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Retail Sales Forecasting
Category: Fashion Retailing
Methods: Retail Store Location Analysis, GeoAnalytics,
Geographic Information Systems (GIS)
Summary
A national retail apparel chain sought help from Decision Analyst in identifying
new market opportunities. The chain felt that major metropolitan areas offered
limited growth opportunities, and wondered if smaller towns might be viable
for its retail stores. Decision Analyst combined survey research, competitive
analyses, and geographic analyses and modeling to forecast sales of new stores
in smaller markets.
Strategic Issues
As a starting point, this major national retailer asked Decision Analyst to
evaluate a specific smaller market. The geographic market under consideration
presented many unknowns for the retailer in being a smaller “micropolitan”
area with a population of approximately 150,000 persons. Prior to this “opportunity,”
the retailer’s location strategy had been confined to larger metropolitan
markets, where they were positioned with multistore programs in enclosed malls.
The smaller market stood to differ in terms of shopper behavior, competitive
climate, consumer attitudes, fashion awareness, advertising media, etc.
Research Objectives
The first objective of this research was to assess consumer attitudes toward
the retailer and determine if residents would “accept” the new store
concept in their market. If this proved positive, the second objective was to
determine the level of sales the store could achieve at the proposed location
within the market.
Research Design and Methods
For this project Decision Analyst utilized its strengths in consumer survey
research as well as GeoAnalytics. The
initial phase of the project focused on gaining insight into consumer behavior
and attitudes toward the retailer. Surveys were conducted with 300 local shoppers
using Decision Analyst’s proprietary American
Consumer Opinion® Online panel. Respondents were questioned about brand
awareness, store preferences, shopping behavior and shopping frequency, annual
spending habits on fashion apparel, and media habits.
The GeoAnalytics phase of the research extended the analysis to the specific
location under consideration. Utilizing our Geographic Information System (GIS)
technology, a trade area was carefully delineated for the location based on
its spatial relationship to surrounding markets, topography, the regional road
network, population growth patterns, and competitive influences. Within this
trade area, competition and demand factors were carefully analyzed to determine
feasibility and predicted sales volume for the new store.
Results
The results of the survey proved to be supportive of the new store. In fact,
the respondents actually possessed a slightly higher awareness of the store
brand than the retailer anticipated, and more positive attitudes toward the
store brand—despite having a more moderate income level than their metro
area customer profile.
Based on the survey results, GIS analysis, market knowledge, and field observations,
Decision Analyst determined that the trade area for the store actually extended
beyond the census-defined “micropolitan” boundaries. In fact, what
the retailer initially viewed as a market of 150,000 people was actually a broader
trade area of almost 200,000 residents that included a number of smaller outlying
communities. Incorporating the survey results on household spending within this
merchandise category, we were able to accurately gauge the depth of market support
and develop an accurate sales forecast for the store.
Encouraged by these findings, the retailer is further examining the broader
store rollout potential across the “micropolitan” market landscape
in the U.S.
Copyright © 2011 by Decision Analyst, Inc.
This case study may not be copied, published, or used in any way without written permission of Decision Analyst.
GeoAnalytic Consulting
Decision Analyst’s strengths in statistics and mathematics, simulation,
modeling, and optimization provide the analytical horsepower to address complex
business and strategy problems. If you would like more information on our GeoAnalytic
research services, please contact Jim King by emailing jking@decisionanalyst.com
or calling 1.800.ANALYSIS (262.5974) or 1.817.640.6166.
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