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LocationManaging Retailing

Module 1 Module 2 Module 3 Module 4

Introduction to

Retailing and

Retail Formats

Introduction to

Retailing

Retail Formats

Store Location

and Layouts

LocationSite Selection

Store Layout

Merchandise

Management

Merchandise

Plans

Buying

Merchandise

PricingBuying Systems

Financial

Performance

Understanding Retail

Customers

Customer

Behavior at

Retail Location

Customer

RelationshipManagement

Supply Chain

Management

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Location Analysis

Dr. Paromita GoswamiLocation

Managing Retail

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Learning Objectives

To outline the process for choosing astore location

To discuss the concept of a trading areaand its related components

To examine three major factors:population characteristics, economicbase characteristics, competition andlevel of saturation

Dr. Paromita Goswami

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Choosing a Store Location


Step 1: Evaluate alternate geographic (trading)areas in terms of residents and existing retailers

Step 3: Select the location type

Step 2: Determine whether to locate as anisolated store or in a planned shopping center

Step 4: Analyze alternate sites contained in thespecific retail location type

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Three Levels of Analysis

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Trading-Area Analysis

A trading area is a geograph ic areaconta in ing the cu stomers o f a

part icu lar f i rm or grou p of f i rms for

speci fic go ods or serv ices


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Customer Spotting Map for aSupermarket


Retail Management

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GIS Components


Retail Management

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GIS Software in Action


Retail Management

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The Segments of a Trading Area


Retail Management

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The Size and Shape ofTrading Areas

Primary trading area- 50-80% of a storescustomers

Secondary trading area- 15-25% of astores customers

Fringe trading area/ Tertiary- allremaining customers


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Trading Areas and Store Types


Largest

TRADINGAREAS

Smallest

Department stores

Supermarkets

Apparel stores

Gift stores

Convenience stores

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Multiple Regression Steps

Current trade areas are determined by usingthe 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

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Reillys Law

Reillys lawof retail gravitation, a traditional means

of trading-area delineation, establishes a point ofindifference between two cities or communities, sothe trading area of each can be determined

Point of Indifference:

Is the extremity of a citys trading area where

households would be indifferent betweenshopping in that city or an alternative city in adifferent geographical direction


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Reillys Law of Gravitation: An illustration of trading area of

Cuttack


Dcb

d

1 +Pb

Pc

=

where Dcbis the breaking point from Cuttack,measured in miles along the road toBhubaneswar;

dis the distance between Cuttack andBhubaneswar along the major highway;

Pc is the population of Cuttack; and

Pb is the population of Bhubaneswar

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Huffs Law of Gravitation

Huffs law:of shopper attraction delineatestrading areas on the basis of product

assortment (of the items desired by theconsumer) carried at various shoppinglocations, travel times from the shoppers

home to alternative locations, and the

sensitivity of the kind of shopping to traveltime


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U i i d Sh i C

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University and Shopping Centers:Illustration of Huffs Model

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Huffs Model: The Solution

Pij = 1000 32

(1000 32) + (500 52) + (100 12)

Step 1)Probability = .48

Step 2).48 x 12,000 students = 5,760 customers

Step 3)5,760 customers x $150 = $864,000

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Elements in Trading-AreaSelection


Population

Characteristics

Economic BaseCharacteristics

Nature and Saturationof Competition

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Retail Saturation Theory

Understored: the number of stores in relation tohouseholds is relatively low so that engaging inretailing is an attractive economic endeavor

Overstored:the number of stores in relation tohouseholds is so large that engaging in retailing isusually unprofitable or marginally profitable

Saturated: just enough store facilities for a given typeof store to efficiently and satisfactorily serve thepopulation and yield a fair profit to the owners


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Retail Saturation

Index of Retail Saturation (IRS):

is the ratio of demand for a product dividedby available supply

H is the number of households in the area;

RE is the annual retail expenditures for aparticular line of trade per household in the

area;RF is the square footage of retail facilities of aparticular line of trade in the area (includingsquare footage of the proposed store)


IRS = (H X RE)/RF

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Demand Density

Demand Density:

Is the extent to which the potential demandfor the retailers goods and services is

concentrated in certain census tracts, ZIPcode areas, or parts of the community


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Demand Density Map


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Supply Density

Supply Density:

The extent to which retailers areconcentrated in different areas of the market

under question


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Store Density and SiteAvailability Map


Retail Management

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Location

Illustration: Which trading areawould you choose?

Characteristics Area A Area B

Total population, 2007 13,732 15,499

Population change, 1997-2007 +8.2 +2.5

College graduates, 25 +, 20007 (% 41.4 39.2

Median household income, 2007 Rs. 61,236 Rs. 61,242

Managerial and professionaloccupations (%), 2007

45.3 45.0

4. location

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