Over the next few months, we will write a series of columns addressing retail analysis and development as one vitally important community economic development initiative, both as a “jobs” attractor/retainer and as a “family attractor/retainer” or quality of life component. Critical to successful retail development are the community analyses necessary to understand our local markets and develop our respective retail marketing plans. These plans should be a part of a broader overall economic development strategy based upon a strategic planning process.

One of the initial analyses a community should conduct to pursue an effective retail development program is a “trade area” study. Where are our shoppers coming from? Where should they be coming from? The customers come from somewhere and a trade area analysis identifies just that.

Measuring trade areas

A community’s trade area can be measured through statistical models and surveys. Nothing is more accurate than a properly conducted survey. However, several models calculate a trade area’s geographic boundaries with respectable consistency to surveys.

A trade area survey can be as simple as collecting, organizing and mapping the zip codes of customers to our local businesses. Most of us are probably aware of this method when we make a purchase at a national chain store and the clerk asks us for our zip code. We all can do the same thing with participating local retailers, organizing to conduct a trade area survey. This is a wonderful program for a local chamber of commerce or merchants’ association and their participating businesses.

Other methods for measuring trade area boundaries are through the use of statistical models. Some models measure a market for a community based upon travel time. For instance, you might see a map with a trade area measured as a 20-minute drive time from the city or business. Other more sophisticated models utilize cell phone migration data to map movements of people to and from districts to estimate markets. While other models measure what we call “retail gravity” in calculating that point between two communities where a customer is equally likely to go either way to buy a comparable good or service (the trade area boundary) based upon probability and factors of distance to and size of the communities measured. For more information on selected models or for a presentation to a local audience discussing retail trade area measurement further, please contact us.

Who makes up your trade area?

It is critical to identify the number of people within our trade area boundaries, how much money they have and spend, and what they spend their money on. This is called a demographic assessment.  Today, this is aided greatly through the use of technology. Geographic Information Systems (GIS), which is a computer-based database mapping system, has revolutionized retail analysis by connecting geo-coded information (from zip codes, for instance) with census demographics.  What retailers are most interested in includes:

• Total number of people within the trade area, by age and other factors;

• Households from within the trade area;

• Median household income of trade area residents;

• Projections of future population, housing and income; and

• Available dollars to be spent on multiple retail categories, from groceries to clothing to restaurants and other sectors.

Where do I get help?

Selected retail analyses are arguably critical to successful business retention and development in our communities.  A comprehensive trade area study requires use of a model and specific data or customer surveying of businesses.  Some economic development organizations have models to use (as we do), but many generally pay third party providers (consultants, universities, etc.) to do this work.  Chamber Fayetteville has conducted gravity models measuring trade areas for each HAMMRC community and we would be happy to discuss trade area assessments further with interested parties.