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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
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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
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Choosing a Store Location
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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
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GIS Components
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GIS Software in Action
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The Segments of a Trading Area
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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
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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
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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
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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)
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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
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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