Retail Location Analysis GRANT THRALL: Hello. This is Professor Grant Thrall. This video is on retail location, particularly for large mall-type branch retailers. This is a summary of all of the myriad of factors that a multi-branch retailer will consider before locating a facility. Rooftops before retail-- they want to see that there will be enough population to support their activity before they make a choice to build or to rent. Net new revenue-- retailers are looking to add additional revenue by adding a second store. A first store already there in the market will decline in revenue. The two stores combined will add net new revenue possibly to the multi-branch retailer. Near customers are more important than distance customers. This is the friction of space, the distance, the k function. Value platform-- this is the total shopping experience that a customer will have-- shopping experience going to Walmart versus a woman going to a Chico's clothing store which tends to be located at the highest retail agglomeration in town. Trade area-- trade area including how do we calculate a trade area? Is a trade area calculated on the basis of drive time? Drive distance? Circles? I like to have the trade area calculated to represent how customers are actually going to be making a decision. So if they are driving and they're driving through congested traffic, then we would like to calculate the trade area based upon drive time if we know typical or the average time that people are willing to spend to purchase the particular good or service. Psychographics-- this is a way in which we measure demographics today, lifestyle segmentation profile. It is a better measure of the propensity to consume as opposed to just a count of is the person black or Asian or Hispanic. Threshold population-- this comes from central place theory. How many people are required to keep our retail operation open? Demographic change-- the neighborhoods, as people, go through lifecycles. At what point in its life, it might be a neighborhood targeted to young families, and there might be a demand for those types of goods and services that support young families, children, say, under five. But in time, when people age and they often age in place, those children in diapers are now in elementary school or high school, demands for the goods and services change, just as the population has changed. Mental maps-- we could be very accurate in terms of our GIS calculation of phenomena that's spatially distributed. But we need to step back and say, does this really make sense? The decision that somebody is making in terms of which retail outlet to purchase from is based more on their perception, their experience. More on mental maps later. Also, the retailer wants to minimize administrative and supply costs. So let's say you're a multi-branch retailer and your trade area is 6-minute or 10-minute drive time, then you're not going to locate just one retail facility. Before you make a commitment on one, you will actually have planned up where you might locate five or six within the urban area, so that their trade areas maybe tangent, but not overlap. And by doing that then, there can be one semi-tractor trailer coming in from the regional warehouse and then supply all the multi-branch retailers in one truckload. Interdependence with corporate finances-- we may see a multi-branch retailer close and people are amazed because, say, the restaurant was always packed. It doesn't just deal with the success of the single branch. It also is dependent upon the success of the whole operations of the corporations. It may be that you have a location that you think this is really dynamite for this particular retailer, but they're going to, say, finances to build a finite number of retail facilities each year. Let's say 12. And they will pick the top 12, which according to their calculations are going to make them, corporate, the highest net new revenue. The decisions are typically made at the corporate level. So this is item 12. The business geographer, the geospatial analyst, the strategic marketing director-- they go by different names, same type of person-- they too have mental maps. They have biases and so forth. And they're not risk takers. So once a model has been developed, a model being an algorithm that they follow in terms of evaluating a prospective retail location, once one has been adopted, they are loathe to go to another model without great deliberation. If the new facility is successful, then, OK, that's another nice new facility. If it's not successful, then the business geographer will then consider, well, they'll blame the business geographer because they went outside the box. So before they adopt new models, they do so with great deliberation. They are not risk takers. The business geographer today performs due diligence for the corporation. The real estate deal-maker is out there trying to make a deal. Business geographer is analyzing and projecting what will be the net new revenue to corporate if a particular site is developed. And so that's protecting the corporate from the deal driving corporation. And the corporation may wind up with, if it's just deal-making, may wind up with a collection of locations that the totality just don't make any sense. Business geographer is generally invisible. A lot of companies don't even refer to them they don't acknowledge that they exist. They're part of sort of secret intelligence. And the decisions will ultimately be made in the corporate interest. This is something that redevelopment agencies and economic development agencies, particularly when there is a general public on the board of these agencies, they want to benefit the community. But keep in mind that the company, giving most consideration to the corporate and to their stockholders, their objective is not to benefit the community. That would be nice if it does, but their objective is to benefit the corporate and to benefit the stockholders.