How to Perform Retail Trade Area Analysis with GIS Mapping Software

Author: Stewart Berry
Map Images: Dan Martin

29 November 2023

Retail trade area analysis

Retail trade area analysis is a crucial method for businesses aiming to gain a comprehensive understanding of their customer base. This process involves an examination of various factors, such as the origin and characteristics of potential customers in a specific location. By delving into the demographic profile of these customers, businesses can tailor their strategies to better meet the needs and preferences of their target audience.

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Benefits of retail trade area analysis

Retail trade area analysis offers a number of benefits to businesses, including:

Improved decision-making: By understanding their customer base and trade area, businesses can make better decisions about where to locate new stores, how to allocate marketing resources, and what products and services to offer.
Increased profitability: By targeting the right customers with the right products and services, businesses can increase their sales and profitability.
Reduced risk: By understanding the competitive landscape and predicting market share, businesses can reduce the risk of opening a new store in a non-viable location.

What is a retail trade area analysis-map showing retail market share by ZIP Code

Market Share by ZIP Code - Maptitude Mapping Software

Huff Model

One widely utilized tool in retail trade area analysis is the Huff Model, a methodology designed to map out and quantify retail trade areas. This model aids businesses in visualizing the distribution of their customer base and assessing the level of competition posed by other establishments in the same vicinity.

Huff Model Analysis using Maptitude

The Huff Model can be used to:

Identify the primary, secondary, and tertiary trade areas for a store
Estimate the number of potential customers in each trade area
Determine the level of competition from other businesses
Predict the market share of a store in a given trade area

To use the Huff Model, businesses need to collect data on the following variables:

The location of their store and competing stores
The population of each trade area
The demographics of each trade area (e.g., age, income, household size)
The attractiveness of each store (e.g., size, product selection, price)

Once this data has been collected, it can be used to calibrate the Huff Model. This involves adjusting the parameters of the model to ensure that it accurately predicts the market shares of existing stores.

Once the Huff Model has been calibrated, it can be used to predict the market share of a new store in a given trade area. This information can be used to evaluate potential store locations and to make decisions about marketing and merchandising strategies.

How to get started with retail trade area analysis

There are a number of ways to get started with retail trade area analysis. One option is to use a commercial software package such as Maptitude Mapping Software. These software packages provide users with all of the tools and data they need to map trade areas, calculate market share, and analyze customer demographics.

Another option is to work with a GIS consultant who specializes in retail trade area analysis. Consultants can help businesses to collect data, calibrate the Huff Model, and interpret the results.

The Market Share Wizard within Maptitude Mapping Software streamlines the complex process of market analysis, providing businesses with valuable insights into their competitive landscape.

Calculating Market Share Video

To further illustrate the practical application of Maptitude Mapping Software and its Market Share Wizard, a video tutorial has been created. This video serves as a guide, demonstrating how businesses can leverage these tools for effective retail trade area analysis. The tutorial covers essential aspects, shedding light on the intersection of Geographic Information Systems (GIS), business development, and retail analysis.

Conclusion

Retail trade area analysis is a valuable tool for businesses of all sizes. By understanding their customer base and trade area, businesses can make better decisions about where to locate new stores, how to allocate marketing resources, and what products and services to offer.

Retail trade area analysis is a multifaceted process that empowers businesses to make informed decisions by understanding the spatial distribution, demographics, and competition within their customer base. Maptitude Mapping Software emerges as a robust solution, offering businesses the tools they need to navigate and thrive in the intricate landscape of retail analysis.