Retailing MKTG 3346

Retail Location and Site Selection

Razi Anwar

Retail Site Selection When Are these Decisions Made?

Openings
Expansions Closings

What are the effects of proposed changes in retail sites on the revenues of new and existing stores?

 Access to consumers
Number Characteristics Growth

Retail Site Selection Why Does It Matter?

Locations of other stores

Cannibalization own stores Agglomeration Competition Complementarity

Retail Site Selection How Is It Done?

Select: Geographic market Site within the geographic market If an opening or expansion, the format/size of the store to be opened

 Agglomeration captures the countervailing effects of complementarity and competition among retailers
Intra-type - Stores of the same type locating near one another
Facilitates consumer search Examples: motor miles and restaurant rows

Retail Site Selection Agglomeration

Inter-type - Stores of different types locating near one another

Facilitates multi-purpose shopping, virtual one-stopshopping, and offers a wider variety of goods to choose from Examples: shopping centers and shopping malls

Retail Site Selection Agglomeration

Trip chaining Make unrelated purchases on the same trip Price search Search until you find an attractive price Cherry picking Visit multiple stores for their bargain prices

 Trip chains reflect the routing problem faced by shoppers

Consumers minimize shopping costs by reducing travel, subject to fulfilling diverse product/service needs

Retail Agglomeration Trip Chains

Price search
Our research incorporates price uncertainty, allowing shoppers to terminate or continue a shopping trip (unplanned)

Data limitations require that we:

Consider visits only to selected store formats Assume that shopping trips begin from the consumers home

How does retail location affect multi-store shopping? RETAIL LOCATION (research with Steve Postrel and Amanda McLaughlin)
Relative to customers Relative to other stores

Retail Site Selection Agglomeration

Retail Competition

Destination Effect

Specifically, how are retailer revenues affected by nearby supermarkets, drug stores, mass merchandisers and supercenters, dollar stores and warehouse clubs?

Retail Site Selection Where Do Consumers Work?

Another consideration in retail site selection is where consumers work
Do shopping trips begin from home? From work?

Retail Site Selection How Is It Done?

RFRS
Location information of stores and consumer panelists, along with demographics, trends and seasonality, are used to analyze consumer spending across retail chains to assess the revenue impact of potential store sites
Panel Data Store Location Block-Group Demo and Size Data and Pop Data

Revenue Forecasting for Retail Sites

Retailer 4 Retailer 3 Retailer 2 Retailer 1 Revenues

RFRS Data Inputs

Panel data
Including demographics Currently available in 21 major markets Sources are IRI and AC Nielsen

Store and shopper locations

We can use straight-line distances, road distances, or traffic-adjusted travel times for shoppers to stores

Store square footage A wide variety of competing retailers can be incorporated into the model

RFRS Model
For every household in the panel, our models predict: (1) Number of visits quarterly (2) Spending per visit Predictors (1) Travel times/distances (2) Store sizes (3) Retail agglomeration (4) Trends (5) Seasonality (6) Demographics

RFRS Forecasting
Model estimates form the basis for forecasting and sensitivity analysis whenever new sites or scenarios are considered
Potential/actual new stores Potential/actual store closings Future periods Population changes

THANK YOU!!