Are All Retail Centers the Same?
Aligning your next new branch to a grocery-anchored or big-box shopping center makes good sense. But are all centers equal? Now, we can measure every center’s ability to best reach your target customer.
Everyone involved in retail financial services distribution planning knows that aligning branches near busy retail centers is a core tenet. “Going to the bank” is rarely a singular purpose trip. Usually, it’s part of an outing where multiple chores are completed. Most practitioners of this “dark art” that is retail distribution strategy know that grocery anchored shopping centers are a good choice for new branch placement. These types of centers drive good traffic, tend to have a draw that matches a branch’s draw, and serve a local neighborhood.
The big question is “are all grocery anchored centers the same?” What if your customers are more likely to shop at Whole Foods rather than Safeway? What if they prefer Walmart over Target? Or Starbucks over Dunkin Donuts in New England?
Years ago, when I started in the retail distribution field, we had limited ability to quantify the benefit of one anchor over another. But today’s technology allows far greater analytical precision.
In economics, the widely accepted Law of Retail Gravitation has been around for 90 years having been developed by William J. Reilly in 1931. According to Reilly’s “law,” customers are willing to travel longer distances to larger retail centers given the higher attraction they present to customers. The logic is that larger centers offer a greater variety of goods and services than smaller centers. The original regional mall concept was derived from this “law”.
While Reilly used center size as a straightforward measure of mass, others recognized that there could be additional factors driving attractiveness. Some 30 years after Reilly, Texas geographer and professor David Huff modified Reilly’s law by calculating gravity-based probabilities for consumers patronizing each store in the store dataset to generate probability market areas for each store in the study area. This approach allowed analysts to not only measure attractiveness but reach into nearby neighborhoods.
The TS Approach
TerraStrat customizes Huff’s modeling approach for each client to help you understand which centers not only produce the greatest traffic levels but the greatest attractiveness to your target segments, whatever they be.
The model’s flexibility can analyze hub and spoke strategies, adjusting for urbanicity, segment strategy, and even branch formats.
The beauty of these new modeling techniques is that all retail centers in a market can be analyzed and scored as to the best match to your specific business strategy, whether you target blue collar households or high income Millenials. This map illustrates a typical analysis.
Not all Kroger-anchored or Aldi-anchored centers are the same, and now you can identify which ones best serve your strategy.
