International Journal of Market Research Vol.

47 Quarter 3

The role of geodemographic

segmentation in retail location strategy
scar Gonzlez-Benito and Javier Gonzlez-Benito
Universidad de Salamanca

This paper studies the role of geodemographic segmentation as an analytic tool

in retail location strategy. The most relevant factors that should determine retail
location selection are revised, and the potential contribution of geodemographic
segmentation to the assessment of such factors is examined. The empirical
application provides evidence on the differences between store networks of
leading Spanish supermarket chains in relation to the geodemographic profile of
their market areas. This result confirms the potential of geodemographic
segmentation for the spatial delimitation of retail chains target markets.

Introduction
Location is a transcendental decision to ensure the viability of retail stores.
Not for nothing is it usual to claim three key success factors in retail
management: location, location and location (Jones & Simmons 1987).
The retail site determines the market area that is to say determines the
set of consumers willing to travel to the store for shopping. The quantity
of consumers that make up this market area, as well as their affinity with
the store in terms of shopping needs and habits, are key questions to reach
a profitable sales level.
Although population density is an important attribute for the selection
of spatial markets, the spatial heterogeneity of consumers is also
fundamental. While the former is related to the quantity of consumers, the
latter is related to the quality of consumers. Geodemographic segmentation seeks to capture the spatial heterogeneity of the market by classifying
intra-urban areas in terms of the characteristics of their residents. The
potential of geodemographic segmentation for indicating the shopping
needs and habits of different geographic areas makes it a useful tool in the
selection of optimal locations for retail stores.

2005 The Market Research Society

295

The role of geodemographic segmentation in retail location strategy

This paper aims to develop a theoretical and empirical analysis of the

relevance of geodemographic segmentation as an analytical tool for
optimising retail location strategy. First, an explanatory model of the
factors and key information that determine retail site selection is proposed.
This theoretical framework allows us to assess the scope of geodemographic segmentation; in other words, it allows us to analyse which relevant
information could be reflected by this segmentation approach, and which
relevant information should be drawn from other sources. Second, an
empirical analysis provides evidence for the explanatory potential of
geodemographic segmentation. Specifically, leading Spanish supermarket
chains are compared in terms of the geodemographic profile of their
market areas. The existence of geodemographic differences between market
areas of retail chains implies that geodemographic segmentation explains
to some extent their site selection criteria. Therefore, geodemographic
segmentation could be a useful tool to support retail location strategy.
The main contents of the paper are divided into two sections that tackle
the theoretical and empirical developments, respectively. The conclusions,
limitations and suggestions for further research are summarised in a final
section.

Theoretical framework: location strategy and

geodemographic segmentation
The affinity between the needs of the target market and product
positioning is crucial to success. The same is applicable to the retail
context. The viability of a retail store depends to a great extent on its
capability to satisfy the expectations of the consumers that make up its
market area. Therefore, the spatial heterogeneity of consumers should be
borne in mind when developing the location strategy. Only those sites
surrounded by consumers akin to the positioning of the store should be
selected. The spatial heterogeneity of the market may also be taken into
account once the store has been located by: (i) developing marketing
actions adapted to the market area the approach consisting of developing
decentralised marketing actions adapted to the market area of each store
in a retail chain has been referred to as micromarketing (Hoch et al. 1995;
Montgomery 1997; Ziliani 2000) and (ii) distinguishing geographic
segments with different shopping needs and habits within the market area.
Geodemographic segmentation tries to capture the spatial heterogeneity
of the market. Gonzlez-Benito and Gonzlez-Benito (2004) deal with the
role of geodemographic segmentation in the development of retail

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International Journal of Market Research Vol. 47 Quarter 3

micromarketing strategies, specifically the development of retail price

discrimination strategies. In the same way, geodemographic segmentation
is used to make other post-location decisions, such as those related to
communication campaigns or the proposal of new service offerings. These
applications of geodemographic segmentation are especially relevant when
the market is saturated and retail chains have reached a mature stage in
their coverage strategy. The interest of this study is the role of geodemographic segmentation in the development of an optimal retail location
strategy. This application of geodemographic segmentation is especially
relevant in a former stage of the life cycle: the growth and expansion of
retail chains. First, an explanatory model of the relevant factors to take
into account in retail site selection is proposed. Then, the discussion
focuses on the extent to which the spatial heterogeneity captured by
geodemographic segmentation facilitates the analysis of these factors.
Key factors in retail location strategy
Retail location decisions can be managed at different levels of geographic
aggregation: choice of region, metropolitan area, intra-urban area, specific
site, etc. In any case, the factors to bear in mind in the assessment of
possible locations can be classified into two broad types: on the one hand,
market factors, relating to the potential of the location for attracting
consumers and enhancing sales; on the other hand, operative factors,
relating to the effort involved in opening and operating the store. The
former refer to the capability to generate income, while the latter refer to
the costs involved. Both market and operative factors determine the
profitability of the store. This approach is summarised in Figure 1.
MARKET FACTORS
Implications for store attraction

LOCATION RELATING TO CONSUMERS

LOCATION RELATING TO OTHER FACILITIES

LOCATION STRATEGY

LOCATION RELATING TO COMPETITORS

OPERATIVE FACTORS
Costs involved in operating a location

Figure 1 Location strategy: key factors

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The role of geodemographic segmentation in retail location strategy

Location is a key factor in the retail attraction exerted by a retail store.

Cliquet (1992, p. 73) defines the concept of retail attraction as the
capability to make consumers come to the store by overcoming both
physical barriers and competition influence. This meaning is especially
appropriate from the perspective of location because it points out the
spatial component of shopping behaviour. Shopping activity implies
travelling and, consequently, an additional cost in terms of time, money,
effort and opportunity. The spatial accessibility of the store, which is
determined by location, constitutes an important attribute in the
perception of utility by consumers. The further the distance to the store,
the higher the costs involved, the lower the utility perceived by consumers,
and the lower their predisposition to visit the store. This conception of
distance as a factor dissuading the predisposition to shop is the basic
principle of spatial interaction theory (Fotheringham & OKelly 1989).
The underlying notion is a descending spatial demand curve based on the
inverse relationship between demand and price (Jones & Simmons 1990,
pp. 3845).
Therefore, location implies the spatial delimitation of the market
approached by the store that is to say, the choice of geographic market.
On the one hand, this circumstance suggests the choice of sites
characterised by a high population density in the surrounding area. On the
other hand, it requires a geographic segmentation of the market that
allows managers to select those residential areas whose shopping needs
and habits match the positioning of the retail store or chain. In summary,
location selection should consider both the quantity and the quality of the
consumers within the market area.
These arguments focus on the location of the store in relation to the
residence of consumers, and on the role of the distance to consumers as
determinant of the attraction exerted by the store. In addition, the location
of the store should also be assessed in relation to the location of other
complementary facilities. There is growing evidence of shopping trips in
which consumers combine different destinations and purposes (Dellaert et
al. 1998; Popkowski Leszczyc et al. 2004). Therefore, the location in
relation to complementary retail stores, recreational facilities or
workplaces, may enhance retail attraction by fostering multi-purpose and
multi-destination shopping trips and by taking advantage of the
population flows generated by these complementary facilities. Moreover,
some shopping needs arise when consumers are far from their residence,
during leisure time or at the workplace, the location in relation to these
areas being determinant. As a final argument in this respect, there may be

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International Journal of Market Research Vol. 47 Quarter 3

both positive and negative effects of the location in relation to

complementary facilities based on image transference (Burns 1992; Finn &
Louviere 1996).
The effect of location on retail attraction also depends on the location
of competitors. Location close to competitors implies the overlapping of
market areas and, consequently, the sharing out of the demand (Ingene &
Lusch 1981). Therefore, the selection of market areas with low competitor
presence may be a key to success.
Nevertheless, a possible positive effect on retail attraction of the
proximity to competitors has also been recognised in the literature (e.g.
Fotheringham 1986, 1988). This positive effect may compensate the
negative effect derived from the overlapping of market areas. The
explanation is based on economic arguments. The proximity of competing
stores facilitates the reduction of risk perceived by consumers because they
can search and compare between stores without increasing to a great
extent the travel costs involved. This reasoning is more appropriate for
those retail sectors in which the search and comparison are more
important that is to say, for high implication shopping. In addition, the
role of variety-seeking in the repetitive shopping for some products and
services should be taken into account. The spatial concentration of
competitors becomes more attractive because it facilitates shopping in
different stores during the same trip.
The opposite effect has also been recognised in the literature
(Fotheringham 1986, 1988; Haynes & Fotheringham 1990; Lo 1990,
1991a, 1991b) that is, the positive effect of the location close to
competitors can be neutralised or even inverted. The explanation is based
on psychological arguments. Sometimes consumers tend to choose a
shopping area first and then the specific store in which to shop. When the
volume of stores located in a shopping area is high, the location of new
competitors may not be appreciated by consumers that is to say,
consumers might not distinguish between shopping areas when the size of
their retail offer goes beyond a certain threshold. As a consequence, the
location of new competitors does not attract more consumers and existing
demand must be distributed among a higher number of stores. This trend
to underestimate shopping opportunities when the size of a spatial
concentration of competing retail stores increases is based on a
psychophysical principle (Stevens 1957).
Although location determines to a great extent the capability of the
retail store to attract consumers and generate sales, it also influences the
costs involved in the opening and maintenance of the retail store. In fact,

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The role of geodemographic segmentation in retail location strategy

the high costs involved in the opening of a store make location a strategic
decision with a top priority. The failing of a location might have important
financial consequences for the retail chain. The operating costs are not
negligible either, because they determine the profitability of the store. The
land value, which differs considerably across intra-urban areas, logistic
factors, relating to the supply and stock of merchandise, or the provision
of services to overcome accessibility barriers such as parking or free
transport, are key characteristics of alternative locations that should be
assessed in the selection process. The underlying idea is that the emphasis
on attracting the demand that should characterise the location strategy
should be weighed against the costs involved in satisfying such demand
appropriately.
The role of geodemographic segmentation
Geodemographic segmentation refers to the classification of consumers by
the type of residential area in which they live. It is therefore based on the
differentiation of residential areas according to the demographic, socioeconomic or even psychographic characteristics of their residents. The first
underlying principle is that similar residential areas have similar shopping
needs and habits and, consequently, similar response patterns to marketing
stimuli (Batey & Brown 1995; Birkin 1995). The second underlying idea
is that individuals with similar characteristics tend to reside in the same
areas and share the same environments that is to say, residential areas
tend to be internally homogeneous so that their residents do not differ
significantly from a mean profile.
The potential utility of geodemographic segmentation has led to the
commercialisation of several standard geodemographic classifications that
embrace almost the entire urban geography of developed countries. Widely
known examples are ACORN from CACI, or MOSAIC from CCN
Systems. As a pioneer firm in Spain, MOSAIC Iberia S.A. launched the
first geodemographic typology of the Spanish urban geography. The last
version of this taxonomy is now commercialised by EXPERIAN.
The importance of the geodemographic characterisation of the
customers of retail stores has repeatedly been pointed out in the literature
(Hoch et al. 1995; Putler et al. 1996; Kumar & Karande 2000; GonzlezBenito 2002; Inman et al. 2004). Many studies have dealt with both
current and potential applications of geodemographic segmentation (see,
for example, Beaumont & Inglis 1989; Flowerdew & Goldstein 1989;
Journal of the Market Research Society, 31, 1, 1989; Mitchell & McGoldrick

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International Journal of Market Research Vol. 47 Quarter 3

1994; OMalley et al. 1995, 1997). Most of them have emphasised the
selection of geographic markets and the location of retail stores as
especially relevant applications. Geodemographic segmentation allows
retailers to measure the spatial heterogeneity of the market, distinguishing
the intra-urban zones that are more attractive for each type of store.
Therefore, the utility of geodemographic segmentation as an analytic
tool in retail site selection is based on its capacity to differentiate
geographic markets in terms of the quality of the consumers. The idea is
to select possible locations not only in terms of the quantity of consumers
but also the fit between these consumers and the projected store. The
market area should include those consumers whose shopping needs and
habits match the assortment and services provided by the store.
Geodemographic segmentation facilitates a precise selection of intra-urban
areas in this respect. In summary, geodemographic segmentation facilitates
retail location strategy as an indicator of the market factors mentioned
above.
Since the focus of geodemographic segmentation is on the classification
of consumers according to their residence, the information provided by
these classification schemes concerns site assessment in regard to the
location relating to consumers. Nevertheless, geodemographic typologies
may also reflect the retail and services infrastructure, business activity or
complementary facilities located in a market area. Therefore, geodemographic segmentation may indirectly assist retail site assessment in regard
to the location relating to complementary facilities. Also indirectly,
geodemographic typologies may be indicators of the type of competition
located in a market area. Site selection based on the characteristics of
market areas derives necessarily in significant correlation between geodemographic profiles and retail formats and chains. Therefore,
geodemographic segmentation may facilitate retail site assessment in
regard to the location relating to competitors. In any case, the geographic
information systems that support standard geodemographic classifications
usually record detailed information in relation to industrial and
commercial activities across intra-urban zones, and this information may
directly facilitate retail site selection relating to complementary facilities
and competition.
The relationship between geodemographic segmentation and the
operative factors mentioned above is also indirect, but not negligible.
Residential zones differ in terms of land value, logistic facilities or
requisites for spatial accessibility such as transport, parking, safety, etc.,
and these circumstances are sometimes related to the profile of the

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residents. Consequently, the relationship between geodemographic

segmentation and the cost involved in opening and maintaining the retail
store should not be dismissed.

Empirical analysis
The empirical contents of this study seek to provide evidence for the
usefulness of geodemographic segmentation in retail site selection.
Specifically, the relationship between supermarket chains and the
geodemographic profile of their market areas is analysed. The supermarket
is a mature format in Spanish retailing, although in constant evolution
towards new variants, such as the discount or the hard discount.
Therefore, well-established supermarket chains comprise a suitable
scenario for the a-posteriori appraisal of the relationship between location
patterns and geodemographics. The confirmation of the relationship
implies that geodemographic segmentation explains part of the criteria
followed by retailers in the selection of spatial markets, regardless of
whether retailers have used geodemographic segmentation to make the
decision. Presumably, these criteria would be those related to the shopping
needs and habits of the residents in the market area.
Data
The empirical analysis focuses on supermarket-type chains operating in
Spain. Detailed information about each supermarket operating in the
whole Spanish geography was obtained from the Censo de Supermercados
(Supermarket Census) of Publicaciones Alimarket in November 2001. The
data include chain, group, address, size of sales area and retail format. In
all, the census includes 12,769 supermarkets.
The geodemographic classification MOSAIC, commercialised by
EXPERIAN, was used to characterise each of the supermarkets included in
the census. MOSAIC divides the Spanish urban geography into 506,329
areas classified into 14 groups and 48 typologies (see Table 1). It is
important to point out that the relevance of some groups and typologies
varies across towns and regions. For example, some geodemographic
typologies are only present in large metropolitan areas such as Madrid or
Barcelona, and some typologies are inherent to highly industrialised
regions.
Each store was assigned the geodemographic group and type associated
with its address, although the subsequent analysis focuses exclusively on

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International Journal of Market Research Vol. 47 Quarter 3

Table 1 MOSAIC groups and typologies

Group

% population

A. Elite

5.4

B. Urban well-off

4.0

C. Provincial well-off

7.1

D. Qualified professionals

7.0

E. Mid-level professionals

9.6

F. Consolidated

G. Tourist
H. Industrial

10.6

3.3
14.3

I. Non-qualified

5.4

J. Sectorial mix

7.5

K. Diversified rural

5.3

L. Agricultural

10.5

M. Passive areas

9.1

N. Security and defence

0.9

Typology
A01 Classic elite
A02 Urban elite
A03 Residential elite
B04 Settled well-off
B05 Consummate well-off
B06 Pre-retirement well-off
C07 Well-off in tourist area
C08 Provincial well-off
C09 Industrial well-off
C10 Well-off in mixed areas
D11 Newly settled professionals
D12 New emerging professionals
D13 Professionals from the 80s
D14 Professionals from the 70s
E15 Satisfied immigrants
E16 Autochthonous residents
E17 Apparent white collar
E18 Provincial white collar
F19 Stable employees
F20 Apparent employees
F21 Traditional employee
F22 Mid-level employee
F23 Modest employee
G24 Summer resorts
G25 Tourist areas
H26 Older workers
H27 Modern workers
H28 Workers in SME
H29 Classic workers
H30 Traditional workers
H31 Modest workers
I32 Unskilled stable workers
I33 Unskilled large households
I34 Unskilled modest workers
J35 Local business
J36 Territorial services centre
J37 Small mixed city
K38 Rural in expansion
K39 Older rural
K40 Rural border
L41 Young farmers
L42 Traditional farmers
L43 Mature agricultural workers
M44 Retired urban professionals
M45 Older people on their own
M46 Unskilled retired
M47 Rural aged
N48 Security and defence

% population
2.5
1.8
1.1
1.4
1.2
1.3
1.4
2.6
2.0
1.1
1.7
1.4
2.3
1.6
1.7
2.8
2.4
2.7
1.1
2.4
1.2
2.7
3.2
1.5
1.8
3.2
1.6
2.9
2.7
1.2
2.7
1.6
2.3
1.5
2.7
2.6
2.2
1.3
1.8
2.2
2.5
4.5
3.5
2.1
0.6
0.6
5.8
0.9

Source: MOSAIC (EXPERIAN Marketing Services)

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The role of geodemographic segmentation in retail location strategy

Table 2 MOSAIC factors

Factor

Minimum

Maximum

Professional activity
Habitat
Tourism and commerce
Families
Employment
Type of household
Businesses

Primary sector/building
Intensive urban development
Low linking with tourism and commerce
Older families
Active economies
Households in transition
Low economic activity

Services sector
Extensive urban development
High linking with tourism and commerce
Young families
Unemployment
Settled households
High economic activity

Source: MOSAIC (EXPERIAN Marketing Services)

the group. Since some addresses were not precise enough, the
geodemographic characterisation was not possible for 1274 stores.
Therefore, the subsequent analysis obviates these observations. A priori,
there are no reasons to expect that missing observations bias the
relationship between retail chain and geodemographic profile.
MOSAIC classification is based on a cluster analysis with seven
geodemographic factors: professional activity, habitat, tourism and
commerce, families, employment, type of household, and business. Table 2
summarises the interpretation of these factors, which are measured on a
scale between 0 and 10. Mean values of the factors within each group and
type allowed us to characterise the supermarkets, too, according to these
geodemographic dimensions.
The analysis focuses exclusively on ten leading supermarket chains:
Caprabo, Champion, Charter, Consum, Da, El Arbol, Lidl, Mercadona,
Plus Superdescuento and Supersol. The selection of these chains was based
on the following criteria.

304

Size of the stores. The geodemographic profile assigned corresponds to

a geographic area that is presumably smaller than the stores market
area. Consequently, the reliability of the geodemographic
characterisation increases as the size of the market area diminishes.
For this reason, the analysis obviated retail chains operating big
supermarkets (hypermarkets). This circumstance does not mean that
geodemographic segmentation is not useful to assess the market area
of large stores. However, the consideration of these large stores
requires a characterisation of the market area that is more complex
and sophisticated than the simple one used in this study. The mean and
standard deviation of the size of the stores within each retail chain are
shown in Table 3.

International Journal of Market Research Vol. 47 Quarter 3

Table 3 Retail chains studied: number of stores and size

Alimarket census
Retail chain

Number of stores Mean size

Caprabo
Champion
Charter
Consum
Da
El Arbol
Lidl
Mercadona
Plus Superdescuento
Supersol
All retail chains

350
153
171
715
2316
618
323
558
172
467
5843

889.29
1696.60
286.15
715.50
258.29
531.73
784.37
1058.58
720.03
740.00
577.03

After geodemographic characterisation

S.D. size Number of stores Mean size
776.55
714.36
137.36
342.39
169.88
257.40
129.99
380.56
80.01
499.98
478.24

315
131
159
645
2154
572
256
500
140
403
5275

849.80
1692.79
286.43
705.40
249.63
527.89
786.49
1054.20
719.90
712.55
558.48

S.D. size
760.86
739.85
141.29
333.07
160.60
254.96
128.35
372.15
80.48
490.65
470.50

Date: November 2001

Size of chains. The interest in identifying possible relationships

between retail chains and the geodemographic profile of their market
areas requires that the analysis should focus on those chains with a
high number of supermarkets. This circumstance also implies that all
the selected chains are widely known, although the store network
operated by some of them covers only some Spanish regions. The
number of stores within each chain is also shown in Table 3.

Property structure. Some chains were selected because they belong to

the same business group. Therefore, it is possible to assess possible
similarities or differences in the geodemographic profile of their store
networks. The relationship between chains and business groups is
shown in Table 4.

Table 4 Retail chains studied: retail group and format

Retail chain
Retail group

Supermarket

Caprabo
El Arbol Dist. y Supermercado
Ahold
Mercadona
Eroski
Carrefour
Lidl Supermercados
Tengelmann Espaa

Caprabo
El Arbol
Supersol
Mercadona
Charter, Consum
Champion

Discount store

Da
Lidl
Plus Superdescuento

Date: November 2001

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Retail chain
Geodemographic group
A. Elite
B. Urban well-off
C. Provincial well-off
D. Qualified professionals
E. Mid-level professionals
F. Consolidated
G. Tourist
H. Industrial
I. Non-qualified
J. Sectorial mix
K. Diversified rural
L. Agricultural
M. Passive areas
N. Security and defence
Non-residential area
All geodemographic groups

Caprabo

Champion

Charter

Consum

Da

El Arbol

Lidl

Mercadona

Plus Superdescuento

Supersol

15.2
9.2
7.9
6.0
3.5
5.1
10.2
20.0
0.6
8.6
2.2
0.3
2.9
0.3
7.9
100%

13.0
4.6
9.2
4.6
7.6
4.6
8.4
16.0
3.8
4.6
7.6
1.5
2.3
0.8
11.5
100%

3.8
3.1
3.8
6.3
13.2
3.8
3.8
24.5
0.0
18.9
6.3
5.7
4.4
0.0
2.5
100%

8.5
3.3
12.6
5.1
10.9
7.1
9.1
16.0
2.2
9.9
4.3
2.8
2.8
0.5
5.0
100%

5.0
5.6
7.1
5.0
10.3
8.5
2.0
15.1
2.3
10.9
5.8
9.1
7.1
0.6
5.6
100%

5.2
1.6
10.7
4.4
10.5
9.4
1.7
6.3
3.8
19.1
3.7
10.8
5.6
1.0
6.1
100%

3.9
4.3
5.9
3.1
10.2
5.5
4.7
12.9
5.9
6.3
7.8
5.9
2.3
0.8
20.7
100%

6.8
1.8
7.6
3.4
8.6
8.8
6.0
17.8
5.4
8.0
5.6
8.6
1.8
1.0
8.8
100%

4.3
0.7
8.6
5.7
7.1
8.6
3.6
13.6
4.3
2.9
11.4
4.3
2.9
1.4
20.7
100%

8.4
2.7
7.4
5.7
9.2
13.2
5.5
4.5
8.9
5.2
4.5
8.4
2.2
3.0
11.2
100%

Pearsons 2 = 838.226 (sign. 0.000)

Column percentages
denotes percentage at least one standard deviation above the average percentage across chains
denotes percentage at least one standard deviation below the average percentage across chains
Date: November 2001

The role of geodemographic segmentation in retail location strategy

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Table 5 Geodemographic characterisation of retail chains

International Journal of Market Research Vol. 47 Quarter 3

Store format. Chains were selected because they operate within

different retail formats. In this way, it is possible to make comparisons
between them. Specifically, traditional supermarkets and discount
stores were distinguished. The relationship between chains and
formats is also shown in Table 4.

Analysis and results

Since the main purpose was to depict and compare the geodemographic
profile of each retail chain included in the sample, the contingency table
for both dimensions was calculated. Each cell in the table quantifies the
number of supermarkets within the chain in question (see Tables 3 and 4)
whose market area is within the MOSAIC geodemographic group in
question (see Table 1). In order to facilitate comparison across chains,
Table 5 shows the percentages within each chain derived from the
contingency table. Figure 2 illustrates graphically the same content.
The 2 test included in Table 5 allows us to reject the hypothesis of
independence between retail chains and geodemographic groups.
Consequently, a significant relationship between both dimensions is
confirmed. The location strategy of retail chains implies the selection of
spatial markets with specific geodemographic profiles. And, reciprocally,
the geodemographic group indicates to some extent which retail chains are
located in an intra-urban zone. Such a relationship could be partially
explained by the relationship between the Spanish regions and the
presence of specific retail chains and geodemographic groups.
In order to analyse specific differences between retail chains, 2 tests
were obtained for each pair of retail chains. The results are summarised in
Table 6. In almost all cases, the hypothesis of equality in geodemographic
profiles is rejected. This implies that, in most of the cases, chains differ
from each other in terms of the type of markets selected to locate their
store networks.
It is interesting to point out that there are no significant differences
between Lidl and Plus Superdescuento. Both chains operate within the
discount format and, more specifically, within a format that could be
dubbed discount with parking. They are stores that have about 800
square metres of sales area, with facilities for access with vehicles, and
practise a low pricing policy. The results also reflect that the
geodemographic profile of Champion has an intermediate position. The
confidence level for the differences between Champion and Plus
Superdescuento, Lidl, Consum, Mercadona and Caprabo is substantially

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Non-residential area
N. Security and defence
M. Passive areas
80
L. Agricultural
K. Diversified rural
J. Sectoral mix
60
I. Non-qualified
H. Industrial
G. Tourist
40
F. Consolidated
E. Mid-level professionals
D. Qualified professionals
20

C. Provincial well-off
B. Urban well-off
A. Elite

0
Caprabo

Champion

Charter

Consum

Da

Figure 2 Geodemographic characterisation of retail chains

El Arbol

Lidl

Mercadona

Plus
Superdescuento

Supersol

The role of geodemographic segmentation in retail location strategy

308

%
100

Table 6 Differences between pairs of retail chains

Retail chain
Caprabo

Champion

26.726 **
(0.021)

Charter

77.780 *** 51.324 ***

(0.000)
(0.000)

Consum

60.700 *** 21.799 *

(0.000)
(0.083)

45.768 ***
(0.000)

Da

182.546 *** 66.141 ***

(0.000)
(0.000)

39.568 ***
(0.000)

149.019 ***
(0.000)

El Arbol

196.222 *** 80.638 ***

(0.000)
(0.000)

74.493 ***
(0.000)

124.381 ***
(0.000)

Lidl

101.899 *** 24.495 **

(0.000)
(0.040)

62.603 ***
(0.000)

89.914 *** 114.371 ***

(0.000)
(0.000)

Mercadona

100.078 *** 23.689 *

(0.000)
(0.050)

53.428 ***
(0.000)

55.203 ***
(0.000)

87.473 ***
(0.000)

89.905 *** 35.912 ***

(0.000)
(0.001)

85.889 *** 22.000 *

(0.000)
(0.079)

66.465 ***
(0.000)

71.837 ***
(0.000)

81.251 ***
(0.000)

77.772 *** 13.549

(0.000)
(0.484)

33.121 ***
(0.003)

145.651 *** 44.466 ***

(0.000)
(0.000)

119.204 ***
(0.000)

87.903 *** 52.328 ***

(0.000)
(0.000)

55.210 ***
(0.000)

Plus Superdescuento
Supersol

Pearsons 2 (significance in parentheses)

* p < 0.10; ** p < 0.05; *** p < 0.01
Date: November 2001

Champion

Charter

Consum

Da

El Arbol

Lidl

Mercadona

Plus Superdescuento

87.387 ***
(0.000)

120.237 *** 173.702 ***

(0.000)
(0.000)

100.877 ***
(0.000)

42.928 ***
(0.000)

309

International Journal of Market Research Vol. 47 Quarter 3

Retail chain

The role of geodemographic segmentation in retail location strategy

lower. The differences observed for the rest of the paired comparisons are
highly significant. As might be expected, the geodemographic profiles of
chains included within the same business group differ significantly (see
also Table 4). This result is consistent with the interest in avoiding
cannibalisation effects. There are also significant differences between
chains that operate within supermarket and discount formats (see Table 4).
However, it is logical to expect stronger differences across formats than
within formats. In this respect, it should be taken into account that the
distinction between supermarkets and discount stores is not a very precise
classification of retail formats, and there is still high heterogeneity within
them. The similarities detected for discounters with parking, and between
some supermarket chains, could be the consequence of the overlapping of
segments targeted by retail chains within formats.
An in-depth analysis of the geodemographic profile of each retail chain
is beyond the scope of this research. Nevertheless, it is interesting to
mention the peculiarities of the geodemographic profile of each chain. In
this respect, the geodemographic groups that are more typical of each
chain were identified by considering those whose percentage within the
chain is one standard deviation above the average percentage across
chains. Analogously, the geodemographic groups that are less typical of
each chain were identified by considering those whose percentage within
the chain is one standard deviation below the average percentage across
chains. The result is also shown in Table 5, and is summarised in the
following associations.

310

Caprabo. Typical groups: elite, urban well-off, qualified professionals

and tourist. Atypical groups: mid-level professionals, non-qualified,
diversified rural and agricultural.
Champion. Typical groups: elite and tourist. Atypical groups:
consolidated and agricultural.
Charter. Typical groups: qualified professionals, mid-level
professionals, industrial and sectorial mix. Atypical groups: provincial
well-off, consolidated, non-qualified, security and defence, and nonresidential areas.
Consum. Typical groups: provincial well-off and tourist.
Da. Typical groups: passive areas. Atypical groups: tourist.
El Arbol. Typical groups: provincial well-off, sectorial mix and
agricultural. Atypical groups: tourist and industrial.
Lidl. Typical groups: non-residential areas. Atypical groups: qualified
professionals.

International Journal of Market Research Vol. 47 Quarter 3

Mercadona. Typical groups: qualified professionals.

Plus Superdescuento. Typical groups: diversified rural and nonresidential areas. Atypical groups: urban well-off and sectorial mix.
Supersol. Typical groups: consolidated, non-qualified, and security
and defence. Atypical groups: industrial.

To go deeper into the geodemographic profile of each retail chain

requires analysis of the different variables and dimensions that define the
MOSAIC groups used in this research. In this respect, the retail chains
were characterised according to the geodemographic factors that
determine MOSAIC groups and typologies (see Table 2). The mean values
of each factor within each group were the raw data used for this purpose.
Then a factor score for each chain was obtained by weighting these mean
values with the percentages of the groups within the chain. The results are
summarised in Table 7, and illustrated graphically in Figure 3.
Analogously, the main associations between chains and geodemographic
factors were pointed out by distinguishing factors with a high or low score
across chains. Specifically, a factor score for one chain was considered
relatively high if it was one standard deviation above the average factor
score across chains. In the same way, a factor score for one chain was
considered relatively low if it was one standard deviation below the
average factor score across chains. The results are shown in Table 7, and
are summarised in the following associations.

Caprabo. Services sector as professional activity, high linking with tourism

and commerce, and active economies with low unemployment.
Champion. Services sector as professional activity, and high linking
with tourism and commerce.
Charter. Primary sector/building as professional activity, intensive
urban development, low linking with tourism and commerce,
households in transition and low economic activity.
Consum. High linking with tourism and commerce.
Da. Low linking with tourism and commerce, older families and low
economic activity.
El Arbol. Extensive urban development, older families and high
unemployment.
Lidl. High economic activity.
Mercadona. Young families.
Plus Superdescuento. Young families.
Supersol. Extensive urban development, young families, high
unemployment and settled households.

311

Retail chain
Geodemographic factor
Professional activity
Habitat
Tourism and commerce
Families
Employment
Type of household
Businesses

Caprabo
5.97
5.42
5.96
5.45
4.64
5.37
6.30

Champion
5.74
5.54
5.95
5.55
5.03
5.45
6.28

Charter
5.03
5.15
5.44
5.42
5.08
5.08
5.75

Consum
5.60
5.34
6.00
5.50
5.09
5.40
6.03

Score from 0 to 10
denotes score at least one standard deviation above the average score across chains
denotes score at least one standard deviation below the average score across chains
Date: November 2001

Da
5.36
5.56
5.45
5.35
5.40
5.32
5.81

El Arbol
5.13
5.74
5.59
5.38
5.63
5.38
6.15

Lidl
5.26
5.56
5.75
5.50
5.44
5.36
6.39

Mercadona
5.19
5.38
5.73
5.71
5.41
5.55
6.07

Plus Superdescuento
5.25
5.48
5.68
5.63
5.48
5.56
6.29

Supersol
5.65
5.72
5.91
5.69
5.81
5.76
6.16

The role of geodemographic segmentation in retail location strategy

312
Table 7 Characterisation of retail chains with geodemographic factors

6.4

Supersol
Plus Superdescuento
Mercadona

6.2

Lidl
El Arbol

6.0

Da
Consum
5.8

Charter

5.6

Caprabo

5.4

5.2

5.0

4.8

4.6
Professional
activity

Habitat

Tourism
and commerce

Families

313

Figure 3 Characterisation of retail chains with geodemographic factors

Employment

Type of
household

Businesses

International Journal of Market Research Vol. 47 Quarter 3

Champion

The role of geodemographic segmentation in retail location strategy

Conclusions
The growth of retailers is directly related to the definition of a location
strategy to configure their store networks, and the need to segment
geographic markets is implicit in the development and implementation of
such a strategy. Only those consumers that match the desired competitive
positioning should be considered. Since geodemographic segmentation
represents the spatial approach to market segmentation that is to say, it
classifies intra-urban zones according to the characteristics of their
residents, it constitutes a potentially useful analytical tool for understanding and selecting geographic markets. Therefore, geodemographic
segmentation may facilitate retail site selection in the growth and
expansion of retailers.
This research has tackled the role of geodemographic segmentation in
reducing uncertainty in location decisions. The proposal of an explanatory
model of the factors involved in retail site selection has allowed us to infer
that the main contribution of geodemographic segmentation is its potential
for assessing the quality of consumers within a market area. The demographic, socio-economic and psychographic characteristics of the residents
in an intra-urban zone indicate their shopping needs and habits and, consequently, their affinity with the store to be located. The geodemographic
profile can also be an indirect indicator of the presence of complementary
facilities that allow retailers to generate and capture flows of possible
customers, or the presence of specific types of competitor that weaken or
strengthen the expected attraction for the new store. Finally, the geodemographic profile can also be an indirect indicator of the costs involved in the
opening and maintenance of the store in each possible location.
An empirical analysis of some leading supermarket chains operating in
Spain has allowed us to prove that their store networks differ in terms of
the geodemographic profile of their market areas. This lends support to
the potential of geodemographics to target specific publics in the location
strategy. The commercialisation of standard geodemographic classifications covering the urban geography of most of the developed countries
allows retailers to develop a detailed analysis of the spatial heterogeneity
of the market and identify the residential zones that are more adequate for
the opening of new stores. The utility of these standard classifications
becomes reinforced when they are complemented with additional
information recorded in the geographic information systems that support
them.
In any case, the empirical analysis is only proof of the possibilities of
geodemographic segmentation. The difficulties found in relation to the

314

International Journal of Market Research Vol. 47 Quarter 3

geodemographic characterisations of supermarkets market areas should

be borne in mind. It was not possible to assign a geodemographic profile
to some of them because of the incompatibility between data sources. In
addition, the profile refers only to the close residential area that surrounds
the store. Although these limitations can be overcome, they require a more
technical effort than the one required for this research. On the other hand,
it should be taken into account that once the utility of geodemographic
segmentation has been proved, the interest lies in identifying the relationships between geodemographic dimensions, consumers shopping needs
and habits, and the attributes and qualities of the stores that satisfy them.

Acknowledgements
The authors are grateful for the generous collaboration of EXPERIAN and
Publicaciones Alimarket, which provided the data used in this study
(MOSAIC information and Censo de Supermercados, respectively). This
research was financed by the Regional Ministry of Economy and
Employment of Castile and Leon, Spain.

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