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PPT 8-1

5
th
Edition
PPT 8-2
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 5/e Copyright 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
Site Location
Chapter 8
PPT 8-3
Retailing Strategy
Retail Locations
Chapter 7
Site Locations
Chapter 8
Human Resource
Management
Chapter 9
Information and
Distribution
Systems
Chapter 10
Customer
Relationship
Management
Chapter 11
Retail Market and
Financial Strategy
Chapter 5, 6
PPT 8-4
Location Chapters
Chapter 7
General Description of the Location Types
Advantages and Disadvantages of Different Location
Appendix Terms and Condition Involved in Leasing
Sites
Chapter 8
Considerations in Selecting Area for Locating Store
Issues in Evaluating Specific Sites
PPT 8-5
Three Levels of Analysis
PPT 8-6
Trade Area Issues
Which Trade Areas Are Most Attractive for
Locating Retail Outlets?
How Many Outlets to Locate in a Trade Area?
More Stores Increases Economies of Scale and
Reduces Costs
More Stores also Results in More Cannibalization
and Less Sales per Store
PPT 8-7
Factors Affecting Demand
for a Region or Trade Area
PPT 8-8
Factors Affecting the
Attractiveness of a Site
How Attractive Is the Site to the Retailers
Target Market?
Match Between Trade Area Demographics and
Retailers Target Market
Likelihood of Customers Coming to Location
Convenience
Other Attractive Retailers At Location
Principle of cumulative attraction - a cluster of similar
and complementary retailing activities will have greater
drawing power.
PPT 8-9
Convenience of Going to Site
Accessibility
Road pattern and condition
Natural and artificial barriers
Visibility
Traffic flow
Parking
Congestion
Ingress/egress
PPT 8-10
In High Traffic Areas
Near Anchor
Center of Shopping Area
Near Stores Selling Complementary
Merchandise
Clustering Specialty Stores Appealing to
Teenagers
Better locations cost more

Location Within a Center
PPT 8-11
Map of Dallas North Park Center
PPT 8-12
Estimating Demand for a New Location
Definition of the Trade Area
Primary, Secondary, Tertiary Zones
Approaches for Estimating Demand
Analog Approach
Regression Approach
Huff Gravity Model
PPT 8-13
Trade Area

Primary zone - 60 to 65 percent of its customers
Secondary zone - 20 percent of a stores sales
Tertiary zone - customers who occasionally shop
at the store or shopping center
PPT 8-14
Factors Defining Trade Areas
Accessibility
Natural & Physical Barriers
Type of Shopping Area
Type of Store
Competition
Parasite Stores
PPT 8-15
Oblong Trade Area Caused by
Major Highways and Natural Boundaries
PPT 8-16
Sources of Information
Customer Spotting
Census Data
Geodemographic Information
Systems
ACORN
Information on Competition
Yellow Pages

PPT 8-17
Customer Spotting
Purpose: to spot, or locate, the residences of
customers for a store or shopping center.

How to obtain data:
credit card or checks
customer loyalty programs
manually as part of the checkout process
automobile license plates
PPT 8-18
Census Data of the U.S.
.
Only once in 10 years.
Each household in the country is
counted to determine the number
of persons per household,
household relationships, sex, race
age and marital status.
PPT 8-19
Geodemographic Information Systems
Demographic data vendors specialize in
repackaging and updating census-type data.
Geographic Information System (GIS) is a
computer system that enables analysts to
visualize information about their customers
demographics, buying behavior, and other data in
a map format.
GIS is a spatial database that stores the location and
shape of information.
Analysts can identify the boundaries of a trade area
and isolate target customer groups
PPT 8-20
Indices for Assessing Sales Potential
Market Potential Index (MPI)
Number of Households Purchasing a Product or
Service in a Trade Area
Spending Potential Index (SPI)
Average Amount Spent on a Product or Service by a
Household in a Trade Area

PPT 8-21
Sources for Measuring Competition
The Internet - lists current locations and future
sites.
Yellow Pages
Other Sources: Directories published by trade
associations, chambers of commerce, Chain
Store Guide, International Council of Shopping
Centers, Urban Land Institute, local newspaper
advertising departments, municipal and county
governments, specialized trade magazines, list
brokers
PPT 8-22
Measuring Competition
Calculate total square footage of retail space
devoted to a type of store per household
Higher ratios will indicate higher levels of
competition
PPT 8-23
Competitive Analysis for
Edward Breiner
PPT 8-24
Methods for Estimating Demand
Analog Approach
Multiple Regression Analysis
Huffs Model
PPT 8-25
The Analog Approach
1. Current trade area is determined by using the
customer spotting technique.

2. Based on the density of customers from the store, the
primary, secondary and tertiary trade area zones are
defined.

3. Match the characteristics of our current store with the
potential new stores locations to determine the best
site.
3 Steps:
PPT 8-26
Income Distribution of Three-Mile
Ring Surrounding Edward Breiner Optical
PPT 8-27
Demographic Trends for Three-Mile
Ring Surrounding Edward Breiner Optical
PPT 8-28
ACORN Neighborhood Lifestyle Clusters
for Three-Mile Ring
Breiner Optical
PPT 8-29
Descriptions of Largest PRIZM
Clusters Surrounding Edward Breiner Optical
PPT 8-30
Description of Largest PRIZM
Clusters Surrounding Edward Breiner Optical
PPT 8-31
Description of Largest PRIZM
Clusters Surrounding Edward Breiner Optical
PPT 8-32
Description of Largest PRIZM
Clusters Surrounding Edward Breiner Optical
PPT 8-33
Descriptions of Edward Breiner Optical
and Four Potential Locations Trade Areas
PPT 8-34
Multiple Regression Analysis
Need to define the retail trade area potential
for retail chains with greater than 20 stores.
Similar to the analog approach, it uses
statistics rather than judgement to predict
sales for a new store.
PPT 8-35
Multiple Regression Steps
Current trade areas are determined by using
the customer spotting technique
Primary, secondary, and tertiary zones are
determined by plotting customers on a map
Select appropriate measures of
performance, such as per capita sales or
market share.
Select a set of variables that may be useful
in predicting performance.
Solve the regression equation and use it to
project performance for future sites.
PPT 8-36
Yearly Sales, Population, and
Income for 10 Home Improvement Centers
PPT 8-37
Regression of Population on Sales
PPT 8-38
Illustration of Regression Approach
1. Specify Regression Model Identify Critical Predictors
of Store Sales
Sales = B
0
+ B
1
x X
1
+ B
2
x X
2

X
1
= population in trade area
X2 = average household income in trade
area
2. Estimate Weights - B
0
,B
1
, B
2
3. Use Estimated Weights to Forecast sales
Sales = -144,146 + 6,937 x X
1
+ 10,132 x X
2

Sales = -144,146 + 6,937 x 55,000 + 10,132 x 28,000 = $521,085

PPT 8-39
Huffs Gravity Model
Based on the premise that the probability that a
given customer will shop in a particular store
or shopping center becomes larger as the size
of store or center grows and distance or
travel time from customer shrinks
PPT 8-40
Huffs Model Formula
trips shopping of kinds
different on time travel of effect the reflects that o exponent t An
center
shopping point to starting s customer' from distance or time Travel
center shopping of Size
center shopping particular
a to traveling origin of point given a at customer a of y Probabilit
Where
ij
T b
ij
T
j
j
S
j
i
ij
P
n
1 j
b
ij
T
j
S
b
ij
T
j
S
ij
P

PPT 8-41
University and Shopping Centers:
Gravity Model Illustration
PPT 8-42
Huffs Model: The Solution
P
ij
= 1000 3
2

(1000 3
2
) + (500 5
2
) + (100 1
2
)

Probability = .48

.48 x 12,000 students = 5,760 customers

5,760 customers x $150 = $864,000

Repeat steps 1 to 3 for the remaining areas
and then sum them.