Podcast
Questions and Answers
What distinguishes a destination store from a parasite store?
What distinguishes a destination store from a parasite store?
A destination store draws customers due to its better assortment and strong image, whereas a parasite store relies on nearby attractions for traffic.
How can the trading area of an existing store be delineated?
How can the trading area of an existing store be delineated?
By analyzing store records or conducting special research studies to assess customer patterns and demographics.
What is an analog model and its importance in trading-area analysis?
What is an analog model and its importance in trading-area analysis?
An analog model estimates potential sales by comparing a new store to similar existing ones, considering location and competition.
Explain the concept of Reilly's Law of Retail Gravitation.
Explain the concept of Reilly's Law of Retail Gravitation.
What role does trend analysis play in delineating the trading area of a new store?
What role does trend analysis play in delineating the trading area of a new store?
Describe the regression model in the context of trading-area analysis.
Describe the regression model in the context of trading-area analysis.
What is the difference between a trading area model and the traditional methods of delineating trading areas?
What is the difference between a trading area model and the traditional methods of delineating trading areas?
How does the gravity model relate to consumer attraction to stores?
How does the gravity model relate to consumer attraction to stores?
What is the primary concept behind Reilly's Law in relation to trading areas?
What is the primary concept behind Reilly's Law in relation to trading areas?
List two limitations of Reilly's Law as described in the content.
List two limitations of Reilly's Law as described in the content.
How does Huff's Law differ from Reilly's Law regarding shopper attraction?
How does Huff's Law differ from Reilly's Law regarding shopper attraction?
What characteristic of a community's economic base is considered beneficial for stability?
What characteristic of a community's economic base is considered beneficial for stability?
What types of locations are identified in the content, and which one is characterized as a freestanding retail outlet?
What types of locations are identified in the content, and which one is characterized as a freestanding retail outlet?
Define what is meant by a 'fringe trading area' in the context of urban retailing.
Define what is meant by a 'fringe trading area' in the context of urban retailing.
In retail planning, why is it crucial to understand population characteristics?
In retail planning, why is it crucial to understand population characteristics?
What role does travel time play in Huff's Law of shopper attraction?
What role does travel time play in Huff's Law of shopper attraction?
What characterizes the fringe trading area in a retail context?
What characterizes the fringe trading area in a retail context?
Define a destination store and its significance in retailing.
Define a destination store and its significance in retailing.
Explain how delineation methods contribute to identifying trading areas.
Explain how delineation methods contribute to identifying trading areas.
What are Reilly's and Huff's Laws in the context of trading area analysis?
What are Reilly's and Huff's Laws in the context of trading area analysis?
How does the primary trading area impact a retailer's strategy?
How does the primary trading area impact a retailer's strategy?
What factors should a retailer consider when evaluating alternate geographic trading areas?
What factors should a retailer consider when evaluating alternate geographic trading areas?
How does a retail location impact long-run strategy compared to short-run strategy?
How does a retail location impact long-run strategy compared to short-run strategy?
What is the importance of assessing alternate sites within a chosen retail location type?
What is the importance of assessing alternate sites within a chosen retail location type?
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Study Notes
Location Decisions
- Location decisions are complex and have long-term impact on a retailer's strategy
- Three issues occur when a firm moves to a new location:
- Lost loyal shoppers and employees
- New site may not have the same attributes as the old one
- Most store fixtures and renovations cannot be transferred
Trading Area Analysis
- Trading area: Geographical area containing customers and potential customers of a retailer for specific goods and/or services.
- Primary Trading Area: 50-80% of a store’s customers, closest to the store, and possesses the highest density of customers.
- Secondary Trading Area: 15-25% of store’s customers, located outside the primary area.
- Fringe Trading Area: Includes remaining customers, widely dispersed.
- Destination Store: A store with a strong image, assortment, and promotions, attracting customers beyond its immediate competitors.
- Parasite Store: A store that does not create its own traffic and relies on customers drawn to the location for other reasons.
Delineating a Trading Area of Existing Store
- Store records (secondary data) and special research studies (primary data) can be used to delineate the trading area.
- Computer-generated maps can be tailored to individual retailer's needs.
Delineating a Trading Area of a New Store
- Trend Analysis: Projecting future based on past trends, using data like population location, auto registrations, etc.
- Computerized Trading-area models can be used to assess new store locations:
- Analog Model: Estimating potential sales based on similar stores.
- Regression Model: Using mathematical equations to show association between potential sales and independent variables.
- Gravity Model: Based on the idea that people are drawn to stores that are closer and more attractive.
Reilly's Law
- Reilly's Law of Retail Gravitation: Establishes a point of indifference between two cities based on population size and travel time.
- Assumptions:
- Two competing areas are equally accessible from a major road.
- Retailers in the two areas are equally effective.
- Limitations:
- Distance is measured by major thoroughfares, not all streets.
- Travel time does not reflect the distance traveled.
- Actual distance may not correspond with perceived distance.
Huff's Law
- Huff's Law of Shopper Attraction: Delineates trading areas based on product assortment, travel times from the shopper's home, and the sensitivity of the kind of shopping to travel time.
Characteristics of Trading Areas
- Characteristics of the Population: Population size, households, income distribution, age, education, etc.
- Economic Base Characteristics: Community's commercial and industrial infrastructure and residents' sources of income. Diversification of economic base is desirable.
- The Nature of Competition and the Level of Saturation: Competitive intensity and the number of existing retailers.
Types of Locations
- Isolated Store: A freestanding retail outlet located on a highway or street, not sharing traffic with adjacent retailers.
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