UNIT : VI
Trading Area Analysis
CONTENTS
• Importance of Location of Retailer, Trading-Area Analysis,
Characteristics of Trading Areas.
What Are the Three Most Important Things in Retailing?
Importance of Location to Esprit
Choosing a Store Location
Step 1: Evaluate alternate geographic (trading)
areas in terms of residents and existing retailers
Step 2: Determine whether to locate as an
isolated store or in a planned shopping center
Step 3: Select the location type
Step 4: Analyze alternate sites contained in the
specific retail location type
Importance of Location of Retailer
* Business's location is key to successful operations and overall growth. When
choosing the location, consider company needs, customers, employees and
equipment needed to complete the services
* A good location therefore can lead to strong competitive advantages, because
location is considered one of the elements of the retail marketing mix that
is“unique”and thus cannot be imitated by competitors.
Inventory
Parking
Operations and Customer
Equipment Convenience
Service & Sales
Importance of location decision
Location is a major cost factor because
it :
i. involves large capital investment
ii. affects transportation costs
iii. affects human resources cost
Location is a major revenue factor
because it :
i. affects the amount of customer traffic
ii. affects the volume of business
Location, Location, Location
Criteria to consider include
population size and traits
competition
transportation access
parking availability
nature of nearby stores
property costs
length of agreement
legal restrictions
Levels of location decision and its determining factors
A retailer takes a location decision based on:
- selection of a city
- selection of an area or type of location within
a city
- identification of a specific site
Types of Retail Location
Types of locations
Types of
Free standing locations
Neighborhood stores
Highway stores
Secondary Business Is a shopping •Downtown or central business district
area that is smaller than the CBD and Secondary business district
Strip center
that revolves around at least one
department or variety store at a major
street intersection.
• Regional shopping centres of malls
Neighborhood / community
Specialist markets
Periodic/ weekly markets
A Central Business District CBD is the main geographic and commercial center of
a city. (high land rates , intense development)
Planned Shopping Centers A shopping center has been defined as “ a group of
retail and other commercial establishments that is planned , developed, owned
and managed as a single property”.
Regional Shopping Centers or Mall: Regional shopping centers or mall are the
largest planned shopping centers. Often they are anchored by two or more major
department stores have enclosed mall serve a large trading area and have high
rents. (Ansal plaza,spencers plaza crossroads, DLF city in Gurgaon)
Neighborhood/Community Shopping Centers: Neighborhood /community
centers usually have a balanced mix of stores including a few grocery stores , a
chemist, a variety store and a few other stores selling convenience goods to the
residents of the neighborhood.
Regional Shopping Centre This center sells a full variety of general merchandise,
mostly apparel, in typically enclosed malls with inward facing stores that share a
common walkway. Its main attractions are its anchors (Retail anchors).
Theme/Festival Center These centers typically employ a unifying theme that is
carried out by the individual shops in their architectural design and, to an extent,
in their merchandise. The biggest appeal of these centers is to tourists; they can
be anchored by restaurants and entertainment facilities. These centers, generally
located in urban areas, tend to be adapted from older, some-times historic,
buildings, and can be part of mixed use projects.
Strip Center A strip mall is an open-air shopping mall where the stores are
arranged in a row, with a sidewalk in front).
This is a list of the world's largest shopping malls based on their gross leasable area.
Gross leasable
SN Store Country City Year Opened
area (GLA)
New South China
1 China Dongguan 2005 659,612 m2(7,100,000 sq ft)
Mall
Golden Resources
2 China Beijing 2004 557,419 m2(6,000,010 sq ft)
Mall
3 SM Tianjin China Tianjin 2016 540,000 m2(5,812,511 sq.ft)
4 SM City North EDSA Philippines Quezon City 1985 498,000 m2(5,360,000 sq ft)
5 SM Megamall Philippines Mandaluyong 1991 474,000 m2(5,100,000 sq ft)
Trading Area Analysis
• A trading area is a geographic area containing the
customers of a particular firm or group of firms for specific
goods or services.
• A trading area is a contiguous/attached area from which a
retailer gets customers for the merchandise he is selling. A
trade area may be a town, city, district, state, and country
or even beyond the country’s boundaries.
• The trade area may be divided into few layers (zones)
depending upon the size and operations of the store, its
location, merchandise offered and services offered.
Benefits of Trading Area Analysis
Assessment of effects of
Discovery of consumer trading area overlap
demographics and
socioeconomic Ascertain whether chain’s
characteristics competitors will open
nearby
Opportunity to determine
focus of promotional Discovery of ideal
activities number of outlets,
geographic weaknesses
Opportunity to view media
coverage patterns Review of other issues,
such as transportation
Trade Area Analysis Factors
Population 1. Demand (Population quality/quantity, growth pot.)
Characteristics a. Demographics, e.g., GIS software
b. Psychographics, e.g., PRIZM
c. Growth, e.g., Census, Survey of Buying Power
Economic Base 2. Supply* (Economics, Competition, Legal constraints)
Characteristics a. Number and quality of competitors
b. Building codes, zoning, community/mall regs
Competition
Characteristics
Primary trading area
Secondary trading area
Fringe (Tertiary) trading area
• Primary Zone - The highest density of customers to
population and the highest per capita sales. The closest 2/3
(50-80%) of a store’s customers
• Secondary Zone - Generating about 15-25% of a store’s sales.
• Tertiary/ Fringe Zone - Includes some out shoppers who are
willing to travel greater distances to visit certain stores.
THANK YOU
