What is Trade Area Analysis in Retail Marketing. MBA Marketing study material.

Location is one of a very important factor in retail marketing strategies. Consequently, analysis of trade area for retail store allied with distinct planning with complex processes. Trade area analysis is a study of the contiguous geographic area to measure the key statistics affecting the store performance. The aim of this post is to demonstrate the concept and process of trade area analysis in retail marketing. 

The concept: Trade Area Analysis

Trade area analysis is a method, technique or study to provide an understanding and visualizing the approximate extent and scope of a geographic area for trading. This analysis also helps to make available the information like store backing, local market opportunities, competitive data, and barriers that would discourage consumers from visiting the site.

A trade area may include a city, district, state, country or even beyond the country for international retail business strategies.A figure below indicates the layers of trade areas:

·         Primary area: Highest store customer’s density (approx. 60-80%)

·         Secondary area: Medium store customer’s density (approx. 10-20%)

·         Territory area: Lowest store customer’s density (remaining)

Approaches to Trade Area Analysis:

1.      GIS Mapping Software:

Geographic Information System (GIS) is a digital mapping software which provides a geographical data with mapping techniques to select the trade location accurately.  It combines the mapping with data for key locations to the graphical view including demographic factors of population, data on customer purchase and competitor’s data. Currently, there is more such software are available in the market.

2.      Radial Analysis:

Radial or ring-based analysis is the easiest method of trade area analysis in retail. This analysis assumes that the trade area is round or a ring and store are located in the center of this ring. It is executed by calculating demographic variables that fall in the selected circular area from the store.

Above image of the radial, the analysis indicates the store located at the center of the ring. Dots are the demographic sites. Red dots are fallen within 5 miles of radius.

3.      Gravity Model:

A gravity model of trade was firstly presented by Jan Tinbergen in 1962. It is based on bilateral trade flows between two different geographical distances can be measured by applying Newton’s gravity equation. This model suggests that two relative economic distances attract each other to trade. Below is the equation of gravity model:

1^st Area population * 2^nd Area population / Distance between Area

4.      Drive Time Analysis:

This is GIS-based analysis to indicate that how many people live within 30 minutes of drive time from a store? It also helps to calculate the overlap between the distances measured in time from the store. It is most recent trending and used software to analyze trade area. It is a study of the road network which combines the advanced digital GIS modeling technology to gives an accurate data.

Above image of drive time analysis showing areas that can be reached within 5, 10 and 15-minute drive times from the selected store location.

Store Location and Layout in Retail Marketing. MBA Marketing study material

Designing a retail store location and layout is a process of using store place in a premeditated and tactical way to influencing the customers and boost the sales margin. Store location and layout designing are directly affected by consumer’s buying behavior. The escalation in footfall into the store place mostly depends upon the interior, layout, location of the store. This post gives a wide-ranging overview of store location and layout in retail marketing.  

Types of Retail Store Location:

1.      Mall Space:

Malls consist big center in which many brands and retailers are competing with each other under one roof as discuss in types of retailers. There are a variety of stores and shops format in mall space. Leasing amount in the mall is much bigger as compared to other locations.

2.      Shopping Centres:

These are the strip malls, commercial building with retail shops or shopping complex where there is a range of retail shops exist. Leasing contract with shopping centers indulgent than a mall. There are minimum 3 units up to 20 shops in one building with limited parking area.

3.      Downtown Area:

Downtown is a core area which is located in heart of the city. Getting a store on lease basis is much easier with fewer rules. The store may locate in a commercial building or strip shops. It’s a premium choice of store location in this kind of area but limited parking space is a big issue for this.

4.      Free Standing Locations:

Free standing location is any area or single detached building or residence which can be used for business operations. This can be located in the neighborhood, any busy highways or residential areas. This is beneficial in terms of leasing amount with free from rules.

5.      Home-Based:

Initially, all the businesses get a kick from home itself, but some of the businesses are taking a decision to continue with it in the home itself. This location is inexpensive and reliable but a challenge is to attract customers in this kind of locations.

Types of Retail Store Layout:

1.      Straight Layout: Ideal use of walls and create a free space to move freely :

2.      Diagonal Layout: Crosswise arrangement of racks:

3.      Angular Layout: Curve shape arrangements with a sophisticated design:

4.      Geometric Layout: Trendy design with symmetric arrangements with racks.

5.      Mixed Layout: Mixture of Diagonal, geometric and angular layout space: