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WelcomeRetail Analysis:
Identifying Investment Opportunities Through Spending Analysis
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AgendaDashboard
Q&A
Follow-Up
Speakers
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Christopher Doll
Strategic Business Consultant Nuguru ConsultingSpecializes in facilitation, strategic planning, feasibility studies, business planning, and corporate finance.
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Retail Analysis
August 2012
Venturus
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Agenda► Introductions► Purpose of Retail Studies - Benefits►Retail Analysis Methodology►Retail Analysis for Investment►Retail Analysis and Customer Profiling►Community Impacts – Retail Spending►Questions
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Venturus Ltd.
►Founded as Nuguru in 2007►Name change in 2012►Staff-Christopher Doll, Eunice Washkowsky,
and Thai Hoang►What we do - Facilitation, Strategic
Planning, Investment Attraction, Corporate Finance, Feasibility Studies, Economic Studies, Marketing and Branding, Major Projects Planning, and Public Speaking
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Clients
►Clients – Cameco, PCS, University of Saskatchewan and Winnipeg, Municipalities including Saskatoon, North Battleford, Warman, and Dalmeny, Economic Development Agencies, WestcapManagement/Golden Opportunities, Private Companies, First Nations, National Hotel Developers, and Value Added Processors
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Retail Study Purpose
►Three target markets: Entrepreneurs looking to identify new
opportunities Existing business considering expansion Potential outside investors/companies through
targeted investment attraction
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Retail Analysis Methodology
►Retail Analysis uses statistics, surveys, comparative spending analysis, gravitational models, and population models (local, regional and tourism behaviour) to provide information on how consumers behave in a particular area.
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Retail Analysis Methodology
►Statistics and Surveys►Acquisition of good statistical information is
difficult as data availability for smaller populations is challenging due to privacy issues and rapid evolution of the retail market
►Surveys are time consuming, expensive, and often incomplete. Usually based on retail sales dollars or square footage.
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Retail Analysis Methodology
►Statistics are most accurate at regional or city levels
►Retail behaves on a regional basis in most markets anyway
►Data for spending can be acquired on a household or per capita basis, but what information does that provide?
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Retail Analysis Methodology
►The existing data examines spending overall in a retail category, but we don’t at this point understand where the spending occurs or if it provides retail opportunities.
►In order to better understand spending we use gravitational models like Reilly’s Law of Retail Gravitation
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Reilly’s Law
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Reilly’s Law
►Ok so what does it mean?►Basically a larger population has more retail
“pull” than a smaller one so it determines the point at which a consumer will go to destination A or B based on the size of the market or population base
►Can also be used (inverse equation) to determine where retail leakage in spending and percentage is most likely to occur
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Reilly’s Example
Regional Impact - North Battleford Population Spending by Retail Centre
Retail Centre Retail $MM Effort Formula % of sales Total MMNorth Battleford 408.8 1 408.8 83.36 $408.80Lloydminster 928.2 9 11.45926 2.34 $9.55Saskatoon 4471 10 44.71 9.12 $37.27Edmonton 20452 35 16.69551 3.40 $13.92Calgary 21,776 70 4.444082 0.91 $3.70Regina 3,665 40 2.290471 0.47 $1.91Prince Albert 801 20 2.00125 0.41 $1.67
Total 490.4006 476.8226
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Comparative Analysis
►Data in each retail sector can be acquired for a given population and compared to other areas. Reduced to a per capita basis spending levels can be compared.
►Spending can then be normalized based on income
►Opportunities can be determined by under spending in a specific retail category and the market size
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Comparative Analysis
►So once the data has been filtered by Reilly’s Law, and comparative analysis and normalized spending specific opportunities in a market can be identified
►The key is to ensure the market size is large enough to support the opportunity
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Example
Region/Area Yorkton Income North Battleford Geography Level CA Adjusted Per Cap Adj CA Per Capita 17608 0.99029167 17669 Total $ Total Sales $m 486.9 491.6733268 $27,923.29 408.8 $23,136.57 ($84,576,648) (%) Total Sales $m 0.12 0.121176421 0.1 New Car, Used, Recreational Motor Vehicle & Parts Dealers $m 168.9 170.5558121 $9,686.27 88.2 $4,991.79 ($82,946,674) (%) New Car, Used, Recreational Motor Vehicle & Parts Dealers $m 0.17 0.171666596 0.09 Gasoline Stations $m 44.7 45.1382167 $2,563.51 61.9 $3,503.31 $16,605,409 (%) Gasoline Stations $m 0.1 0.100980351 0.13 Furniture Stores $m 6.7 6.765683487 $384.24 4.2 $237.70 ($2,589,122) (%) Furniture Stores $m 0.06 0.06058821 0.04 Home Furnishings Stores $m 5.5 5.55391928 $315.42 2.7 $152.81 ($2,873,160) (%) Home Furnishings Stores $m 0.09 0.090882315 0.04 Computer & Software Stores $m 0.5 0.504901753 $28.67 0.2 $11.32 ($306,651) (%) Computer & Software Stores $m 0.03 0.030294105 0.01 Home Electronics & Appliance Stores $m 9.7 9.795094003 $556.29 7 $396.17 ($2,829,027) (%) Home Electronics & Appliance Stores $m 0.07 0.070686245 0.05 Home Centres, Hardware, Specialized Building Materials & Garden Stores $m 26.3 26.55783219 $1,508.28 30.8 $1,743.17 $4,150,163 (%) Home Centres, Hardware, Specialized Building Materials & Garden Stores $m 0.1 0.100980351 0.11 Supermarkets $m 35.4 35.74704409 $2,030.16 50.7 $2,869.43 $14,829,116 (%) Supermarkets $m 0.05 0.050490175 0.08 Convenience & Specialty Food Stores $m 2.3 2.322548063 $131.90 2.5 $141.49 $169,406 (%) Convenience & Specialty Food Stores $m 0.02 0.02019607 0.03 Beer, Wine & Liquor Stores $m 7.4 7.472545941 $424.38 8.4 $475.41 $901,567 (%) Beer, Wine & Liquor Stores $m 0.05 0.050490175 0.05 Pharmacies & Personal Care Stores $m 23.5 23.73038238 $1,347.70 21.7 $1,228.14 ($2,112,592) (%) Pharmacies & Personal Care Stores $m 0.08 0.08078428 0.07 Clothing Stores $m 14 14.13724908 $802.89 6.2 $350.90 ($7,986,225) (%) Clothing Stores $m 0.08 0.08078428 0.03 Shoe, Clothing Accessories & Jewellery Stores $m 5.4 5.45293893 $309.69 3.8 $215.07 ($1,671,830) (%) Shoe, Clothing Accessories & Jewellery Stores $m 0.1 0.100980351 0.07 Department & Other General Merchandise Stores $m 124 125.2156347 $7,111.29 110.9 $6,276.53 ($14,749,424) (%) Department & Other General Merchandise Stores $m 0.25 0.252450876 0.23 Sporting Goods, Hobby, Music & Book Stores $m 5.4 5.45293893 $309.69 3.7 $209.41 ($1,771,830) (%) Sporting Goods, Hobby, Music & Book Stores $m 0.05 0.050490175 0.03 Miscellaneous Store Retail $m 7.3 7.37156559 $418.65 5.8 $328.26 ($1,597,103) (%) Miscellaneous Store Retail $m 0.07 0.070686245 0.05
($84,777,978)
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Population Models
►In some markets population models become more important and spending cannot be explained by Reilly’s alone
►Markets with substantial regional and tourism populations may not behave typically
►Las Vegas has a significantly outsized retail sector given its population base
►Outlet malls are single largest tourism driver
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Retail Analysis for Investment
►Large retailers are interested in Saskatchewan but the market is difficult for them to assess.
►Markets typically based on population blocks – one store per 500,000 etc.
►Retailers need compelling proof of market size to enter Saskatchewan markets
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Drivers of Success
►There are two keys to investment attraction:
►Potential investors are looking for a tailored package that addresses an opportunity specific to their industry.
►Effective investment attraction requires identification of targets and direct contact w ith decision makers.
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Why Strategic Business Attraction
►Past approaches: Incentive Competition Website - Passive Marketing Devine Intervention Government Handout
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Not Just Retail
►Targeted investment attraction works based on competitive and comparative advantages that can be determined through comparative analysis and direct contact with potential investors
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Retail Analysis and Customer Profiling
►Retail Analysis determines where consumers are spending their money and what they are buying
►It determines how a market may behave differently from the norm
►Kindersley for example has far too many hotels on a per capita basis but the market and consumers are behaving differently
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Retail Analysis and Customer Profiling
►Provides more ammunition for opportunity identification
►Where would you expect to find this car?
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Community Impacts
►Retail Spending Analysis is used to determine the flow of spending
►Leakage to other markets and online can be determined
►Can show how many dollars are leaving a community and what percentage of spending occurs inside and outside the region
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The Process - Summary
►Process>Data Collection>Comparative Analysis>Spending Normalization>Reilly’s Law>Aggregation of total spending to determine opportunities
►Other information Dollars spent or percentage spent in other
communities Behaviour of spending in your region or
community and how it differs from others
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Q&APlease send your questions via the Chat or Question widget on your dashboard.
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Thank You
Verona ThibaultPresident, SEDA@[email protected]@seda.sk.ca306-384-5817
Christopher DollConsultant, Nuguru Consulting [email protected]