Retail Market Analysis

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Retail Market Analysis
Greg Davis, Extension Specialist OSU AEDEcon
Department 614-292-6356 davis.1081_at_osu.edu
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Todays Agenda

• Overview of Retail Market Analysis (RMA)
• Proposal
• Assignment
• determining market region
• determining market centers
• Next Steps

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Why Retail Market Analysis?

• Retail Market Analysis (RMA) is a way to
• Evaluate the health of local retail sales
• Provide insight on a variety of economic
  development issues
• ex. downtown revitalization, business attraction
  and expansion
• Explore new and unique opportunities
• demonstrate their market potential

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GOAL Identify local market trends in retail
spending

• Examine drivers of retail demand
• Demographic
• Economic
• Identify the local market areas that make up the
  region
• Compare local market to competing markets in the
  region
• Retail sales surplus/leakage analysis of each
  retail sector

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Retail Market Analysis - RMA

• RMA is not a detailed plan of action
• RMA is a tool for identifying retail market
  trends which provides facts and analysis
• Where it is done (level of analysis) local
  community

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RMA Model (people )

• Requires understanding broader demographic and
  economic trends within a region
• population
• age
• income distributions among population
• the number of people employed by different
  economic sectors
• Requires understanding retail spending patterns
  within local community relative to spending in
  neighboring areas
• leakage
• surplus

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Determining the Market Region and Associated
Market Centers
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Market Comparison

• What is a market center?
• What is the local market area?
• A market area is the geographic area that
  contains most of the customers of a local
  shopping district.
• What are the neighboring market areas?
• People living in neighboring market areas may
  shop in the local market center.
• People living in the local market area may shop
  in neighboring market centers.

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Market Center

• downtown or regional shopping district
• example
• primary market center is Pomeroy-Middleport
• neighboring market centers, Athens, Belpre,
  Gallipolis, Jackson, Marietta, Wellston

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Market Area

• contains most of the customers that primarily
  shop in the retail center
• boundaries are estimated based on the amount of
  sales in the retail center and distance from this
  center
• all the market areas of interest comprise the
  market region

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Market Region

• surrounding areas that either help (i.e. are
  complementary) or hinder (i.e. are competitive)
  retail sales activity within the local market
  areas
• regions identified by initial survey given to
  respective community task force members
  concerning shopping habits and calculating an
  outer boundary that is within reasonable shopping
  distance from the center of the study area

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Defining Market Area Boundaries

• determined based on three main factors
• sales for 2006 in each market center
• distance to the market center
• input from the local taskforce

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Retail Sectors Studied
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Hobby Floral Books Camera Optical Goods
Candy Sporting Goods Rec. Vehicles Paint Electroni
cs
ALL goods are sold at this retail center level
Bakery Jewelry Lumber Nursery
Furniture Shoes/ Apparel Appliance Dept Stores
SOME good are sold at this retail center level
Motor Vehicles Liquor Variety Stores Bars/Restaura
nts
Hardware Drug Store Grocery Store Gas Station
Minimum Convenience
Full Convenience
Partial Shopping
Full Shopping
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Data

• 4th quarter 2006 business data -- InfoUSA
• Advantages/disadvantages
• Demographic data -- US Census Bureau
• Spatial data (ex. political boundaries, road
  network) -- US Census Bureau and Ohio Dept. of
  Transportation
• Geographic Information System (GIS) is used to
  perform spatial analysis and display information
• Build trade areas and region
• Calculate retail sales, surpluses, and leakages
  by trade area
• Maps of surplus/leakages

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Potential Sales

• estimate of what could be achieved in a market
  area if all the population living within the
  market area shopped within the market area
• Potential Sales (Population of A) x (Income
  ratio of A) x (Regional per capita consumption of
  R)
• The income ratio is the ratio of per capita
  income in market area A to the regional per
  capita income. This gives an indication of the
  relative spending power of residents in market
  area A. The regional per capita consumption of
  good R is the total regional sales in sector R
  divided by the population of the region

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Estimating Retail Sales

• estimated retail sales figures derived from
  infoUSA (private market research company)
• sales for each retail sector within each market
  area are calculated by summing up the sales for
  all businesses that fall within that market area
  using GIS

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Surplus

• positive difference between actual and potential
  sales expressed either in terms of dollars or as
  a percentage of potential sales
• implies either that people from outside the
  market area shop there or that people living
  within the market area consume more than the
  average person living within the region

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Leakage

• negative difference between actual and potential
  sales
• implies either that people living within the
  market area shop outside the market area or that
  people living within the market area consume less
  than the average person living within the region

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Pulling it Together

• Population
• Income
• Employment
• Business

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Demographic Trends of Interest

• Between 1990 and 2000, Jackson County grew at a
  rate of 8.0
• Ohio population growth 4.7
• Jackson 0.7
• Wellston 0.5
• Oak Hill -8.0
• Coalton -1.4

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Demographic Trends of Interest

• 2000 per capita income for Ohio 21,003
• Jackson Countys per capita income 18,628
  (slight decrease from 1990)
• City of Jackson 14,855
• Oak Hill 13,580
• Wellston 13,476
• Coalton has the lowest per capita income at
  11,080

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Employment Trends of Interest

• between 1998 and 2001
• Ohio employment up Jackson Co employment down
• Manufacturing employment largest employment
  sector, but decreasing
• Service sector employment increasing
• in 2000, 40.7 of available county workforce
  traveled outside county to work
• out-commuting increased 70 between 1990-2000
• in-commuting increased 90.2 between 1990-2000

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Retail Trends of Interest

• retail establishments decreased slightly between
  1998 and 2001 in Jackson County and across Ohio
• retail employees and annual payroll between 1998
  and 2001 increased slightly in Jackson County

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Business Trends of Interest

• active businesses decreased slightly in Jackson
  County from 683 to 598
• 6.3 decrease between 1997 and 2001
• net business starts minus business terminations
  during this period -40

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Jackson Market Region

• Lancaster to the north
• Huntington, WV/Ashland, KY to the south
• Athens to the east
• Chillicothe and Waverly/Piketon to the west

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Jackson
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Jackson
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What to do now?

• Plug leakages in sales of non-specialized goods
• Address large leakages in convenience goods by
  working with existing retailers or by recruiting
  new retail businesses to the community
• Build on existing surpluses
• Identify businesses complimentary to sectors with
  a surplus
• Identify underserved segments of the population
• Identify growing segments of the population
• Look at changing demographics
• Identify niche markets
• Identify and fill product voids
• Capitalize on other attractive aspects of the
  local community
• Recreational opportunities, tourism, history, etc

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Proposed Project
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Meigs County RMA

• Project Scope
• Examine drivers of retail demand
• Surplus/leakage analysis
• Timeline
• Today
• Define Project
• Discuss Market Areas
• Sept-Oct
• Finalize market areas
• Run surpluses/leakages
• Nov 2007
• Wrap-up

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Assignment
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Marietta
Athens
Belpre
Wellston
Pomeroy-Middleport
Jackson
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Questions

• Greg Davis, Extension Specialist, AEDE
  Department, OSU
• 614-292-6356
• Davis.1081_at_osu.edu
• See a sample report at

http//www-agecon.ag.ohio-state.edu/programs/ComRe
gEcon/rma/London20RMA2010-03.pdf