logging in or signing up ch07 Quintilliano Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 2385 Category: Education License: All Rights Reserved Like it (5) Dislike it (0) Added: January 31, 2008 This Presentation is Public Favorites: 2 Presentation Description No description available. Comments Posting comment... By: nishugoel0102 (21 month(s) ago) hello..i liked this ppt..and i need it plz mail it to me ai nishugoel0102@gmail.com as soon as possible. Saving..... Post Reply Close Saving..... Edit Comment Close By: neha.jin (28 month(s) ago) hi, rele liked your presentation..!!! ur valuable inputs in the ppt will surely help me in adding richness to the concept.. thanks for uploading it.. Saving..... Post Reply Close Saving..... Edit Comment Close By: akash001 (35 month(s) ago) i liked that ppt. i want to download it Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript Marketing Selection and Retail Location Analysis: Marketing Selection and Retail Location Analysis Chapter 7 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.Learning Objectives: Learning Objectives Explain the criteria used in selecting a target market. Identify the different options, both store-based and nonstore-based, for effectively reaching a target market and identify the advantages and disadvantages of business districts, shopping centers, and freestanding units as sites for retail location. Define geographic information systems (GIS) and discuss their potential uses in a retail enterprise. Learning Objectives: Learning Objectives Describe the various factors to consider in identifying the most attractive geographic market for a new store. Discuss the various attributes to consider in evaluating retail sites within a retail market. Explain how to select the best geographic site for a store. Selecting a Target Market: Selecting a Target Market Home Page Is the introductory or first material viewers see when they access a retailer’s Internet site. It is the equivalent to a retailer’s store-front in the physical world. Virtual Store Is the collection of all the pages of information on the retailer’s Internet site. Ease of Access Refers to the consumer’s ability to easily and quickly find a retailer’s Web site in cyberspace. LO 1Selecting a Target Market: Selecting a Target Market Market Segmentation Identifying a Target Market LO 1Selecting a Target Market: Selecting a Target Market Market Segmentation Is dividing of a heterogeneous consumer population into smaller, more homogenous groups on demographic, economic, psychographic, and behavioral 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 LO 1Ease of Access: Ease of Access LO 1: Exhibit 7.1 Number of Web Sites Difficulty Finding Desired Site Through Search EngineTarget Market: Target Market The Limited has a well-defined target market: the moderate-income, career-oriented woman who is fashion conscious. LO 1Location of Store-Based Retailers: Location of Store-Based Retailers Store-Based Retailers operate from a fixed store location that requires customers to travel to the store to view and select merchandise or service. Nonstore-Based Retailers intercept customers at home, at work, or at a place other than a store where they might be susceptible to purchasing. LO 2Retail Formats for Accessing a Target Market: Retail Formats for Accessing a Target Market LO 2: Exhibit 7.2 Retail Formats Store-Based Nonstore-Based Freestanding Business District Nontraditional Shopping Centers/Malls Interactive TV Mail-Order Internet Automated Merchandising Systems Direct Selling Street PeddlingLocation of Store-Based Retailers: Location of Store-Based Retailers Central Business Districts (CBD) usually consists of an 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 originated historically. Secondary Business District (SBD) is a shopping area that is smaller than the CBD and that revolves around at least one department or variety store at a major street intersection. LO 2Location of Store-Based Retailers: Location of Store-Based Retailers Neighborhood Business District (NBD) is a chopping 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 its located on a major artery of a residential area. Shopping Center (or mall) is a centrally owned or managed shopping district that is planned, has balanced tenancy (the stores complement each other in merchandise offerings), and is surrounded by parking facilities. LO 2Location of Store-Based Retailers: Location of Store-Based Retailers Anchor Stores are the stores in a shopping center that are the most the most dominant and are expected to draw customers to the shopping center. Free-Standing Retailer generally locates along major traffic arteries and does not have any adjacent retailers to share traffic with. LO 2Shopping Center Advantages over a CBD: Shopping Center Advantages over a CBD Heavy traffic resulting from the wide range of product offerings. Cooperative planning and sharing of common resources. Access to highways and availability of parking. Lower crime rate. Clean, neat environment. LO 2Shopping Center Disadvantages : Shopping Center Disadvantages Inflexible store hours (open during mall hours only). High rents. Restrictions as to what merchandise the retailer may sell. Inflexible operations and required membership in the center’s merchant organization. Possibility of too much competition and the fact that much of the traffic is not interested in a perticular product offering. Dominance of the smaller stores by the anchor tenants. LO 2Advantages of Freestanding Retailing: Advantages of Freestanding Retailing Lack of direct competition. Generally lower rents. Freedom in operations and hours. Facilities that can be adapted to individual needs. Inexpensive parking. LO 2Limitations of Freestanding Retailing: Limitations of Freestanding Retailing Lack of drawing power from complementary stores. Difficulties in attracting customers for the initial visit. Higher advertising and promotional costs. Operating costs that cannot be shared with others. Stores that may have to be built rather than rented. Zoning laws that may restrict some activities. LO 2Nonstore-based Retail Formats: Nonstore-based Retail Formats Direct Selling Street Peddling Interactive TV Mail-Order Internet Automated Merchandising Systems LO 2ISCS Shopping Center Definitions: ISCS Shopping Center Definitions LO 2ISCS Shopping Center Definitions: ISCS Shopping Center Definitions LO 2Typical Size & Trading Area of Shopping Centers: Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Neighborhood Gross Leasable Square Feet 30,000 to 150,000 Primary Trade Area 3 MilesTypical Size & Trading Area of Shopping Centers: Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Community Gross Leasable Square Feet 100,000 to 350,000 Primary Trade Area 3-6 MilesTypical Size & Trading Area of Shopping Centers: Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Regional Gross Leasable Square Feet 400,000 to 800,000 Primary Trade Area 5-15 MilesTypical Size & Trading Area of Shopping Centers: Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Super-Regional Gross Leasable Square Feet 800,000 Primary Trade Area 5-25 MilesQuestion to Ponder: Question to Ponder Given the wide variety of locations available to target specific consumer groups, what new locations will provide the greatest opportunities for the retailers of tomorrow?Geographic Information Systems: Geographic Information Systems Thematic Maps Uses of GIS LO 3Geographic Information Systems: Geographic Information Systems Geographic Information System (GIS) 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 includes the characteristics of the population, humanly created objects, and mobile physical structures. LO 3Geographic Information Systems: Geographic Information Systems Thematic Maps use visual techniques such as colors, shading, and lines to display cultural characteristics of the physical space. LO 3GIS Components: GIS Components LO 3: Exhibit 7.4 Data Inputs Physical Geography Latitude/Longitude Land/Water Terrain Rainfall/Snow Temperature 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 InformationUses of GIS: Uses of GIS Market selection. Site analysis. Trade area definition. New store cannibalization. Advertising management. Merchandise management. Evaluation of store managers. LO 3Market Identification: Market Identification Retail Location Theories Market Demand Potential Market Supply Factors LO 4Selecting a Retail Location: Selecting a Retail Location LO 4: Exhibit 7.5 Identify the most attractive markets in which to operate Select the best site(s) available Identify the most attractive sites that are available within each marketMarket Identification: Market Identification Trading Area Is the geographic area from which a retailer, or group of retailers, or community draws its customers. LO 4Retail Location Theories: Retail Location Theories Retail Gravity Theory Saturation Theory Buying Power Index LO 4Retail Location Theories: Retail Location Theories Retail Gravity Theory Suggests that there are underlying consistencies in shopping behavior that yield to mathematical analysis and prediction based on the notion or concept of gravity. LO 4Retail Location Theories: Retail Location Theories Reilly’s Law of Retail Gravitation based on Newtonian gravitational principles, explains how large urbanized areas attract customers from smaller rural communities. LO 4 where Dab is the breaking point from city A, measured in miles along the road to city B; d is the distance between city A and city B along the major highway; Pa is the population of city A; and Pb is the population of city B.Retail Location Theories: Retail Location Theories Point of Indifference Is the extremity of a city’s trading area where households would be indifferent between shopping in that city or an alternative city in a different geographical direction. LO 4Trading Area for City A: Trading Area for City A LO 4: Exhibit 7.6 City B (Population 14,000) 3.5 miles City A (Population 240,000) City C (Population 21,000) 14.5 miles 1.3 miles X Y Z 10.8 miles 3.7 miles 3.2 miles City D (Population 30,000)Retail Location Theories: Retail Location Theories Saturation Theory Examines how the demand for goods and services of a potential trading area is being served by current retail establishments in comparison with other potential markets. LO 4Retail Location Theories: Retail Location Theories Retail Store Saturation is a condition where there is just enough store facilities for a given type of store to efficiently and satisfactorily serve the population and yield a fair profit to the owners. Understored is a condition in a community where the number of stores in relation to households is relatively low so that engaging in retailing is an attractive economic endeavor. Overstored is a condition in a community where the number of stores in relation to households is so large that engaging in retailing is usually unprofitable or marginally profitable. LO 4Retail Location Theories: Retail Location Theories Index of Retail Saturation (IRS) is the ratio of demand for a product (households in the geographic area multiplied by annual retail expenditures for a particular line of trade per household) divided by available supply (the square footage of retail facilities of a particular line of trade in a geographic area). LO 4 IRS = (H X RE)/RF Where IRS is the index of retail saturation for and area; H is the number of households in the area; RE is the annual retail expenditures for a particular line of trade per household in the area; RF is the square footage of retail facilities of a particular line of trade in the area (including square footage of the proposed store).Retail Location Theories: Retail Location Theories Buying Power Index (BPI) is an indicator of a market’s overall retail potential and is composed of the weighted measures of effective buying income (personal income, including all nontax payments such as social security, minus all taxes), retail sales, and population size. LO 4 BPI = 0.5(the area’s percentage of U.S. effective buying income) + 0.3(the area’s percentage of U.S. retail sales) + 0.2(the area’s percentage of U.S. population)Market Demand Potential: Market Demand Potential Population Characteristics Buyer Behavior Characteristics Household Income Household Age Profile Household Composition Community Life Cycle Population Density Mobility LO 4Identifying Communities with High Demand Potential for Fast-Food Drive-In Restaurant: Identifying Communities with High Demand Potential for Fast-Food Drive-In Restaurant LO 4: Exhibit 7.7Market Supply Factors: Market Supply Factors Square Feet Per Store Square Feet Per Employee Growth in Stores Quality of Competition LO 4Site Analysis: Site Analysis 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 LO 5Site Analysis: Site Analysis Size of Trading Areas Description of Trading Area Demand Density Supply Density Site Availability LO 5Customer Spotting Map for a Supermarket: Customer Spotting Map for a Supermarket LO 5: Exhibit 7.8 City Limits Store 4 miles from store 3 miles from store 1 mile from store 2 miles from store Description of Trading Area: Description of Trading Area Exhibit 7.9 identifies the 65 neighborhood types or clusters that MapInfo has distinguished for describing neighborhoods. This information is used in describing a trading area. LO 5PSYTE USA Cluster Demographic: PSYTE USA Cluster Demographic LO 5: Exhibit 7.9PSYTE USA Cluster Demographic: PSYTE USA Cluster Demographic LO 5: Exhibit 7.9Demand Density: Demand Density Demand Density Is the extent to which the potential demand for the retailer’s goods and services is concentrated in certain census tracts, ZIP code areas, or parts of the community. LO 5Demand Density Map: Demand Density Map LO 5: Exhibit 7.10 Three-Variable Demand-Density Map Variable 1 = Median income over $22,000 Variable 2 = Households per square mile greater than 1,200 Variable 3 = Average growth in population over last 3 years in excess of 3 percent per year Number of Variables Met 0 1 2 3Supply Density: Supply Density Supply Density The extent to which retailers are concentrated in different areas of the market under question. LO 5Store Density and Site Availability Map: Store Density and Site Availability Map LO 5: Exhibit 7.11Checklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 mixChecklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 shapeChecklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 Checklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 zoningChecklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 merchantsSite Selection: Site Selection 100 Percent Location Is when there is no better use for a site than the retail store that is being planned for that site. LO 6Site Selection: Site Selection Nature of Site Terms of Purchase or Lease Expected Profitability LO 6Nature of Site : Nature of Site Traffic Characteristics Types of Neighbors LO 6Nature of Site : Nature of Site 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. LO 6Terms of Purchase or Lease : Terms of Purchase or Lease Length of lease Exclusivity clause Guaranteed traffic rate Anchor clause LO 6Expected Profitability : Expected Profitability Net profit margin Asset turnover Return on assets LO 6If Retailers Could Select Their Neighbors: If Retailers Could Select Their Neighbors LO 6 Fast-food restaurant Gas service station Health food store Fitness center, medical center Recycled merchandise Supercenter Home improvement store Supercenter Hardware store Wholesale club, supermarket Zale’s Jewelry Sears, JCPenney, Mervyn’s Record Giant Wal-Mart; Kmart Payless Shoes Supercenters, KinderCare Long’s Drug Stores TJMaxx, Kmart Cato Fashion Kmart; Wal-Mart Bennetton Nordstron; Bloomingdale’s Nursery and Crafts Toys “R” Us; Circuit City Retailer Next to You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
ch07 Quintilliano Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 2385 Category: Education License: All Rights Reserved Like it (5) Dislike it (0) Added: January 31, 2008 This Presentation is Public Favorites: 2 Presentation Description No description available. Comments Posting comment... By: nishugoel0102 (21 month(s) ago) hello..i liked this ppt..and i need it plz mail it to me ai nishugoel0102@gmail.com as soon as possible. Saving..... Post Reply Close Saving..... Edit Comment Close By: neha.jin (28 month(s) ago) hi, rele liked your presentation..!!! ur valuable inputs in the ppt will surely help me in adding richness to the concept.. thanks for uploading it.. Saving..... Post Reply Close Saving..... Edit Comment Close By: akash001 (35 month(s) ago) i liked that ppt. i want to download it Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript Marketing Selection and Retail Location Analysis: Marketing Selection and Retail Location Analysis Chapter 7 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.Learning Objectives: Learning Objectives Explain the criteria used in selecting a target market. Identify the different options, both store-based and nonstore-based, for effectively reaching a target market and identify the advantages and disadvantages of business districts, shopping centers, and freestanding units as sites for retail location. Define geographic information systems (GIS) and discuss their potential uses in a retail enterprise. Learning Objectives: Learning Objectives Describe the various factors to consider in identifying the most attractive geographic market for a new store. Discuss the various attributes to consider in evaluating retail sites within a retail market. Explain how to select the best geographic site for a store. Selecting a Target Market: Selecting a Target Market Home Page Is the introductory or first material viewers see when they access a retailer’s Internet site. It is the equivalent to a retailer’s store-front in the physical world. Virtual Store Is the collection of all the pages of information on the retailer’s Internet site. Ease of Access Refers to the consumer’s ability to easily and quickly find a retailer’s Web site in cyberspace. LO 1Selecting a Target Market: Selecting a Target Market Market Segmentation Identifying a Target Market LO 1Selecting a Target Market: Selecting a Target Market Market Segmentation Is dividing of a heterogeneous consumer population into smaller, more homogenous groups on demographic, economic, psychographic, and behavioral 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 LO 1Ease of Access: Ease of Access LO 1: Exhibit 7.1 Number of Web Sites Difficulty Finding Desired Site Through Search EngineTarget Market: Target Market The Limited has a well-defined target market: the moderate-income, career-oriented woman who is fashion conscious. LO 1Location of Store-Based Retailers: Location of Store-Based Retailers Store-Based Retailers operate from a fixed store location that requires customers to travel to the store to view and select merchandise or service. Nonstore-Based Retailers intercept customers at home, at work, or at a place other than a store where they might be susceptible to purchasing. LO 2Retail Formats for Accessing a Target Market: Retail Formats for Accessing a Target Market LO 2: Exhibit 7.2 Retail Formats Store-Based Nonstore-Based Freestanding Business District Nontraditional Shopping Centers/Malls Interactive TV Mail-Order Internet Automated Merchandising Systems Direct Selling Street PeddlingLocation of Store-Based Retailers: Location of Store-Based Retailers Central Business Districts (CBD) usually consists of an 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 originated historically. Secondary Business District (SBD) is a shopping area that is smaller than the CBD and that revolves around at least one department or variety store at a major street intersection. LO 2Location of Store-Based Retailers: Location of Store-Based Retailers Neighborhood Business District (NBD) is a chopping 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 its located on a major artery of a residential area. Shopping Center (or mall) is a centrally owned or managed shopping district that is planned, has balanced tenancy (the stores complement each other in merchandise offerings), and is surrounded by parking facilities. LO 2Location of Store-Based Retailers: Location of Store-Based Retailers Anchor Stores are the stores in a shopping center that are the most the most dominant and are expected to draw customers to the shopping center. Free-Standing Retailer generally locates along major traffic arteries and does not have any adjacent retailers to share traffic with. LO 2Shopping Center Advantages over a CBD: Shopping Center Advantages over a CBD Heavy traffic resulting from the wide range of product offerings. Cooperative planning and sharing of common resources. Access to highways and availability of parking. Lower crime rate. Clean, neat environment. LO 2Shopping Center Disadvantages : Shopping Center Disadvantages Inflexible store hours (open during mall hours only). High rents. Restrictions as to what merchandise the retailer may sell. Inflexible operations and required membership in the center’s merchant organization. Possibility of too much competition and the fact that much of the traffic is not interested in a perticular product offering. Dominance of the smaller stores by the anchor tenants. LO 2Advantages of Freestanding Retailing: Advantages of Freestanding Retailing Lack of direct competition. Generally lower rents. Freedom in operations and hours. Facilities that can be adapted to individual needs. Inexpensive parking. LO 2Limitations of Freestanding Retailing: Limitations of Freestanding Retailing Lack of drawing power from complementary stores. Difficulties in attracting customers for the initial visit. Higher advertising and promotional costs. Operating costs that cannot be shared with others. Stores that may have to be built rather than rented. Zoning laws that may restrict some activities. LO 2Nonstore-based Retail Formats: Nonstore-based Retail Formats Direct Selling Street Peddling Interactive TV Mail-Order Internet Automated Merchandising Systems LO 2ISCS Shopping Center Definitions: ISCS Shopping Center Definitions LO 2ISCS Shopping Center Definitions: ISCS Shopping Center Definitions LO 2Typical Size & Trading Area of Shopping Centers: Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Neighborhood Gross Leasable Square Feet 30,000 to 150,000 Primary Trade Area 3 MilesTypical Size & Trading Area of Shopping Centers: Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Community Gross Leasable Square Feet 100,000 to 350,000 Primary Trade Area 3-6 MilesTypical Size & Trading Area of Shopping Centers: Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Regional Gross Leasable Square Feet 400,000 to 800,000 Primary Trade Area 5-15 MilesTypical Size & Trading Area of Shopping Centers: Typical Size & Trading Area of Shopping Centers LO 2 Type of Shopping Center Super-Regional Gross Leasable Square Feet 800,000 Primary Trade Area 5-25 MilesQuestion to Ponder: Question to Ponder Given the wide variety of locations available to target specific consumer groups, what new locations will provide the greatest opportunities for the retailers of tomorrow?Geographic Information Systems: Geographic Information Systems Thematic Maps Uses of GIS LO 3Geographic Information Systems: Geographic Information Systems Geographic Information System (GIS) 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 includes the characteristics of the population, humanly created objects, and mobile physical structures. LO 3Geographic Information Systems: Geographic Information Systems Thematic Maps use visual techniques such as colors, shading, and lines to display cultural characteristics of the physical space. LO 3GIS Components: GIS Components LO 3: Exhibit 7.4 Data Inputs Physical Geography Latitude/Longitude Land/Water Terrain Rainfall/Snow Temperature 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 InformationUses of GIS: Uses of GIS Market selection. Site analysis. Trade area definition. New store cannibalization. Advertising management. Merchandise management. Evaluation of store managers. LO 3Market Identification: Market Identification Retail Location Theories Market Demand Potential Market Supply Factors LO 4Selecting a Retail Location: Selecting a Retail Location LO 4: Exhibit 7.5 Identify the most attractive markets in which to operate Select the best site(s) available Identify the most attractive sites that are available within each marketMarket Identification: Market Identification Trading Area Is the geographic area from which a retailer, or group of retailers, or community draws its customers. LO 4Retail Location Theories: Retail Location Theories Retail Gravity Theory Saturation Theory Buying Power Index LO 4Retail Location Theories: Retail Location Theories Retail Gravity Theory Suggests that there are underlying consistencies in shopping behavior that yield to mathematical analysis and prediction based on the notion or concept of gravity. LO 4Retail Location Theories: Retail Location Theories Reilly’s Law of Retail Gravitation based on Newtonian gravitational principles, explains how large urbanized areas attract customers from smaller rural communities. LO 4 where Dab is the breaking point from city A, measured in miles along the road to city B; d is the distance between city A and city B along the major highway; Pa is the population of city A; and Pb is the population of city B.Retail Location Theories: Retail Location Theories Point of Indifference Is the extremity of a city’s trading area where households would be indifferent between shopping in that city or an alternative city in a different geographical direction. LO 4Trading Area for City A: Trading Area for City A LO 4: Exhibit 7.6 City B (Population 14,000) 3.5 miles City A (Population 240,000) City C (Population 21,000) 14.5 miles 1.3 miles X Y Z 10.8 miles 3.7 miles 3.2 miles City D (Population 30,000)Retail Location Theories: Retail Location Theories Saturation Theory Examines how the demand for goods and services of a potential trading area is being served by current retail establishments in comparison with other potential markets. LO 4Retail Location Theories: Retail Location Theories Retail Store Saturation is a condition where there is just enough store facilities for a given type of store to efficiently and satisfactorily serve the population and yield a fair profit to the owners. Understored is a condition in a community where the number of stores in relation to households is relatively low so that engaging in retailing is an attractive economic endeavor. Overstored is a condition in a community where the number of stores in relation to households is so large that engaging in retailing is usually unprofitable or marginally profitable. LO 4Retail Location Theories: Retail Location Theories Index of Retail Saturation (IRS) is the ratio of demand for a product (households in the geographic area multiplied by annual retail expenditures for a particular line of trade per household) divided by available supply (the square footage of retail facilities of a particular line of trade in a geographic area). LO 4 IRS = (H X RE)/RF Where IRS is the index of retail saturation for and area; H is the number of households in the area; RE is the annual retail expenditures for a particular line of trade per household in the area; RF is the square footage of retail facilities of a particular line of trade in the area (including square footage of the proposed store).Retail Location Theories: Retail Location Theories Buying Power Index (BPI) is an indicator of a market’s overall retail potential and is composed of the weighted measures of effective buying income (personal income, including all nontax payments such as social security, minus all taxes), retail sales, and population size. LO 4 BPI = 0.5(the area’s percentage of U.S. effective buying income) + 0.3(the area’s percentage of U.S. retail sales) + 0.2(the area’s percentage of U.S. population)Market Demand Potential: Market Demand Potential Population Characteristics Buyer Behavior Characteristics Household Income Household Age Profile Household Composition Community Life Cycle Population Density Mobility LO 4Identifying Communities with High Demand Potential for Fast-Food Drive-In Restaurant: Identifying Communities with High Demand Potential for Fast-Food Drive-In Restaurant LO 4: Exhibit 7.7Market Supply Factors: Market Supply Factors Square Feet Per Store Square Feet Per Employee Growth in Stores Quality of Competition LO 4Site Analysis: Site Analysis 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 LO 5Site Analysis: Site Analysis Size of Trading Areas Description of Trading Area Demand Density Supply Density Site Availability LO 5Customer Spotting Map for a Supermarket: Customer Spotting Map for a Supermarket LO 5: Exhibit 7.8 City Limits Store 4 miles from store 3 miles from store 1 mile from store 2 miles from store Description of Trading Area: Description of Trading Area Exhibit 7.9 identifies the 65 neighborhood types or clusters that MapInfo has distinguished for describing neighborhoods. This information is used in describing a trading area. LO 5PSYTE USA Cluster Demographic: PSYTE USA Cluster Demographic LO 5: Exhibit 7.9PSYTE USA Cluster Demographic: PSYTE USA Cluster Demographic LO 5: Exhibit 7.9Demand Density: Demand Density Demand Density Is the extent to which the potential demand for the retailer’s goods and services is concentrated in certain census tracts, ZIP code areas, or parts of the community. LO 5Demand Density Map: Demand Density Map LO 5: Exhibit 7.10 Three-Variable Demand-Density Map Variable 1 = Median income over $22,000 Variable 2 = Households per square mile greater than 1,200 Variable 3 = Average growth in population over last 3 years in excess of 3 percent per year Number of Variables Met 0 1 2 3Supply Density: Supply Density Supply Density The extent to which retailers are concentrated in different areas of the market under question. LO 5Store Density and Site Availability Map: Store Density and Site Availability Map LO 5: Exhibit 7.11Checklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 mixChecklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 shapeChecklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 Checklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 zoningChecklist for Site Evaluations: Checklist for Site Evaluations LO 5: Exhibit 7.12 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 merchantsSite Selection: Site Selection 100 Percent Location Is when there is no better use for a site than the retail store that is being planned for that site. LO 6Site Selection: Site Selection Nature of Site Terms of Purchase or Lease Expected Profitability LO 6Nature of Site : Nature of Site Traffic Characteristics Types of Neighbors LO 6Nature of Site : Nature of Site 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. LO 6Terms of Purchase or Lease : Terms of Purchase or Lease Length of lease Exclusivity clause Guaranteed traffic rate Anchor clause LO 6Expected Profitability : Expected Profitability Net profit margin Asset turnover Return on assets LO 6If Retailers Could Select Their Neighbors: If Retailers Could Select Their Neighbors LO 6 Fast-food restaurant Gas service station Health food store Fitness center, medical center Recycled merchandise Supercenter Home improvement store Supercenter Hardware store Wholesale club, supermarket Zale’s Jewelry Sears, JCPenney, Mervyn’s Record Giant Wal-Mart; Kmart Payless Shoes Supercenters, KinderCare Long’s Drug Stores TJMaxx, Kmart Cato Fashion Kmart; Wal-Mart Bennetton Nordstron; Bloomingdale’s Nursery and Crafts Toys “R” Us; Circuit City Retailer Next to