Location research and site analysis for new food co ops
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LOCATION RESEARCH AND SITE ANALYSIS FOR NEW FOOD CO-OPS. A Presentation for “Co-op 500” by Peter C. Davis Location Research Consultant Cooperative Development Services. Location Research Defined. The body of knowledge and research methodologies used for:

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LOCATION RESEARCH AND SITE ANALYSIS FOR NEW FOOD CO-OPS

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Location research and site analysis for new food co ops

LOCATION RESEARCHAND SITE ANALYSISFOR NEW FOOD CO-OPS

A Presentation for “Co-op 500” by

Peter C. Davis

Location Research Consultant

Cooperative Development Services

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Location research defined

Location Research Defined

The body of knowledge and research methodologies used for:

  • The development of strategies for market entry or expansion

  • The evaluation of retail locations and sites

  • The forecasting of expected sales levels given alternative scenarios/assumptions

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Site analysis explained

Site Analysis Explained

The major location research activity associated with the evaluation of a retail food store site:

  • The market at large

  • The trade area served by the store

  • The competitive environment

  • The location (in the marketing sense)

  • The site (in the physical, real estate sense)

  • The facility

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Three levels of research analysis

Three Levels ofResearch Analysis

First Level: Basic Q & D Study

Second Level: Enhanced Q & D Study

Third Level: Full Market Study

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First level basic q d

First Level: Basic Q & D

An in-office assessment of the level of market potential available

A macro-level estimate of sales potential available to a retail food co-op

Based totally on secondary, in-office data

No local input of data or observations

Results in a 1-2 page summary that helps determine the likelihood of go/no-go

Price: $1,000 - $1,200

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Second level enhanced q d

Second Level: Enhanced Q & D

Everything included in the Basic Q & D Study

Also provides for local input regarding:

  • Trade area size and configuration

  • Population history and growth

  • Competition

  • Site/Location characteristics

  • Any other insights into the local market

    No fieldwork is conducted

    Provides for a somewhat more reliable evaluation of a natural food store opportunity, presented in a 2-3 page summary report

    Price: $1,500 - $1,800

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Third level full market study

Third Level: Full Market Study

Utilizes both primary and secondary data

Includes extensive fieldwork in order to

  • Evaluate site & location characteristics

  • Evaluate competitive environment

  • Evaluate patterns of accessibility

  • Evaluate extent of retail synergy

    Utilizes detailed analog sales forecasting

    Generally acceptable by potential lenders

    Results in full report (25-50 pages) with tables, charts, maps

    Price: $7,500 - $8,500 plus expenses

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Some definitions

Some Definitions

Trade Area:

  • The geographic area from which a store obtains most of its sales volume (dollars)

  • Usually defined as that area within which the store obtains 65% - 85% of its sales volume

  • Defined in terms of geographic sectors (usually Census Tracts)

  • Affected by population density, competition, retail synergy, trade area access, barriers, etc.

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Some definitions1

Some Definitions

Capture Rate:

  • The percentage of a store’s sales volume that is derived from a specific geographic area such as a trade area or trade area sector

  • The amount of sales derived from an area, divided by the total sales achieved by the store

  • Usually totals 65% - 85% for a store’s trade area

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Some definitions2

Some Definitions

Sales Penetration Rate:

  • Also defined as Average Sales/Capita

  • The sales derived from a specific trade area sector, divided by the relevant population of that sector

  • An indicator of a store’s strength with respect to the population base that exists in the trade area sector

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Some definitions3

Some Definitions

Demography:

  • The characteristics of a population base

  • With respect to natural food stores, usually includes race or ethnicity, age, education, type of employment, and income

  • Certain demographic characteristics are positively related to a natural food store’s sales penetration rates while others are negatively related to a natural food store’s sales penetration rates

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Some definitions4

Some Definitions

Market Potential:

  • The annual food-at-home expenditure potential for a population base

  • Determined by the prevailing trade area socio-economic and demographic characteristics

  • For conventional food, it generally ranges from about $2,200 to $2,600 per person, per year

  • For natural food, it generally ranges from about $225 to $450 per person, per year

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Phases of a market study for a proposed new retail food co op

Phases of a Market Study for aProposed New Retail Food Co-op

  • Phase I - CAT Survey (existing store)

  • Phase II - Market Area Fieldwork

  • Phase III - Data Analysis and the Preparation of a Sales Forecast

  • Phase IV - Preparation of Report

  • Phase V – Presentation (if desired)

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Phase i what is a cat survey

Phase I: What is a CAT Survey

Defined as a Customer Address and Transaction Survey of shoppers at an existing retail food co-op, conducted in order to identify where they live and how much they spent at the store

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Phase i what is a cat survey1

Phase I: What is a CAT Survey

CAT Survey Results are used to:

  • Allocate a store’s sales to the specific geographic sectors from which they are derived

  • Define a store’s trade area

  • Calculate a store’s sales penetration rates in the various sectors in its trade area

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Phase i what is a cat survey2

Phase I: What is a CAT Survey

A CAT Survey serves as a means of measuring a store’s performance in each of its trade area sectors, under certain conditions and assumptions with respect to its facility, site and location characteristics, its competitive environment, and its merchandising and operating practices

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Phase i what is a cat survey3

Phase I: What is a CAT Survey

Because CAT Surveys are interpreted in light of the facility, location, site, market and competitive conditions that exist, they form the basis for an analog sales forecasting system. Completed CAT Surveys thus comprise a database of analogs

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Phase ii fieldwork

Phase II: Fieldwork

Fieldwork - an important part of a market study, for it allows a trained location research or site analyst to supplement population, demography and CAT Survey data with personal, impartial observations regarding facility/site/location characteristics, the competitive environment, patterns of retail synergy and trade area access, etc.

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Phase ii fieldwork facility characteristics

Phase II: Fieldwork Facility Characteristics

Evaluation of:

  • Size and shape of the facility

  • Its layout and position on the site

  • Its condition

  • Its appearance

  • Its applicability as a food store

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Phase ii fieldwork location characteristics

Phase II: FieldworkLocation Characteristics

Evaluation of:

  • Population Density in the trade area

  • Demographic Characteristics of the population in the trade area and surrounding the site

  • Retail Synergy – type, amount, proximity

  • Trade AreaAccess

    • Distance and Direction

    • Types of streets/roads

    • Barriers – geographic/man-made/perceived

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Phase ii fieldwork site characteristics

Phase II: FieldworkSite Characteristics

Evaluation of:

  • Visibility – direction and distance, signage

  • Ingress/egress – ease or difficulty, number of points, speed limits, lanes, etc.

  • Parking – both configuration of the parking lot, and its capacity

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Phase ii fieldwork competitive environment

Phase II: FieldworkCompetitive Environment

Direct Competition:

  • Similar merchandise mix

  • Primary appeal toward same shopper clientele

  • Includes other natural food stores, co-ops and specialty food stores

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Phase ii fieldwork competitive environment1

Phase II: FieldworkCompetitive Environment

Indirect Competition:

  • Strong – usually with a natural foods “store within a store;” a readily-defined and identified department including dry grocery, bulk, HBC, frozen, refrigerated, and perhaps meat/seafood

  • Medium – usually 4, 8 or 12-foot sections of natural food set in conventional gondola runs, and identified by shelf-talkers, banners, etc.

  • Weak – limited amount of natural food, usually integrated with conventional groceries without any major product identification

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Phase ii fieldwork competitive impact

Phase II: FieldworkCompetitive Impact

Adjacent – Where the competitor is in close proximity to the study store

Intercepting – Where the competitor exists between a population sector and the study store

Impacting – Where the competitor is closer to a population sector than is the study store

A single competitor may be rated differently with respect to different population sectors

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Phase iii data analysis

Phase III: Data Analysis

  • Population – history, trends, projections

  • Demography – characteristics of trade area population including race, age, education, employment, and income

  • Per-capita Expenditure Potential

  • Competition – direct and indirect, and adjacent, impacting, or intercepting

  • Patterns of access – local and regional

  • Retail Synergy – amount, type, effect

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Phase iv analog sales forecast

Phase IV: Analog Sales Forecast

An Analog (derived from analogous, meaning similar) represents performance data about a store (given its facility, site, location, market and competitive characteristics) that can be used to forecast the performance of another store with similar facility, site, location, market and competitive characteristics.

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Phase iv example of an analog

Phase IV: Example of an Analog

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Phase iv trade area map

Phase IV: Trade Area Map

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Phase iv analog explained

Phase IV: Analog Explained

Can be a store(in terms of its performance at the trade area level)

Can be a sector of a store’s trade area.

An Analog that represents a good match with respect to characteristics of the study store or site can thus be used to forecast sales penetration levels for the study store or site – either at the trade area level, or at the population sector level.

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Phase iv analog selection

Phase IV: Analog Selection

By Location Type

  • Free-standing

  • Strip/Community Shopping Center

  • CBD/SBD/FBD

  • Downtown/Suburban/Edge of Town

  • Neighborhood/Regional/Highway

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Phase iv analog selection1

Phase IV: Analog Selection

By Store Size/Specialty Departments

  • Sales Area Size

  • Presence or Absence of

    • Meat/Seafood Department

    • Deli (service/self service)

    • Bakery

    • Café Seating Area

    • Coffee bar/juice bar

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Phase iv analog selection2

Phase IV: Analog Selection

By Population Density

  • Urban

  • Suburban

  • Rural

  • The greater the density of population, the lower sales penetration levels tend to be

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Phase iv analog selection3

Phase IV: Analog Selection

According to Demography

  • Ethnicity

  • Age Groups

  • Educational Attainment

  • Employment Type

  • Income Level (MHI, % HH with incomes $50 - $150 K)

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Phase iv analog selection4

Phase IV: Analog Selection

According to Competition

  • Direct Competition – number, type, locations

  • Indirect Competition

    • Strong

    • Medium

    • Weak

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Phase iv analog selection5

Phase IV: Analog Selection

According to Distance

  • Other things being equal, sales/capita levels tend to decrease as distance from the store increases

  • Because of the importance of demography in the performance of a natural food store or co-op, distance alone is not enough

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Phase v market study report

Phase V: Market Study Report

Introduction and Background

Summary of Findings and Conclusions

Review of Study Methodology

Review of Facility, Site, Location Characteristics

Definition and Description of Relevant Trade Area

Review of the Competitive Environment

Market Analysis of Relevant Scenarios

Maps, Tables, Charts

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So why do a market study

SO WHY DO A MARKET STUDY?

It Provides a Reliable Method for Defining the Relevant Trade Area to be Served, and the Levels of Sales Penetration to Be Achieved in it

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So why do a market study1

SO WHY DO A MARKET STUDY?

It Provides an Objective Review of the Location, Site and Facility Characteristics that Impact a Store’s Sales Performance

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So why do a market study2

SO WHY DO A MARKET STUDY?

It Provides an Impartial Review of the Competitive Environment that Affects the Store’s Sales Performance

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So why do a market study3

SO WHY DO A MARKET STUDY?

It Provides an Advanced Sales Forecasting Technique with Respect to the Anticipated Sales to be Achieved during First Few Years of the Store’s Operation

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So why do a market study4

SO WHY DO A MARKET STUDY?

It provides a means for evaluating the financial implications of opening a new retail food co-op, by providing the top line number to be used in the pro-forma operating statement

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So why do a market study5

SO WHY DO A MARKET STUDY?

It Serves as a Tool –

for Management

for Marketing

for the Membership

for the Bank

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Thank you

THANK YOU

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