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Chapter 9

Trading-Area Analysis. Chapter 9. Chapter Objectives. To Demonstrate Importance of Store Location To Discuss the Concept of Trading Area To Show How Trading Areas Can Be Delineated To Examine Factors in Trading Area Analysis. Location. Good Location CAN Overcome Mediocre Strategy Mix

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Chapter 9

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  1. Trading-Area Analysis Chapter 9

  2. Chapter Objectives • To Demonstrate Importance of Store Location • To Discuss the Concept of Trading Area • To Show How Trading Areas Can Be Delineated • To Examine Factors in Trading Area Analysis

  3. Location • Good Location CAN Overcome Mediocre Strategy Mix • Poor Location Difficult to Overcome • Requires Extensive Decision Making • Least Flexible Element of Strategy Mix

  4. Problems with Moving Location • Loyal Customers and Employees May Be Lost • New Location May Not Have Same Characteristics • Store Fixtures and Renovations May Not Transfer

  5. Determine Type of Location Select General Location Analyze Alternate Sites Site Selection Steps Evaluate Alternate Geographic (Trading) Areas

  6. Trading Area Analysis Benefits • Consumer Characteristics Detailed • Promotional Activity Focus Determined • Ascertain Overall Net Increase • Proper Number of Stores Calculated • Geographic Weaknesses Highlighted

  7. Overall Net Increase Total Revised Sales Total Sales Total Previous Sales of Existing Store of New Store of Existing Store + -

  8. Trading Area (New & Proposed)

  9. Geographic Information Systems (GIS) • Trading Area by Specific Demographics • Derive Sales Potential • Effect of New Location on Existing

  10. Trading Area Parts • Primary • Secondary • Fringe (Tertiary)

  11. Segments of a Trading Area

  12. Size & Shape of Trading Areas • Not Concentric • Two Stores in Same Area Can Have Different Trading Areas (TA)

  13. Store Types • Destination • Parasite

  14. Trading Areas Influences • Store Size • Competitors’ Locations • New Stores • Residential Housing Patterns • Travel or Driving Time • Promotion

  15. Segments of a Trading Area

  16. Delineating Trading Areas (Existing Stores) By Geographic Location • Shopping Frequency • Average Dollar Purchases • Concentration of Store’s Credit Card

  17. Delineating Trading Areas (New Stores) • Trend Analysis • Analog Model • Regression Model • Gravity Model • Reilly’s Law of Retail Gravitation • Huffs Law of Shopper Attraction

  18. Delineating Trading Areas (Existing Stores) By Geographic Location • Shopping Frequency • Average Dollar Purchases • Concentration of Store’s Credit Card

  19. Trading Area Characteristics • Population • Census • Survey of Buying Power • Effective Buying Index (EBI) • Buying Power Index (BPI) • Economic Base

  20. Nature of Competition • Understored • Saturated • Overstored

  21. Measuring Saturation • Number of People Per Establishment • Average Sales • Store • Category • Store Per Capita or Household • Per Square Foot • Per Sales Person

  22. What You Should Know • The Importance of Store Location and the Process of Choosing a Location • The Concept of Trading Area and Its Components • How Trading Areas May Be Delineated for Existing and New Stores • Three Major Factors in Trading Area Analysis: • Population Characteristics • Economic Base Characteristics • Competition and Level of Saturation

  23. Questions? Questions? Questions?

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