Gut instinct location decisions may cause gut ache

The location of your retail store should be chosen carefully.  A sandwich shop at one location will experience higher gross sales revenue than the same sandwich shop at another location.  Traffic patterns, retail sales density, customer lifestyle profiles, and complementary and competing shops are a few weighted factors to site location analysis and decisions.

Top 25 markets.

A national retail store or franchise looking for new site locations will use a variety of demographic, economic, and business information to guide location choices.  

The above map serves to illustrate new national markets for the placement of a retail product that may be purchased by households with children.  Urban concentration of youth is one measure for the market location analysis.  The urban areas, called metropolitan statistical areas by the U.S. Census Bureau, with the highest concentration are color coded in this map.

The top twenty-five urban markets are generally characterized as university and college towns, young families, and growing public school enrollments.

Total sales revenue forecast for top twenty-five urban markets.

A next step is to estimate sales revenue forecasts for each of the top twenty-five urban markets plus the aggregate market.

For illustration purposes only, the chart above uses a price structure that segments the market.  Sales revenue forecast estimates are based on a measure of total market size, estimated market share, and the price structure along the supply chain -- from manufacturer to the retail store.

Now site selection analysis becomes more granular by trade area and by city block within each of the top twenty-five urban markets.  

For example, College Station, TX has the highest urban concentration of youth relative to the other U.S. cities.  There is a site location available close to residential subdivisions and the Texas A&M University campus.  Spaces available range from 1,800 square feet to 12,000 square feet.  The retail store or franchise will now need to estimate gross sales revenue forecasts at that site or within that trade area, and compare that analysis with other sites available in College Station, TX.

This simple demonstration makes the point: Do your homework before signing a retail lease agreement!

Jerry L. Hoffman

Hoffman Strategy Group LLC, 4424 Hallcliffe Road, Lincoln, NE, 68516, United States

Jerry L. Hoffman is owner of Hoffman Strategy Group LLC, a firm nationally known for strategic development, economic analysis, and market location consultancy.