Retail Location Model

Submitted By: Group 1

Krishna Bhawsar (007)

Mayur Verma (008)

Roziwala Suraj (016)

Structure

– Importance of location for retailer

– Trading area analysis

– Chief factor to consider in evaluating an area

– Weightages given to a criteria

– Analyzing retail trade area

– Model applied

Importance of location

– Critical importance - can make or break the business

– Must be consistent with its mission and goals

– Some basic questions to be answered:

– Target customer?

– What are you selling?

– Retail space or storage space size of your store

Type of goods

– Convenience goods

– Specialty goods

– Infrequent goods

Population and Customer

– Research the area thoroughly before making a final decision.

– Obtain location demographics on the area's population, income and age.

– Find a location where your customers live, work and shop.

Accessibility, Visibility and Traffic

Don't confuse a lot of traffic for a lot of customers.

How many people walk or drive past the location.

Is the area served by public transportation?

Can customers and delivery trucks easily get in and out of the parking lot?

– Is there adequate parking?

Cont...

Visibility

– A specialty retail store located six miles out of town in a free standing building will need more marketing than a shopping store located in a mall.

Location Costs

Besides the base rent, consider all costs involved when choosing a retail store location.

Who pays for lawn care, building maintenance, utilities and security?

Who pays for the upkeep and repair of the heating/air units?

If the location is remote, how much additional marketing will it take for customers to find you?

How much is the average utility bill?

Will you need to make any repairs, do any painting or remodeling to have the location fit your needs?

– Will the retailer be responsible for property taxes?

Other considerations

– Your retail shop may require special considerations. Make a list of any unique characteristic of your business that may need to be addressed.

– Will the store require special lighting, fixtures or other hardware installed?

– Are restrooms for staff and customers available?

– Is there adequate fire and police protection for the area?

– Is there sanitation service available?

– Does the parking lot and building exterior have adequate lighting?

– Does the building have a canopy that provides shelter if raining?

– What is the crime rate in the area?

Trading-Area Analysis

– Trading area- geographic area containing the customers of a particular firm or group of firms for specific goods or services

– First step in the choice of a retail store location is to describe and evaluate alternate trading areas and then decide the most desirable one

Benefits of thorough trading area analysis

– Reveals opportunities

– Focus on promotional activities is ascertained

– New customers or take business from existing stores

– Anticipate- whether competitors want to open nearby stores if the firm doesn't do so itself

Cont...

– Best number of stores for a chain to operate in a given area is calculated.

– Geographic weaknesses are highlighted

– The impact of the internet is taken into account.

– Other factors (transportation, labour availability etc.) are reviewed.

Primary, Secondary and Fringe trading areas

Destination and parasite store

– Destination store: better assortment, promotes more and creates a stronger image

– Parasite store: does not create its own traffic and has no real trading area of its own

Analyzing retail trade areas

Model

Objective - Maximize total demand at Client's side

Assumptions

– We are working for Big Bazaar

– Determining location for opening 4th store in Ahmedabad

– Some data are fuzzy ( randomly generated to demonstrate the model). To do actual analysis we needs primary research to determine various data and POS (point of sale) data

Comparison of different Model

Characterisitics Huff’s Law Reilly’s Law Our Model

Law/Model Law of shopper attraction

Law of retail gravitation

Competition Ignoring Model

Formula Pij=(Sj/(Tij)^λ)/( Dab=d/1+ Min

Pij= Probability of consumer travelling from home I to shoping location jSij = square footage of selling space in shopping location jTij = travel timeλ= parameter used to measure effect of travel timeN= number of shopping location

Dab = Limit of city A’s Trading area, measured in miles along the road to city Bd = distance in miles along a major roadway between cities A & BPa = population of city APb = population of city B

Aij = 1, if demand point I is allocated to site j.Wi = weightage of each Wards(location)Dij = [(xi-uj)^2+(yi-vj)^2)]^(1/2)Distance from all demand points to all sites

Criteria - Overview

– Population Size and Characteristic –

– No. of houses

– Total population

– Total literate population

– Availability of Store location

– Transportation Access

– Traffic Conditions

– Closeness to source of supply

– Delivery Costs

– Timelineness

– Availability of Labor

– Clerical

– Managerial

– Competitive Situation

– Size of Existing Competitors

– Level of Saturation

Criteria

– Population Size and characteristics

– Extensive knowledge about an area’s population characteristics can be gained from secondary sources such as AMC (Ahmedabad Municipality Corporation)

– After converting, 0-0.4 –poor, 0.4-0.7 – moderate, 0.7-1 – good

– Map of Ahmedabad is shown on next slide with 57 wards

– Xi & Yi are the coordinates of the centroid of the wards.

Criteria

– Availability of store location

– Transportation Access provides the ease of availability of public transportation to that ward. Such data can be obtained from AMTS ( Ahmedabad Municipality transportation service ) as well as BRTS ( Bus rapid transit system) along with the data of traffic conditions. It is a secondary source of data and is provided in Sheet amts in Excel file provided.

Criteria

– Closeness to sources of supply

– Two criteria such as delivery costs : depends upon the truck load and the location within the city. Prices fluctuate based on the location of the ward where the delivery is to be made.

– Timeliness shows the constraints that suppliers faced while making deliveries in the city during day. There are some restriction of the truck size that cannot be entered in the city during day.

Criteria

– Availability of Labor

– Staff – shop floor workers working at POS or stocking the merchandise.

– Managerial – Managers such as operations and merchandise manager required at location. Their availability depends upon the type of location, its risk associated and the distance from the city center or their home.

Criteria

– Competitive Situation

– Size of existing competitors can be determine by primary study by calculating the assortment’s value.

– Level of saturation depends upon the various type of retailers present in that particular ward ranging from Kirana shops to big Bazzar.

Calculating weights Wi using AHP(analytical Hierarchy Process)

– To calculate weight for each location (wards) refer sheet weight of excel sheet provided,

– 1st step – determine maximum value of each column. Then divide every cell value to its respective maximum value found. We will get output ranging from 0 to 1

– 2nd step – add the row value of each wards separately.

– 3rd step divide each total row value with the sum of all the value. Thus we obtain weights corresponding to each location (wards)

– AHP is pairwise comparison on ratio scale method to determine the ranking or weightage of various demand points.

Location of existing & Proposed site

A (iscon ) B (himalaya mall)

existing sites F 800 700 940 458

c(shahibaugh) d (kankaria) e(RTO)

optimized sites S 1240 580 1300 800 1020 380

f (satellite) g(bodakdev)

competitive sites C 980 680 820 620

complete set of sites T

T Uj Vj

a 800 700

b 940 458

c 1240 580

d 1300 800

e 1020 380

f 980 680

g 820 620

Running Model

– Refer to excel sheet distance

– Location Shahibaugh shows least distance 2.06 out of proposed three location. Hence it should be selected.

T Uj Vj Dij Model

f iscon(51) a 800 700 254.6625 3.603339

himalaya(14) b 940 458 10.44031 0.221969

s

shahibaugh(53) c 1240 580 83.35466 2.067215

kankaria (9) d 1300 800 639.151 12.04332

rto(24) e 1020 380 192.0104 3.332077

c satellite(59) f 980 680 63.32456 1.328803

bodakdev (49) g 820 620 902.3464 19.66612

Thank you