2. A trading area is a contiguous area from which a
retailer gets customers for the merchandise he is
selling
Trade area analysis and mapping describe the
characteristics of the area around a store or
network of stores
Without accurate trade area definitions, it is not
possible to measure the key statistics that impact
a store's performance
Introduction
5. Trade area analysis and mapping tells:
Where a store's customers are coming from
How many customers you have in a trade area
Where to look for more customers
Aid Site Selection & Target Marketing
6. Analyzing trade areas should be performed regularly to
provide key metrics for improving sales and marketing
performance.
Adding new stores to the network will cause the trade area
of nearby stores to change.
In a saturated market, or if stores are placed too close to
one another, cannibalization can occur.
A change to product offerings will impact the trade area, as
will shifts in population and demographics, the existence of
competitors, changes to highways and roads, and the
addition of other businesses that attract people to the area.
Factors Impacting Trade Area
7. Total size & density (demand & supply) of the population
Per capita disposable income
Education level
Family system (Joint / Nuclear)
Occupation (job / professional / Business)
Standard of living
Age group distribution
No. of residents owning homes
No. of manufacturers, suppliers, wholesalers available
Size of competition
Factors to be Considered for TAA
8. Traffic Flow
Direction of traffic
Movement of Vehicular Traffic
Parking facilities
Distance to store
Access from major roads
State of traffic congestion
Ease of deliveries
Demand Density
9. Procurement
Merchandise Management
Store Location
Transportation
Information
Supply Density
10. Personal Factors like:
Preferences & Emotional Attachment
Prejudices, Likes & dislikes
Political Reasons & compulsions
Unwillingness of key persons to a new & better
location on the grounds of far distances
Preference to residential or suburban areas
eventually getting crowded with time
Selection without thorough investigation
Common Errors in Store Location
11. Identify gaps or overlaps in the market coverage of the
existing store network, and make corrections by opening,
closing or moving stores
Make better site selection decisions by using
characteristics of existing trade areas to predict trade
areas around potential locations
Define a geographic area to analyze for market potential,
market penetration, and competitive threats
Become more efficient and effective at target marketing by
reaching out only to those customers and prospects in a
store's trade area
Use as a key input into customer profiling
Benefits of TAA
12. Three Theoretical approaches:
Radial (Ring) Studies
Gravity Models
Drive Time Analysis
Techniques of TAA
13. Performed by selecting and evaluating demographic
variables that fall within a pre-defined distance from a store
location
This technique assumes that the trade area is circular, with
the store at its centre
Ring analysis does not account for barriers such as rivers
or railroad tracks that may cross through a trade area and
restrict access to a retail site.
Radial studies are a simplistic approach that can result in
an incorrect delineation of the trade area and errors of
omission or commission
Radial (Ring) Studies
15. Gravity models, or spatial interaction models, define a trade area
based on its attractiveness relative to other trade areas
These models provide an approximation of store trade area by
putting the distribution of all locations (including competitors) into a
geographical context and evaluating each location's relative
attractiveness
A distance decay curve is used to model the spatial interaction of
individual locations. Often size of the store, or store sales if
available, is used to drive the attractiveness parameter.
Gravity models are more sophisticated than simple radial
approximations, but still do not account for logistical barriers and
they are limited by the availability and accuracy of competitor data.
Not appropriate for Non-Technical Analysts
Gravity Model
17. Use of GIS tools to digitize the roadway systems that indicate the
type of road such as a city street or a divided highway
Speed limits are assigned based on the type of road, the mode of
transportation (car, truck, motorcycle, etc.), congestion parameters,
and the time of day
Parameters used to dictate the ease of traveling along road
segments
Through this process, a polygon is generated to represent the
extent to which a vehicle can travel outward from the site in all
directions along the existing roadway system
Drive Time Analyses
18. Unlike the radial distance or gravity model-based trade area
approximations, GIS based drive time analyses account for
logistical barriers
Drive time analyses are generally considered to be valid for
“convenience” store scenarios, where patrons are expected to go to
the closest or most logistically convenient location
Based on the accuracy and the present state of technology
Drive Time Analyses
