Geometrx retail trade area analysisChoosing a site for retail stores or any other retail business is not an easy task. Doing it without a practical analysis of the trade area is much like shooting an arrow into a dark space – how can you hit the target if you can’t even see it?  Retail trade area analysis helps businesses to adopt an individual course in the absence of other information such as patronage of a store, opportunities in local area market, competitors and barriers. Today, one of the fundamental technologies required to conduct the trade area analysis is Geographical Information System Technology.  This system uses mapping techniques to identify the potential blinders in the selection of a site within the geographical framework.

The trade area analysis is a method that offers a base for analyzing, understanding and visualizing as well as quantifying the scope and qualities of known or estimated trade areas.

Why is trade area analysis relevant?

The trade area analysis provides the basis for the following:

  • For the understanding of the geographical scope and qualities of store patronage.
  • For assessing performance spatially
  • For  performing competitive analysis
  • For evaluating the market penetration along with market gaps
  • For targeting promotion and marketing
  • For merchandising
  • For identifying or quantifying cannibalization effects
  • For developing and exploring demographic profiles
  • For stability of site and selection of site studies

It also makes use of an analytical methodology for approximating potential area for patronage. These are utilized in the case where the customer data is not available.

Radial filter analysis technique

Due to the recent availability of in-house customer levels along with the point of sales data, retail organizations are better able to explore and assess the spatial qualities of their customer base as well as the market place.

The well-known GIS companies are now using the radial filter-based trend surface modeling techniques and applications for analyzing trade regions. The use of these mapping techniques makes it easy to do analysis and provide exact calculations of spatial location and attributes of store trade regions. This method of mapping has certain advantages over the traditional approaches. It offers a more realistic view, however, it does not take into account the effects of competitors. A more sophisticated technique of gravity modeling allows taking into account the effect of competitors which is suitable for convenience store scenarios.

These small yet precise mapping techniques have a large impact on the decision of choosing trade areas.

To learn how GeoMetrx can assist your business with Retail Trade Area Analysis, request a demo today.