailers need to identify the major variables influencing their potential demand, which can be examined by the types of customers who already shop in the retailers present stores. Supply density - The extent to which retailers are concentrated in different areas of the market under question.

Site Evaluation
Local Demographics Population and/or household base Population growth potential Lifestyles of consumers Income potential Age makeup Population of nearby special markets, that is, daytime workers, students, and tourists, if applicable Occupation mix

Traffic Flow and Accessibility

Number and type of vehicles passing

location Access of vehicles to location Number and type of pedestrians passing location Availability of mass transit, if applicable Accessibility of major highway artery Quality of access streets Level of street congestion Presence of physical barriers that affect trade area shape

Retail Competition

Number and types of stores in area Analysis of key players in general

area Competitiveness of other merchants Number and location of direct competitors in area Possibility of joint promotions with local merchants

Site Characteristic


Number of parking spaces available Distance of parking areas Ease of access for delivery Visibility of site from street History of the site Compatibility of neighboring stores Size and shape of lot Condition of existing building Ease of entrance and exit for traffic Ease of access for handicapped customers Restrictions on sign usage Building safety code restrictions Type of zoning

Cost Factors

Terms of lease/rent agreement Basic rent payments Length of lease Local taxes Operations and maintenance cost Restrictive clauses in lease Membership in local merchants association required Voluntary regulations by local merchants

Site Selection
Retailers are now ready to make the final decision regarding location: selecting the best sites available.

Nature of site

Traffic Characteristics Types of neighbors Terms of purchase or lease Expected Profitability

Nature of site
100 percent location - When there is no better use for a site than the retail store that is being planned for that site. The traffic that passes a site, whether it is vehicular or pedestrian, can be an important determinant of the potential sales at that site. Two traffic-related aspects of the site should be evaluated.
Availability of sufficient parking, either at the site or nearby. Whether direction of traffic is relative to the shopping area.

Type of neighbors A good neighboring business will be one that is compatible with the retailers line of trade. Research has found that retailers experience a benefit from store compatibility. Store compatibility - Exists when two similar retail businesses locate next to or nearby each other and they realize a sales volume greater than what they would have achieved if they were located apart from each other. Retail clusters - Groups of stores closely located that share similar characteristics. The major benefit of clustering is twofold for customers. Once potential customers identify a need for a line of merchandise or service, they dont need to decide on the specific store to visit; they just need to decide to travel to the retail cluster. It allows customers to walk from store to store, comparing prices, products, and service.