Term
| 4 factors affecting store site selection |
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Definition
1. Strategic Fit with Target Market
2. Economic Conditions
3. Competition
4. Cost of operating stores |
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Term
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Definition
-The growth of population and employment
-How long the growth will continue, and how it will effect demand for merchandise sold in its stores
-Which areas are growing quickly and why
-Retail stores will follow the population and household incomes |
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Term
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Definition
Demographic, lifestyle profile, size and composition of households in an area
-Ann Taylor --- Looking for a high income, dual career family
-McD's ---- Looking for families with children |
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Term
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Definition
-Varies across areas
-Affected by proximity of area considered vs. other areas where retailer operates
-Local and state legal environment has effect |
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Term
| How many stores to open in one area? |
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Definition
Economies of Scale
One promotional costs for all stores
Justifies cost of distribution center I Increases sales per store
Target needs of regional market
Management has control of market
Cannibalization
Open stores as long as profits increase
A marginal analysis |
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Term
| Dispute on Cannibalization between franchisor and franchisee |
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Definition
-Cannibalization diminishes returns from locating too many stores in an area
-Franchiser’s goal:
to maximize sales of all stores (because loyalty is based on total store sales)
No concern about cannibalization
-Franchisee’s goal:
to maximize the sales and profits of its store(s)
Concern about cannibalization
-An exclusive territory is granted to reduce conflict |
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Term
When evaluating and selecting a specific site,
retailers consider: |
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Definition
-The characteristic of the site
-The characteristic of the trading area
-The estimated potential sales that can
be generated |
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Term
| Traffic Flow and Accessibility |
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Definition
When traffic is greater, more customers shop
Good for convenience retailers
Not necessary for destination retailers
Too much can impede access to store
Accessibility to store is as important as traffic flow |
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Term
| Location within shopping centers |
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Definition
-Affects both sales and occupancy costs
-In a strip shopping center – closest to the supermarket for impulse buying
-In a enclosed shopping mall – retailers who sell comparison shopping goods locate close to the department store anchors
-Locate stores that appeal to similar target markets because consumers shop at places with a good assortment of merchandise |
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Term
| Trade Area Characteristics |
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Definition
-A contiguous geographic area that accounts for the majority of a store’s sales and customers…by distance or time
-Primary zone
60 to 65 percent of its customers
-Secondary zone
20 percent of a store’s sales
-Tertiary zone
customers who occasionally shop at the store or shopping center |
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Term
| Factors affecting the size of the trade area |
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Definition
Accessibility
Natural & Physical Barriers (Rivers, Bridges)
Type of Shopping Area
Type of Store
The nature of merchandise, assortment, location of alternative sources for the merchandise
Competition
Parasite Stores (dry cleaner lives off WM traffic) |
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Term
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Definition
-Customer Spotting
-Use Census Data (census block – 3,000 people)
-Geographic Information Systems (GIS)….(Chapter 4) ESRI couple lifestyle, demographic, and spending with Census Data |
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Term
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Definition
| Purpose: to spot, or locate, the residences of customers for a store or shopping center |
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Term
| How to obtain customer spotting data |
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Definition
How to obtain data:
credit card or checks
customer loyalty programs
manually as part of the checkout process
automobile license plates |
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Term
| Spending Potential Index (SPI) |
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Definition
Average Amount Spent on a Product or Service by a Household in a Trade Area
U.S. Average Indexed at 100
Find Areas with Indices Greater than 100 (65201 has an index greater than 100 for textbook purchases) |
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Term
| Methods of estimating demand |
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Definition
Huff’s Model
Regression Analysis
Analog Approach |
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Term
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Definition
| Based on the premise that the probability which a given customer will shop in a particular store or shopping center becomes larger as the size of store or center grows and distance or travel time from customer shrinks |
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