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Chapters 9 and 109 and 10Trading-Area Analysis and
Site Selection
RETAIL MANAGEMENT:
A STRATEGICAPPROACH
Administrative Items Midterm – Feb. 16th in class Next Class:
Midterm format details Retail Institutions assignment questions
Dr. Morgan’s presentation, “Toward Creative Practice in Social Enterprise” Schwartz AUDITORIUM, 3:30-4:30 pm, Feb. 8th
Syncrude Recruitment February 9, 11:15 am – 1:00 pm SCHW190
Agenda Introduce Trade Area Analysis and Site
Selection concepts for application to your Retail Institutions Assignments Appreciate the importance of location decisions Understand trade areas and how they are
delineated Overview three different types of site locations Consider Canada’s newest type of retail site
location – the lifestyle centre
The Importance of Location Location is one of the most important decisions a retailer can make
“A retailer with a mediocre strategy mix can succeed with a great location whereas a good retailer may struggle in a poor location.”
Parasite v. Destination Location can be changed, BUT Location is the least flexible part of the strategy mix
Major financial commitment Long term decision
Considerations of lease agreements Considerations of location ownership
Impact of location change on bottom line (increased promotional dollars (awareness campaign))
Impact of location change on loyal clientele – confusion, ill-will
Goal = “one-hundred percent location”, p. 242
Location, Location, LocationCriteria to consider include:
Population Density Demographics
Economics major industry characteristics employment rates availability of labour
Neighbours nature of nearby stores competition
Availability availability of locations legal restrictions property costs length of agreement
Accessibility transportation access parking availability proximity to supplies
Trade Area Analysis
Site Selection
The Segments of a Trading Area (Fig 9.5)
Trading Area:A geographic area containing the customers of a particular firm or group of firms for specific goods or services
50-80%
15-25%
The rest
The Trading Areas of Current and Proposed Outlets (Fig. 9.2 )
Trading area overlap Why would a retailer pursue such a strategy?
How to delineate trading areas Analogue models (Simplest)
Estimates sales based upon similar stores in area, estimated market share, competition and population size and density
Regression models Use a series of mathematical equations to show
associations between potential sales and a number of independent variables
Gravity models People drawn to stores that are closer and more attractive
than competitors’
Reilly’s LawReilly’s law of retail gravitation, a traditional means of trading-area delineation,
establishes a point of indifference between two cities or communities, so the trading area of each can be determined
Reilly’s law of retail gravitation, a traditional means of trading-area delineation, establishes a point of indifference between two cities or communities, so the
trading area of each can be determined
Uses population and distance between areas as measures Good because:
Reasonably reliable method Less costly to determine (two indicators) Easy
Limitations: Distance is only measured by major thoroughfares; some people will travel
shorter distances along cross streets Distance travelled does not reflect travel time and actual distance may not
correspond with perceptions of distance Assumes equal retailer efficiency
City A
City B
Point of Indifference
Pop=90,000Pop=10,000
30 km10 km
Huff’s Law
Huff’s law delineates trading areas on the basis of:
product assortment travel times and the sensitivity of the kind of shopping
to travel time.
Huff’s law of shopper attraction is another gravity model. It determines the probability of a shopper visiting a location.
Huff’s law of shopper attraction is another gravity model. It determines the probability of a shopper visiting a location.
Swiss Chalet Case Study CLIENT:
Swiss Chalet is one of five restaurant chains owned by Cara. Other brands include Harvey’s, Milestones, Montana’s, Kelsey’s; presence in every province.
CHALLENGE:
To easily evaluate the potential for Swiss Chalet delivery and takeout for any market in the country to help determine how many new restaurants could be added to a market.
To communicate the delivery areas to the Call Centre staff so that customer orders could be efficiently routed and guaranteed delivery times could be met.
Swiss Chalet Case StudySOLUTION: Used HouseholdSpend
data to provide a template for mapping
Showed: key demographics current Swiss
Chalet delivery sales
total expenditures for food away from home
current market share of restaurant expenditures
Also provided (not shown): Demographic
Estimates and Projections data
GIS Solutions:Resources and Case Studies http://www.environicsanalytics.ca/services.aspx?item=trade_
area_analysis_site_modelling http://www.environicsanalytics.ca/tradearea.aspx http://www.environicsanalytics.ca/case_swiss_chalet.aspx
http://www.mappinganalytics.com/trade-area-analysis/trade-area-analysis.html
http://www.directionsmag.com/articles/retail-trade-area-analysis-using-the-huff-model/123411
http://www.esri.ca/en_resources/files/EC1_0057_1201_1B_Rona.pdf
http://www.pbinsight.com/files/case-studies/case-study-files/24HourFitnessCSweb.pdf
3 Types of Locations
IsolatedStore
IsolatedStore
PlannedShopping
Centre
PlannedShopping
Centre
UnplannedBusinessDistrict
UnplannedBusinessDistrict
Choice will depend partly upon whether the retailer is a destination or parasite store
CBD Revitalization in Canada
It has been said that Canadian cities are not in as much need of CBD revitalization as some US areas because we didn't have urban flight in the 60's
However, many CBDs did experience a decline in the quality and quantity of their retailing. Consider Winnipeg
Some recent revitalization projects include: Toronto, Victoria, Ottawa and Calgary (Talbot Consultants)
Planned Shopping Centres in Canada:Fast Facts
There are about 4400 shopping centres in Canada (www.icsc.org)
About 1.2 million Canadians work in shopping centres
There are 14 square feet of shopping centre space per capita in Canada (23 in US)
Shopping Centre sales = $528/ft2 in Canada ($309/ft2 in US) – Colliers Canada, 2011
Ninety-two percent of Canadians over age 12 visit some type of centre in an average month.
Canadian Shopping Centre TrendsBUT… Sales at traditional enclosed malls in both Canada and the US
have been on the decline. Development has been slow
Vaughan Mills (opened Oct. 2004) was the first new mall construction after a decade of stalled development; encountered many difficulties
CrossIron Mills (opened August 2009 in Rocky View Alberta) was the first enclosed shopping centre development in Western Canada in over 20 years but had to reinvent traditional leasing with “Swing Shops”
“Most Canadian malls are mediocre emporiums peddling overpriced goods, barely superior to malls in the Third World.” - Paco Underhill
Factors Contributing to Mall Decline Mall merchandise is predominantly fashion; growth in
other categories Mall fashion stores appeal to teens yet few malls in
Canada have done much to attract a teen market. Many large retailers are moving "off-mall". (e.g. -
The Sony Store, Bombay Company, Sears Canada) Shoppers becoming more time sensitive and prefer
frequenting one-stop shops Shopper boredom with ‘chore shopping’ orientation of
mall retailers (Talbot Consultants)
Megamalls The West Edmonton Mall was the first
megamall in North America and remains the continent's largest today.
West Edmonton Mall Trivia
http://www.westedmall.com/about/default.asp
Life-Style Centres in Canada
Park Place, Barrie, ON
The Village in West Vancouver
The Shops at Don Mills
Dartmouth Crossing
Mixed Use CentresQuestions:
1. Do you think it possible for an “open-air” concept of shopping to be successful in Canada?
2. When making a site selection decision for a lifestyle centre, what criteria should be considered?
3. What types of retailers would be appropriate to such a development? Explain.
Can a lifestyle centre work in Atlantic Canada?
Takeaways Location is one of the most important decisions a
retailer can make (inflexibility) There are a variety of considerations in making the
right decision (population, economic base, competitive environment, accessibility, availability)
The right decision depends on the type of retailer, its target customer, its image and overall strategy
When locations change the retailer needs to be able to adapt