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1
Chapter 7: Market Selection and Retail Location Analysis
Chapter 7
Market Selection and Retail Location Analysis
OVERVIEW:
In this chapter, we will review how retailers select and reach their target markets through the choice
of location. The two broad options for reaching a target market are store-based and nonstore-based
locations. The chapter primarily focuses on the decision process for selecting store-based locations.
We describe the various demand and supply factors that must be evaluated for each geographic
market area under consideration. We conclude with a discussion of alternative locations that
retailers consider as they select a specific site.
LEARNING OBJECTIVES:
1. Explain the criteria used in selecting a target market.

2. Identify the different options, both store-based and nonstore-based, for effectively reaching a
target market and identify the advantages and disadvantages of business districts, shopping
centers, and freestanding units as sites for retail location.
3. Define geographic information systems (GIS) and discuss their potential uses in a retail
enterprise.
4. Describe the various factors to consider when identifying the most attractive geographic market
for a new store.
5. Discuss the various attributes to consider when evaluating retail sites within a retail market.
6. Explain how to select the best geographic site for a store.
CHAPTER OUTLINE:
I. Selecting a Target Market
Many retail experts say selecting a target market and evaluating alternative ways to reach this
target market are the two most critical determinants of success in retailing. Traditionally, reaching
the target market has been associated with selecting the best physical location for a store.
The Internet is becoming a major force in retailing. The equivalent of a store on the Internet is a
retailer’s website on the World Wide Web (usually denoted by www). When stopping at an e-
tailer’s website, visitors first view the firm’s home page, which is essentially the e-tailer’s
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
2
storefront. It is equivalent to a retailer’s storefront in the physical world. The total collection of all
the pages of information on the retailer’s website is known as its virtual store. Whereas a
traditional store is located in geographic space, a virtual store is located in cyberspace.
The cyberspace counterpart to a convenient location is the ease of access a consumer has to the site.
This refers to the consumer’s ability to find a website in cyberspace easily and quickly. Exhibit 7.1
illustrates that the importance of easy access increases as the number of websites increases. For this
reason, retailers use website optimization services to help move their stores up the list whenever a
potential customer searches for a particular merchandise category the retailer handles. This is
similar to a practice in the not-too-distant past in which many small local retailers would place
advertisements in the telephone yellow pages (which were organized alphabetically) and refer to
their business as ABC Automotive Repair, or ABC Landscaping, and so on to gain the advantage of
being listed first.
Regardless of whether a retailer is planning a traditional store in geographic space, a virtual store in
cyberspace, or both, the first step is to develop a cost-effective way to reach the household or
individual consumer that the retailer has identified as its target market. It is important to realize that
failure to clearly identify one’s target market will result in a significant waste of marketing
expenditures.
A. Market segmentation
Market segmentation is a method retailers use to segment, or break down, heterogeneous

consumer populations into smaller, more homogeneous groups based on certain characteristics
deemed attractive by the retailer. No single retailer can serve all potential customers; it is
important that it segments the market and select a target market. A target market is the
segment of the market that the retailer decides to pursue through its marketing efforts. Retailers
in the same line of retail trade often pursue different target markets.
The topics of target-market selection and location analysis are combined because a retailer must
identify its target market before it decides how best to reach that market. Reaching the target
market can be achieved through a store-based location in which the consumer travels to the
store, or through a nonstore retailing format in which products and services are offered to the
consumer at a more convenient or accessible location. These are related topics because
individuals of different characteristics are not randomly spread over geographic space.
B. Identifying a Target Market
To reach a target market successfully, the market segment should be measurable, substantial,
and accessible.
3
• Measurability—the retailer seeks a measurable market segment. This requires the retailer
to rely on objective measures for which there is data available (e.g., age, gender, income,
education, ethnic group, and religion).
• Accessibility—the degree to which the retailer can target its promotional or distribution
efforts to a particular market segment.
• Substantialness—the segment must be substantial or large enough to be profitable for the
retailer.
II. Reaching Your Target Market
Once a retailer identifies its target market, it must determine the most effective way to reach this
market. Exhibit 7.2 illustrates the two basic retail formats that can be used to reach target markets:
Store-based—store-based retailers operate from a fixed store location that requires customers to
travel to the store in order to view and select merchandise and/or services. Essentially, the retailer
requires that the consumer perform part of the transportation function, which is one of the eight
marketing functions.
Nonstore-based retailing—nonstore-based retailers reach customers at home, at work, or at places
other than a store where they might be open to purchasing. Many retailers now reach customers on
the Internet. Or, more accurately, the customer chooses to access the retailer on the Internet.
A. Location of Store-Based Retailers
There are four basic types of store-based retail locations (Exhibit 7.2):
• Business districts
• Shopping centers and malls
• Freestanding units
• Nontraditional locations
Business Districts
The central business district (CBD) usually consists of an unplanned shopping area
around the geographic point at which all public transportation systems converge; it is
usually in the center of the city and often where the city originated historically.
The makeup or mix of retailers in a CBD, however, is generally not the result of any
advanced planning and instead largely depends on history, retail trends, and luck.
Strengths of the CBD include:

• Easy access to public transportation
• Wide product assortment
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• Variety in images, prices, and services

• Proximity to commercial activities
Weaknesses of the CBD include:

• Inadequate (and usually expensive) parking
• Older stores
• High rents and taxes
• Traffic and delivery congestion
• Potentially high crime rate
• The often-decaying conditions of many inner cities
Often, the weaknesses of CBDs have resulted in a retail situation known as inner-city
retailing. This occurs when only the poorest citizens are left in an urban area. Despite the
fact that such areas annually contribute 2 percent to 3 percent of all retail spending, product
and service offerings in these areas have decreased while prices have held steady or even
increased.
In larger cities, secondary and neighborhood business districts (NBD) have also developed.
A secondary business district (SBD) is a shopping area that is smaller than the CBD and
revolves around at least one department or general merchandise store at a major street
intersection. A neighborhood business district (NBD) is a shopping area that evolves to
satisfy the convenience-oriented shopping needs of a neighborhood and generally contains
several small stores (with the major retailer being either a supermarket, a bank, or a variety
store) and is located on a major artery of a residential area. An increasing number of
national retail chains are finding the neighborhood business district an attractive location
for new stores.
Shopping Centers and Malls
Shopping centers are centrally owned or managed shopping districts that are planned,
have balanced tenancy (the stores complement each other in merchandise offerings), and
are surrounded by parking facilities. A shopping center has one or more anchor stores
(dominant large-scale stores that are expected to draw customers to the center) and a
variety of smaller stores.
To ensure that these smaller stores complement each other, the shopping center often
specifies the proportion of total space that can be occupied by each type of retailer.
Similarly, the center’s management places limits on the merchandise lines that each retailer
may carry. In addition, a unified, cooperative advertising and promotional strategy is
followed by all the retailers in the center. Because of the many advantages shopping
centers and malls can offer the retailer, they are a fixture of American life and account for
5
usually over 50 percent of the retail sales in a community (excluding new and used
automobile sales).
Some of the advantages a shopping center or mall provides over a CBD location are:
• Heavy traffic resulting from the wide range of product offerings
• Cooperative planning and sharing of common costs
• Access to highways and available parking
• Lower crime rates
• Clean and neat environment
Despite these favorable reasons for locating in a shopping center, the retailer operating in a
mall does face several disadvantages, such as:
• Inflexible store hours (the retailer must stay open during mall hours and cannot be
open at other times)
• High rents
• Restrictions on merchandise the retailer may sell
• Inflexible operations and required membership in the center’s merchant organization
• Possibility of too much competition and the fact that much of the traffic is not
interested in a particular product offering
• Dominance of the smaller stores by the anchor tenant
Shopping-center image, preferences, and personality all attract various subsets of

consumers, giving retailers located at the center a competitive advantage over other
retailers. Therefore, it is extremely important that a retailer considering a shopping-center
location be aware of the makeup, image, preferences, and personality of the center under
question.
As Exhibit 7.3 shows, according to the International Council of Shopping Centers, there
are eight different types of shopping centers and malls, each with a distinctive function:
• Neighborhood center
• Community center
• Regional center
• Superregional center
• Fashion/Specialty center
• Power center
• Theme/Festival center
• Outlet center
Freestanding Location
6
A freestanding retailer generally locates along major traffic arteries, without any adjacent
retailers selling competing products to share traffic. Freestanding retailing offers several
advantages:
• Lack of direct competition
• Generally lower rents
• Freedom in operations and hours
• Facilities that can be adapted to individual needs
• Inexpensive parking
However, freestanding retailing does have some limitations including:

• Lack of drawing power of from complementary stores
• Difficulties in attracting customers for the initial visit
• Higher advertising and promotional costs
• Operating costs cannot be shared with others
• Stores may have to be built rather than rented
• Zoning laws that may restrict some activities
The difficulties of drawing and then holding customers to an isolated or freestanding store
are the reason that only large, well-known retailers should attempt it. Small retailers may
be unable to develop a loyal customer base since customers are often unwilling to travel to
a freestanding store that does not have a wide assortment of products and a local or
national reputation.
Nontraditional Locations
Increasingly, retailers are identifying nontraditional locations that offer greater

convenience. Recognizing, for example, that a significant number of travelers spend
several hours in airports and could use this time to purchase merchandise they might
otherwise purchase in their local communities, today many airport concourses now look
like real regional malls, complete with national brands, casual dining, service kiosks, and
entertainment and infotainment venues. After all, the increased security measures of the
TSA mean that people are arriving earlier for their flights, leaving them with more time to
shop. Also, cutbacks in the food services offered on many flights have caused more people
to seek sustenance in the airport.
Other examples include stores at college campuses, truck and travel stops along interstate
highways, hospitals, etc.
B. Nonstore-Based Retailers
7
There is a great diversity and variety of nonstore-based retailers. Perhaps the oldest form is the
street peddler who sells merchandise from a pushcart or temporary stall set up on a street. Street
peddling is still common in some parts of the world such as Mexico, Turkey, Pakistan, India,
and many parts of Africa and South America. Peddlers also operate in many other U.S. cities,
oftentimes using family members to operate kiosks and carts in heavily traveled areas such as
malls and the parking lots at sporting events.
Exhibit depicts some of the popular forms of nonstore retailing (direct sellers, catalog sales, and
e-tailing). Because retailing in the United States will continue to be predominantly store-based
for the foreseeable future, the text focuses the readers’ attention on location analysis for these
retailers. However, it should be noted that an increasing number of retailers are using multiple
retail formats to reach their target markets.
III. Geographic Information Systems
Geographic Information System (GIS) is a computerized system that combines physical

geography with cultural geography. Physical geography is the latitude (north–south) and longitude
(east–west) of a specific point in physical space and its related physical characteristics (water, land,
temperature, annual rainfall, etc.). Cultural geography consists of the things that people have put in
place in that space. To understand this, one needs to appreciate that culture is the buffer that
humankind has created between itself and the raw physical environment. It includes characteristics
of the population such as age, gender, and income, as well as human-made objects placed in that
space like fixed physical structures and mobile physical structures.
Recent advancements in GIS have allowed the retail analyst to also describe the lifestyle (activities,
interests, opinions) of the residents of geographic areas. This can be quite helpful in selecting
locations for stores that are highly lifestyle sensitive.
Exhibit 7.4 shows the key components of geographic information systems.
A. Thematic Maps
Thematic maps use visual techniques such as colors, shading, and lines to display cultural
characteristics of the physical space. Thematic maps can be very useful management tools for
retailers. They can help the retailer visualize a tremendous amount of information in an easy-to-
understand format. Today, thematic maps are an important feature of geographic information
systems and are fully computerized, making them easy for retailers to develop. Google Earth
displays satellite images of varying resolution of Earth’s surface, allowing users to visually see
things like cities, houses, buildings, or vacant lots. The degree of resolution available is based
somewhat on the points of interest and popularity of the site being considered. Today, retailers,
8
especially the smaller ones, are beginning to use Yahoo or Google maps as an inexpensive
means of selecting or reviewing possible retail expansion ideas. Finally with the use of other
search engines, the retailer can enter the address of neighbors and determine the type of
business being operated and various other information factors about them.
B. Uses of GIS
As a management technology, GIS has a variety of important uses in retailing. Some of the
more popular uses are identified as follows:
• Market selection
• Site analysis
• Trade area definition
• New store cannibalization
• Advertising management
• Merchandise management
• Evaluation of store managers
Although most large retailers are using a combination of mapping and demographics during the
site-selection process, many small to medium-sized retailers are not using GIS technology to its
full potential. This may be due to a lack of technical expertise in using complicated software; if
a program isn’t easy to use, many firms won’t use it. Visualization of these maps is improving,
but it isn’t possible to make a perfect model of the world.
IV. Market Identification
The location decision for store-based retailers involves three sequential steps (Exhibit 7.5):
• Identify the most attractive markets or trading area—the geographic area from which a
retailer, group of retailers, or community draws its customers—in which to operate.
• Evaluate the density of demand and supply within each market and identify the most
attractive sites available within each market.
• Select the best site (or sites) available by estimating the revenue and expenses of a new store
at various locations and then identifying the most profitable ones.
A. Retail Location Theories
The most attractive retail markets are not necessarily the largest. A variety of other factors need
to be considered in identifying attractive markets (e.g., the level of competition, zoning laws,
average wages, and real estate costs).
Retail Gravity Theory
9
Retail gravity theory suggests that there are underlying consistencies in shopping
behavior that yield to mathematical analysis and prediction that are based on the notion or
concept of gravity. Reilly’s law of retail gravitation, named after its developer, William
Reilly, is based on Newtonian gravitational principles and explains how large urbanized
areas attract customers from smaller rural communities. In effect, Reilly’s law states that
two cities attract trade from an intermediate place approximately in direct proportion to the
population of the two cities and in inverse proportion to the square of the distance from
these two cities to the intermediate place.
Reilly’s original law was revised in order to determine the boundaries of a city’s trading
area or to establish a point of indifference between two cities. This point of indifference is
the breaking point at which customers would be indifferent to shopping at either city. The
new formulation of Reilly’s law can be expressed algebraically as:
d
D ab =
P
1+ b
Pa
Where, Dab is the breaking point from A, measured in miles along the road to B;
d is the distance between A and B along the major highway;
Pa is the population of A; and
Pb is the population of B.
Retail gravity theory rests on two assumptions:

• The two competing cities are equally accessible from the major road.
• Population is a good indicator of the differences in the goods and services available
in different cities.
Consumers are attracted to the larger population center not because of the city’s size, but
because of the larger number of stores and wider product assortment available, thereby
making the increased travel time worthwhile.
Retail gravity theory does have several limitations:

• City population does not always reflect the available shopping facilities.
• Distance is measured in miles, not the time involved for the consumer to travel that
distance or the consumer’s perception of that distance or time involved.
• It fails to consider the perceived differences between local and other trading centers,
variety-seeking behavior, and other services provided such as medical services or
entertainment facilities.
• Gravity theory is less useful in metropolitan areas where consumers typically have a
10
number of shopping choices available within the maximum distance they are willing
to travel.
Research on outshopping by residents of rural areas—that is, leaving your community to

shop elsewhere—suggests that factors other than those considered by retail gravity theory
are also important.
Saturation Theory
Another method for identifying attractive potential markets is based on retail saturation,
which examines how the demand for goods and services in a potential trading area is being
served by current retail establishments in comparison with other potential markets. Such
analysis produces three possible outcomes:
• Retail store saturation is a condition where there are just enough store facilities for
a given type of store to efficiently and satisfactorily serve the population and yield a
fair profit to the owners.
• When a market has too few stores to satisfactorily meet the needs of the customer, it
is understored.
• When a market has too many stores to yield a fair return on investment, it is
overstored.
Saturation theory, therefore, implies a balance between the number of existing retail store
facilities (supply) and their use (demand).
A possible indicator of understored versus overstored markets is the index of retail

saturation (IRS). The IRS is the ratio of demand for a product or service divided by
available supply and can be measured as follows:
IRS = (H×RE) / RF
Where, IRS = the index of retail saturation for an area,

H = the number of households in the area,
RE = the annual retail expenditures for a particular line of trade per household in the
area,
RF = the square footage of retail facilities of a particular line of trade in the area
(including square footage of the proposed store).
When the IRS takes on a high value in comparison with the line of trade in other cities, it
indicates that the market is understored and thus a potentially attractive opportunity. When
the IRS takes on a low value, it indicates an overstored market, which precludes the
11
potential for significant profits.
Other Demand and Supply Factors
In addition to using retail gravity theory and the index of retail saturation, which are useful
in evaluating various potential markets, the successful retailer will also look at some other
demand and supply factors for each market.
B. Market Demand Potential
In analyzing the market potential, retailers identify certain criteria that are specific to the
product line or services they are selling. The criteria chosen by one retailer might not be of use
to a retailer selling a different product line. The major components of market demand potential
are as follows:
• Population characteristics
• Buyer behavior characteristics
• Household income
• Household age profile
• Household composition
• Community life cycle
• Population density
• Mobility
The most attractive market areas are those in which the preceding criteria are configured in
such a way that they represent maximum market potential for a particular retailer. This will
vary by the type of retailer and the product lines it handles. In assessing different market areas,
a retailer should first establish the market demand potential criteria that characterize the target
market it would like to attract.
C. Market supply Factors
In deciding to enter a new market, the successful retailer will also spend time analyzing the
competition. The retailer should consider square feet per store and square feet per employee,
store growth, and the quality of competition:
• Square feet per store—it is helpful to obtain data on the (average) square feet per store in
the communities that are being analyzed. This data will indicate whether the community
tends to have large- or small-scale retailing. In addition, this is important in terms of
assessing the extent to which the retailer’s standard type of store would blend with the
existing structure of retail trade in the community.
• Square feet per employee—it is a measure that combines two major supply factors in
12
retailing, store space and labor. A high number for this statistic in a community indicates
that each employee is able to handle more space; this could be due to either a high level
of retail technology in the community or more self-service retailing. Since retail
technology is fairly constant across communities, any difference in square feet per
employee is most often due to the level of service being provided.
• Growth in stores—when growth in stores is rapid, the community is likely to have better-
located stores with more contemporary atmospheres.
• Quality of competition—the three preceding supply factors reflect the quantity of
competition. Retailers also need to look at the strength or quality of competition. They
should attempt to identify the major retail chains and local retailers in each market and
evaluate the strength of each.
V. Site Analysis
Once a retailer has identified the best potential market, the next step is to perform a more detailed
analysis of the market. Site analysis is an evaluation of the density of demand and supply within
each market with the goal of identifying the best retail site(s).
Site analysis begins by evaluating the density of demand and supply in various areas within the
chosen market. To do so, retailers commonly use census tract data, ZIP-code areas, or some other
meaningful geographic factor to identify the most attractive sites, given the retailer’s requirements,
that are available for new stores. One of the advantages of using census tract data is that it’s readily
available from the Census Bureau.
A. Size of Trading Areas
This section attempts to estimate the geographic area from which a store located at a particular
site will be able to attract customers.
At the same time that Reilly was developing retail gravity theory to determine the trading area
for communities, William designed a technique specifically for determining and evaluating
trading areas for an individual store. Applebaum’s technique was based on customer spottings.
For each $100 in weekly store sales, a customer was randomly selected or spotted for an
interview. These spottings usually did not require much time since the interviewer requested
only demographic information, shopping habits, and some pertinent consumer attitudes toward
the store and its competitors. After the home addresses of the shoppers were plotted on a map,
the analyst could make some inferences about trading area size and the competition. Exhibit 7.9
is an example of a map generated using customer spottings.
Thus, it is relatively easy to define the trading area of an existing store. All that is necessary is
13
to interview current customers of the store to determine where they reside. There is a fair
amount of conventional wisdom that has withstood the test of time about the factors that are
related to trading area size, which can be summarized as follows:
• Stores that sell products the consumer wants to purchase in the most convenient manner
will have a smaller trading area than so-called specialty stores.
• As consumer mobility increases, the size of the store’s trading area increases.
• As the size of the store increases, its trading area increases because it can stock a broader
and deeper assortment of merchandise, which will then attract customers from greater
distances.
• As the distance between competing stores increases, their trading areas will increase.
• Natural and human-made obstacles such as rivers, mountains, railroads, and freeways can
abruptly limit the boundaries of a trading area.
B. Description of Trading Area
Retailers can access, at relatively low cost, information concerning the trading area for various
retail locations and the buyer behavior of the trading area. Using the search engine can help to
locate the websites of any of the firms providing geographical information services, indicating
how readily available this information is to the typical retailer. For example, consider the work
of Pitney Bowes MapInfo (www.pbinsight.com).
Pitney Bowes MapInfo is a global software company that integrates software, data, and
services to help retailers make more insightful location decisions. As a market-research firm
specializing in developing psychographic, demographic, or lifestyle analyses of geographic
areas, it produces solutions that are available in 20 languages in 65 countries. MapInfo’s
PSYTE Advantage segmentation system, which breaks down all neighborhoods in the United
States into 72 different clusters, is based on the old adage that birds of a feather flock together.
In distinguishing between neighborhood types, PSYTE Advantage and similar products use
two basic criteria:
• Each type of neighborhood must be different enough from all the others to make it a
distinct marketing segment.
• There must be enough people living in each type of neighborhood to make it a
worthwhile segment to retailers.
Utilizing a variety of databases, including U.S. census data and proprietary computer software,
Pitney Bowes MapInfo found 72 neighborhood types in the United States. These types are
distinguished from each other in many ways:
• Some are based primarily on income
• Some are family-oriented
14
• Some are race-oriented\

• Some are urban
• Some suburban
• Some rural
Most combine two or more distinguishing demographic characteristics. Exhibit 7.10 identifies
these 72 neighborhood types or clusters.
The neighborhood names attempt to capture the essence of the neighborhood and provide an
easy way of remembering distinctions. Also associated with the neighborhoods are
demographics, lifestyles, retail opportunities, and financial and media habits.
C. Demand Density
Demand density is the extent to which the potential demand for the retailer’s goods and
services is concentrated in certain census tracts, ZIP code areas, or parts of the community. To
determine the extent of demand density, retailers need to identify what they believe to be the
major variables influencing their potential demand. One such method of identifying these
variables is to examine the types of customers who already shop in the retailer’s present
stores. The variables identified should be standard demographic variables such as age,
income, and education since this data will be readily available. Exhibit 7.11 provides an
example.
D. Supply Density
While the demand-density map allows you to identify the area within a community that
represents the highest potential demand, the location of existing retail establishments should
also be mapped. Supply density is the extent to which retailers are concentrated in different
geographic areas of the market under question.
E. Site Availability
Just because demand outstrips supply in certain geographic locations does not immediately
imply that stores should be located in those locations. Sites must be available. Some developers
have made use of eminent domain law— the inherent power of the government to seize
private property without the owner’s consent in order to benefit the community—as a means of
securing land to build retail outlets.
A map should be constructed of available sites in each community being analyzed. Exhibit 7.13
shows a checklist for site evaluations.
15
VI. Site Selection
After completing the analysis of each segment in the desired market and identifying the best
available sites within each market, retailers are now ready to make the final decision regarding
location: selecting the best site (or sites) available.
In principle, all retailers should attempt to find a 100-percent location for their stores. A 100-
percent location is one where there is no better use for the site than the retail store that is being
planned. Retailers should remember that what may be a 100-percent site for one store may not be
for another. The best location for a supermarket may not be the best location for a discount
department store.
Unfortunately, there is no best way to identify the 100-percent location. There is, however, general
agreement on the types of things that the retailer should consider in evaluating sites:
• The nature of the site
• Traffic characteristics
• Type of neighbors
• The terms of purchase or lease
A. Nature of Site
Is the site currently a vacant store, a vacant parcel of land, or the site of a planned shopping
center? Many of the available retail sites will be vacant stores. This is because 10 percent to 15
percent of stores go out of business each year. When the retail site that appears to be best suited
to the retailer’s needs is a vacant parcel of land, the retailer needs to investigate why it is
vacant. Why have others passed up the site? Was it previously not for sale or was it priced too
high? Or is there some other reason?
Finally, the site may be part of a planned shopping center. In this case, the retailer can usually
be assured that it will have the proper mix of neighbors, adequate parking facilities, and good
traffic.
Traffic Characteristics
The traffic that passes a site, whether it is vehicular or pedestrian, can be an important
determinant of the potential sales at that site. However, other factors than traffic flow must
be considered. The retailer must determine whether the population and traffic are of the
type desired.
The retailer should evaluate the following traffic-related aspects of the site:
16
• The availability of sufficient parking, either at the site or nearby. Generally, the
space that will be needed is a function of four factors:
o Size of the store
o Frequency of customer visits
o Length of customer visits
o Availability of public transportation
• The direction of traffic relative to the shopping area
• The ease with which consumers can reach the store site
Types of Neighbors
The neighboring establishments surrounding the site can be good or bad depending on the
type of store being considered at the site.
Determining the good and bad neighbors may not always be that easy, especially for an
entrepreneur. A good neighboring business will be one that is compatible with the retailer’s
line of trade.
Research has found that retailers experience a benefit from store compatibility. Store
compatibility exists when two similar retail businesses locate next to or nearby each other
and they realize a sales volume greater than what they would have achieved if they were
located apart from each other.
Retail clusters are groups of stores closely located that share similar characteristics such
as product category, store format, or customer demographics. The major benefit of
clustering is two-fold for customers:
• Once potential customers identify a need for a line of merchandise or service, they
don’t need to decide on the specific store to visit but just need to decide to travel to
the retail cluster.
• Retail clustering allows customers to walk from store to store, comparing prices,
products, and service. However, grouping stores doesn’t always benefit competitors.
B. Terms of Purchase or Lease
The retailer should review terms of the lease, which would include:
• The length of the lease (it could be too long or too short)
• The exclusivity clause (whether or not the retailer will be the only one allowed to sell a
certain line of merchandise)
• The guaranteed traffic rate (a reduction in rent should be offered if the shopping center
fails to achieve a targeted traffic level)
17
• An anchor clause (which would also allow for a rent reduction if the anchor store in a
developing center does not open on time or when the retailer opens)
Lease arrangements generally call for either a fixed payment in which the rental charge is
usually based on a fixed amount per month or a variable payment in which rent is a specified
percentage of sales with a guaranteed minimum rent. It is important for the retailer to choose
the one that is best under the circumstances—perhaps a combination of the two methods.
When the retailer decides to locate in a shopping center, it usually has no other choice than to
lease. However, in the case of a freestanding location, an outright purchase is often possible.
When purchasing a freestanding location, the retailer needs to carefully examine any zoning
regulations that might prevent the use of the property as the retailer intends. It should also make
sure that there are no liens on the property or hazardous wastes that the retailer may need to
clean up.
C. Expected Profitability
The final step in site selection analysis is the construction of a pro forma (expected) return-on-
asset model for each possible site. The return-on-asset model comprises three crucial variables:
• Net profit margin
• Asset turnover
• Return on assets
For purposes of evaluating sites, the potential return on equity is not relevant. This is because
the financial leverage ratio (total assets divided by equity) is a top-management decision; it
represents how much debt the retail enterprise is willing to assume. The retailer should already
have determined that it has or can obtain the capital to finance a new store. It is therefore
reasonable and appropriate to evaluate sites on their potential return on assets and not return on
equity.
If the retailer is to evaluate sites on their potential return on assets, then it will need at least
three estimates:
• Total sales
• Total assets
• Net profit
Each of these is likely to vary, depending on the site. Sales estimates will be different for
alternative sites because each will have unique trade area characteristics, such as the number
and nature of households and the level of competition. Estimated total assets could vary
because the alternative sites will likely have different prices; the cost of construction could also
vary. Finally, estimated profits could vary not only due to varying sales for the different sites
but also because of different operating costs.
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REVIEW AND DISCUSSION QUESTIONS:
[LO01] What criteria are used in selecting a target market?
1. Why should retailers be concerned about selecting the right target market? How are target
market selection and location related?
A target market is that segment of the market that the retailer decides to pursue through its
marketing efforts. Since any single retailer cannot serve all potential customers, it is important
that it segment the market and select a target market.
The topics of target-market selection and location analysis are combined here because a retailer
must identify its target market before it decides how to best reach that market. Reaching the
target market can be achieved through a store-based location in which the consumer travels to
the store or through a nonstore retailing format in which products and services are offered to the
consumer at a more convenient or accessible location. These are related topics because
individuals of different characteristics are not randomly spread over geographic space. In fact, it
has been repeatedly demonstrated that people of similar backgrounds live near each other and
have similar media habits, consumption habits, activities, interests, and opinions.
2. What three criteria should be met to successfully target a market?
First, the selected market segment should be measurable or able to be described by using
objective measures on which data are available.
A second criterion is accessibility, or the degree to which the retailer can target its promotional
or distribution efforts to a particular market segment.
Finally, successful target marketing requires that the segment be substantial enough to be
profitable for the retailer.
[LO02] Identify the different options, both store-based and nonstore-based, for effectively
reaching the retailer’s target market, and identify the advantages and disadvantages of
business districts, shopping centers, and freestanding units as sites for retail location.
3. What types of retailers would be best suited for locating in a lifestyle center?
A shopping center may be considered one probable type of retailer that would be best suited for
locating in a lifestyle center.
A shopping center is a centrally owned or managed shopping district that is planned, has
balanced tenancy (the stores complement each other in merchandise offerings), and is
surrounded by parking facilities. A shopping center has one or more anchor stores (dominant
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large-scale stores that are expected to draw customers to the center) and a variety of smaller
stores. Today, many centers are anchored by a single department store, along with a
Cheesecake Factory or Olive Garden; Bed, Bath and Beyond; Michael’s; Dick’s Sporting
Goods; PetSmart; Office Depot; Old Navy; Cost Cutters; or even the occasional Home Depot
or a multi-screened movie theater.
A unified, cooperative advertising and promotional strategy is followed by all the retailers in
the center.
4. Why are some shopping centers and malls now using big-box stores such as Home Depot, Bass
Pro Shops, and Kaplan’s as anchors? Aren’t anchor stores supposed to be department stores?
A shopping center has one or more anchor stores and a variety of smaller stores. In the past,
these anchors were department stores. However, the recent consolidation of department store
companies has reduced the number of stores, either chain or independent, that is available to
serve as magnets to draw consumers to the center. To ensure that these smaller stores
complement each other, the shopping center often specifies the proportion of total space that
can be occupied by each type of retailer. Similarly, the center’s management places limits on
the merchandise lines that each retailer may carry. In addition, a unified, cooperative
advertising and promotional strategy is followed by all the retailers in the center. The current
retailing move toward entertainment and lifestyle centers has seen a movement away from the
traditional mall or shopping center and toward the lifestyle center concept.
5. What lines of retail trade do you believe will be most affected by the growth of retailing on the
Internet?
The selling of nationally branded major durable goods such as automobiles, stereos, televisions,
computers, etc., will experience rapid growth on the Internet. This is because the savings can be
very high and with a national brand the customer knows what they are purchasing. One should
also expect lower price products such as books and groceries to also sell well as long as the
economies of home delivery can be justified. Finally purely electronic or digital products or
services such as banking, music, software, and travel reservations should experience explosive
growth via these new retail distribution formats, as the security issue is solved.
6. Why isn’t Walmart a good choice to be an anchor at a mall?
Anchors serve as magnets to draw consumers to the shopping center. To ensure that these
smaller stores complement each other, the shopping center often specifies the proportion of
total space that can be occupied by each type of retailer. Similarly, the center’s management
places limits on the merchandise lines that each retailer may carry. In addition, a unified,
cooperative advertising and promotional strategy is followed by all the retailers in the center.
20
Walmart is a traditional retailer which has monopoly of communities and very little
competition in some of the larger communities in the country. It has been operating
successfully over the years with price being competitive advantage. Thus, it is a mammoth that
cannot be squeezed as an anchor.
[LO03] Define geographic information systems (GIS) and discuss their potential uses in a
retail enterprise.
7. How have improvements in the user-friendliness of GIS mapping technology caused retailers to
become more research-driven in locating stores?
The recent advancements in geographic information system (GIS) mapping technology have
allowed the retail analyst to describe the lifestyle (activities, interests, opinions) of residents in
different geographic areas. This can be quite helpful in selecting locations for stores that are
highly lifestyle sensitive, such as sporting goods stores. The increased user-friendliness of GIS
mapping technology has allowed retailers to become more research-driven in locating stores.
They no longer have to rely on real estate brokers to supply information that may or may not be
relevant to their business, such as the fact that the supermarket across the street is doing $30
million in sales annually.
8. How is it possible for small retailers to use GIS? Isn’t it expensive to use GIS?
As a management technology, GIS has a variety of important uses in retailing. Some of the
popular uses are:
• Market selection
• Site analysis
• Trade area definition
• New store cannibalization
• Advertising management
• Merchandise management
• Evaluation of store managers
Although most large retailers are using a combination of mapping and demographics during the
site-selection process, many small to medium-sized retailers are not using GIS technology to its
full potential. This may be due to a lack of technical expertise in using complicated software; if
a program isn’t easy to use, many firms won’t use it.
9. Why do GISs include both physical and cultural geography? Provide some examples of
physical and cultural data that should be included in a GIS.
A geographic information system (GIS) is a computerized system that combines physical
21
geography with cultural geography. Physical geography is the latitude (north-south) and
longitude (east-west) of a specific point in physical space and its related physical characteristics
(water, land, temperature, annual rainfall, etc.). Cultural geography consists of the things that
people have put in place in that space. It includes characteristics of the population such as age,
gender, and income, as well as human-made objects placed in that space like fixed physical
structures (factories, stores, apartment building, schools, churches, houses, highways, railroads,
airports, etc.) and mobile physical structures (e.g., cars and trucks). In reality, culture includes
anything that humans can put onto a physical space, which then becomes an attribute of the
physical space.
[LO04] What factors should be considered in identifying the most attractive retail market?
10. Someone once said “build a better mousetrap and the world will beat a path to your door.” If
this is true, why is it important for a retailer to select the correct site within a trading area?
Explain your answer.
The location decision for store-based retailers involves three sequential and critical steps:
• The retailer must identify the most attractive market or trading area—the geographic area
from which a retailer, group of retailers, or community draws its customers—in which to
operate.
• The retailer must evaluate the density of demand and supply within each market and
identify the most attractive sites available within each market. Essentially, this means
identifying sites most consistent with the retailer’s target market while simultaneously
accounting for those markets that may be under- or overstored.
• The retailer must select the best site (or sites) available. This stage involves estimating
the revenue and expenses of a new store at various locations and then identifying the
most profitable ones.
11. What is the index of retail saturation? How is it used in making a location decision?
A possible indicator of understored versus overstored markets is the index of retail saturation
(IRS). The IRS is the ratio of demand for a product or service divided by available supply and
can be measured as follows:
IRS = (H × RE)/RF
where IRS is the index of retail saturation for an area, H is the number of households in the
area, RE is the annual retail expenditures for a particular line of trade per household in the area,
and RF is the square footage of retail facilities of a particular line of trade in the area (including
square footage of the proposed store). IRS is essentially the sales per square foot of retail space
22
in the marketplace for a particular line of retail trade.

When the IRS takes on a high value in comparison with the line of trade in other cities, it
indicates that the market is understored and thus a potentially attractive opportunity. When the
IRS takes on a low value, it indicates an overstored market, which precludes the potential for
significant profits.
12. With the growth of Internet retailing, will the IRS increase or decrease in importance? Why?
As nonstore-based retailing continues to grow, retailers need to recognize that the index of
retail saturation may become less useful. This is because it incorporates only store-based
retailing in the supply component of the index. Although this is not a problem in the rental
retailers, it may be a problem for apparel retailers and computer retailers because many
households may now make their purchases over the Internet.
13. According to Reilly’s law of retail gravitation, cities attract trade from an intermediate place
based on what two factors? How are these factors used in making a location decision?
Reilly’s law of retail gravitation deals with larger urbanized areas attracting customers from
smaller communities. Two factors that attract trade to an intermediate location are the direct
proportion to the population of the two cities and inverse proportion to the square of the
distance from these two cities to the intermediate place. Essentially, people will tend to shop in
the larger city if travel distance is equal, or even somewhat further, because they believe the
product selection in the larger city to be better and worth the travel.
These two points have factored into a revised Reilly’s law to determine boundaries of a trading
area. The new formula can be expressed algebraically as noted in the text (277). By using the
equation to calculate a trading area, a retailer has useful additional locale information for its
retail decision making.
14. Compute the index of retail saturation for the following three markets. The data for restaurants
is:
Market A B C
Annual retail expenditures $739 $845 $903
per household
Square feet of retail space 610,000 494,000 801,000
Number of households 126,000 109,000 109,000
Based on this data, which market is most attractive? What additional data would you find
helpful in determining the attractiveness of the three markets?
IRS (Market A) = (126,000 x $739) / 610,000
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= 152.65646
IRS (Market B) = (109,000 x $845) / 494,000
= 186.447
IRS (Market C) = (163,000 x $903) / 801,000
= 183.76757
The most attractive market is Market B with an IRS of 186.447 or $186.447 in expected sales
per square foot. Additional information on various factors that influence market demand
potential such as population characteristics, buyer behavior characteristics, household income,
household age profile, household composition, community life cycle, population density, and
mobility would be helpful. In addition, supply factors such as square feet per store, square feet
of space per employee, store growth, and the quality of competition should be analyzed.
[LO05] What attributes should be considered in evaluating retail sites within a retail market?
15. Identify the factors you would consider most important in locating a fast-food restaurant.
Compare these factors with the factors you would use in selecting a site for a supermarket.
Once a retailer has identified the best potential market, the next step is to perform a more
detailed analysis of the market. Only after careful analysis of the market can the retailer choose
the best site (or sites) available. Site analysis consists of an evaluation of the density of demand
and supply within each market. It should be augmented by an identification of the most
attractive sites that are currently available within each market. The third and final step, site
selection, is the selection of the best possible site. However some of the possible factors for
these two different types of retail stores are listed below.
Fast-food Restaurant Supermarket

Number of vehicles passing Ease of access for truck deliveries
High levels of time pressed-consumers Proximity to larger families
Traffic flow for drive through Number of parking spaces
Number of restaurants in the area offering Close proximity to neighborhood offering
similar food similar food
Percentage of workforce traveling 0-14
minutes to work
16. Explain the concepts of demand density and supply density. Why are they important to retail
decision making?
Demand density is the amount of market potential (usually measured in dollars) that is
available in a geographic area. On the other hand supply density is the amount of retail space
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(usually in square footage) that is available in a geographic area. Both demand and supply
density are important because they are key determinants of retail performance and/or
profitability. However, the retail decision-making should consider both demand and supply
density simultaneously. This is the case because a high demand density is less attractive if there
is also a high level of supply density.
[LO06] How is the best geographic site selected?
17. Why is it so hard to find that 100-percent retail location?
Finding that 100-percent retail location is so difficult because of the number of variables
involved. Investigating the nature of the site takes time and while even if the site found is part
of a planned shopping center where it can be assured of the proper mix of neighbors, adequate
parking facilities, and good traffic, proper planning must take place to avoid being part of a
center where a high percentage of space is not rented. Other variables, like traffic
characteristics, can change over time. What once was an easily accessible location may become
undesirable due to construction or growth patterns. Moreover, ascertaining various factors
ahead of time is not always that easy. Because of the number of factors involved and the
complexity of those variables, finding that 100-percent retail location can be very hard to do.
18. Why do some stores cluster around each other? Doesn’t being so close to their competition hurt
their profitability?
Research has found there is benefit from store compatibility. This is when compatible, or very
similar, businesses locate near each other, and show an increase in sales volume than had they
been located separately. There are many benefits to clustering which dates back to the 1950s
when gas stations competed at already populated intersections. Customers want to do
comparison of shop. Clustering allows more ease in this process. It has also been shown that by
clustering, sales can be increased by 20 percent.
WRITING AND SPEAKING EXERCISE:
You have a summer job with a small florist shop, Forget-Me-Knot, in Troy, Illinois, a growing
area a half-hour east of St. Louis, Missouri. Until recently, Forget-Me-Knot and a smaller flower
shop located a mile away in the center of town were able to easily satisfy the demand for flowers
and floral arrangements in the area. Kathy Kistenmacher, the owner, believes there is room for
another store because of the increasing number of people moving from St. Louis to the small
suburban town. In fact, between 2000 and 2010, the city’s population increased from 11,000 to
15,500. Kistenmacher sells more than just flowers, which gives her a competitive advantage over
other flower shops. She also sells novelty items such as figurines, candles, potpourri, and
25
houseplants. These other items make up 25 percent of Kathy’s gross sales.
The shop has been very busy, and sales are growing rapidly. The store is often very crowded
between 4:30 P.M. and 6:30 P.M. Therefore, Kistenmacher is contemplating either expanding
her current business or opening another store at a new location before someone else sees the
opportunity. She does not have the financial capability to do both. The expansion would be less
expensive, but another store might attract more customers. Current customer information is given
in Exhibit 1.
Exhibit 1
1. Current sales: $452,000

2. Sales growth rate (annually since 2000): 15 percent annually
3. Percentage of customers living within 3 miles: 43 percent
4. Percentage of customers living within 3 to 6 miles: 30 percent
5. Percentage of customers living more than 6 miles: 27 percent
6. Average income of those living within 3 miles: $32,000
7. Average income of those living within 3 to 6 miles: $61,000
Forget-Me-Knot is currently located at the edge of town 2 miles from the interstate to St. Louis
on the main traffic artery from the interstate. Kistenmacher is considering two possible locations:
One is in the middle of town, a half-mile from her current location and only two blocks from her
competitor; the other location is next to the Interstate.
The in-town possibility is centrally located, and Kathy feels that this location would attract many
people who shop at the renovated downtown shopping area. The highway location, on the other
hand, is conveniently located in a small shopping complex. This location would appeal to
commuters returning to the town proper from St. Louis. It would also be accessible to other
commuters who live in the new subdivisions across the interstate.
Kathy feels that she has to make a change, but she cannot decide which location to choose, or
whether she should renovate and expand the existing store. She can choose only one alternative.
Since you have taken a retailing class, Kathy asks for your advice. Therefore, based on the
available information, write a memo telling Kathy if she should open another store or just expand
her current location. Explain how you determined this strategy. If you recommend an additional
store, tell her why you chose that location.
Suggested Answer:
Students will have to consider following and do the required calculations before reaching any
26
consensus:
Point of indifference can be calculated using the Reilly’s law given in the text to close in on one
location.
It is obvious that effective buying income is the most important factor, followed by retail sales and
population. Sales & Marketing Management magazine annually publishes a survey of buying
power. This survey reports on current data for metropolitan areas, cities, and states. Using data that
can be easily obtained from Sales & Marketing Management, students can develop the buying
power index (BPI) for each location. Location with higher BPI can be considered.
After doing point of indifference and BPI calculations, students should pay attention to market
demand potential characteristics, especially the household income provided in the exhibit could be
of key consideration. As we know, a flower shop has more demand potential in a place with higher
income.
RETAIL PROJECT
Small as well as large retailers can benefit immensely from knowing the trade area of their store.
Identify a small local retailer such as a florist, pet store, apparel store, gift store, or restaurant.
Contact the store owner or manager and tell him or her that you are a student studying retailing and
would like to volunteer to construct a map of the retailer’s trade area. To do this, you need to obtain
the addresses of all the patrons over a one-week period and plot these on a map. Review the
customer-spotting map for a supermarket in Exhibit 7.9 on page 285. Develop a method to collect
the needed data and construct the map of the trade area. What percentage of customers are within 1
mile of the store? Within 3 miles? Within 5 miles?
Suggested Answer:
This is a good learning project. Be sure to guide your students regarding which local retailers to
contact. You may ask the students present their findings in class and then discuss with the students
why some retail stores have a smaller trade area—such as convenience stores.
PLANNING YOUR OWN ENTREPRENEURIAL BUSINESS:
The retail store you are planning has an estimated circular trade radius of 4 miles. Within this 4-mile
radius there is an average of 1,145 households per square mile. In a normal year, you expect that 47
percent of these households would visit your store (referred to as penetration) an average of 4.3
times (referred to as frequency). Based on those figures, what would you expect to be the traffic
(i.e., number of visitors to your store per year)? (Hint: Traffic can be viewed as the square miles of
the trade area multiplied by the household density multiplied by penetration, which is in turn
multiplied by frequency.)
Once you answer this question, do some sensitivity analysis, which is an assessment of how
27
sensitive store traffic is to changes in your assumptions about penetration and frequency. What
happens if penetration drops to 45 percent or rises to 50 percent? What happens if frequency drops
to 4.0 times annually or rises to 4.5 times annually? In this analysis, change only one thing at a time
and hold all other assumptions constant.
Suggested Answer:
One needs to first compute the following.
1. Square miles of trade area = r2
= (22/7)(4)2
= 50.286
2. Traffic = (square miles in trade area) × (household density) × (penetration) × (frequency)
= (50.286) × (1,145) × (47%) × (4.3)
= 116,364
Next do some sensitivity analysis.

Consider the following possible parameter values
Square Miles in Household Penetration Frequency Traffic

Trade Area Density
50.286 1145 47% 4.3 116,364
50.286 1145 45% 4.3 111,412
50.286 1145 50% 4.3 123,792
50.286 1145 47% 4.0 108,246
50.286 1145 47% 4.5 121,776
(Square Miles in Trade Area) × (Household Density) × (Penetration) × (Frequency) = Traffic
CASE:
Nordstrom Market Selection
Background
Founded in 1901 as a retail shoe business in Seattle, Nordstrom later incorporated in the state of
Washington in 1946. Today, Nordstrom is one of the nation’s leading fashion specialty retailers,
with stores located in 30 states as of March 16, 2012. The west and east coasts of the United
States are the areas in which Nordstrom has the largest presence.
As of March 16, 2012, Nordstrom included 116 ‘Nordstrom’ branded full-line stores, an online
store at www.nordstrom.com, and 105 off-price ‘Nordstrom Rack’ stores. Other retail channels
include their online private sale subsidiary ‘HauteLook’ acquired in February 2011, two ‘Jeffrey’
28
boutiques, one philanthropic ‘treasure&bond’ store and one clearance store that operates under
the name ‘Last Chance.’ HauteLook is a Los-Angeles-based e-tailer that offers flash sales on
designer fashion merchandise may be a key to Nordstrom’s future growth. HauteLook
(www.hautelook.com) offers merchandise at 50-75% off regular price.
Growth Through Market Expansion
In the U.S. market it has been difficult for retailers to grow since household income adjusted for
inflation is often flat if not negative. And even though Nordstrom appears to upper middle class
households they have also been hit hard by the economy. Thus Nordstrom has grown via
expansion into other states outside its home in Seattle, Washington. This actually is somewhat of
a continuation of its store growth strategy going back twenty-five years but store growth and
market expansion is more important than ever.
Between 2008 and 2011, Nordstrom continued its geographic expansion as shown in exhibits 1
and 2. Nordstrom generally opened between a dozen and 20 stores annually with the major focus
on opening of Nordstrom Rack Stores. Over the last five years Nordstrom Rack stores have
almost doubled. At the same time the firm experienced inconsistent financial and operating
performance as shown in exhibit 3. In fact 2011 operating profits were lower than in 2007; a
rather sobering experience for the senior management team. Some analysts are surprised why
with this inconsistent operating performance the firm continues to increase its dividend to
shareholders.
Questions
1. Why do you believe Nordstrom is opening more Nordstrom Rack Stores than its traditional
Nordstrom stores?
Suggested Answer:
Nordstrom traditional stores cater to higher income households and usually a large
community of one million people can only support one of these stores. On the other hand,
Nordstrom has a very strong overall reputation and often middle-income households will
occasionally visit a Nordstrom for a special occasion gift. By opening Nordstrom Rack
Stores with discounted merchandise, the firm is able to broaden its target market and reach
many more potential customers. Incidentally, since Nordstrom seldom has sales at its
traditional stores, it is able to attract the price and promotion oriented shopper with its
Nordstrom Rack Stores.
2. Analyze Nordstrom’s financial and operating performance and store growth and draw
29
conclusions on the effectiveness of the market expansion strategy.
Suggested Answer:
With the exception of 2008 and 2009, Nordstrom’s financial performance is strong. In 2008
same store sales declined 9% and in 2009 they declined 4.2%; however, this was mostly due
to the very weak national economy (recession). In 2007 the firm had a gross margin of
37.4%, followed by 34.5% in 2008, 35.5% in 2009, 36.7% in 2010, and 37.2% in 2011. If
Nordstrom did open Rack Stores, this gross margin would probably be higher by a few
percentage points, however, the Rack Stores are the avenue for sales growth. In 2007, the
firm had a net profit margin (after taxes) of 8.1%, followed by 4.8% in 2008, 5.3% in 2009,
6.6% in 2010 and 6.5% in 2011. Relative to other retailers, this is strong performance. One
area of concern is sales per square foot, which at $431 in 2011, was lower than $435 in
2007. This is a sign that although stores are being opened at a rapid pace, the market may be
saturated and thus, Nordstrom should proceed cautiously with new store openings,
especially in the U.S. market. Overall, the firm is doing quite well and shareholders have
benefitted. In 2007, earnings per share were $2.88 and dividends per share were $.54. By
2011, the earnings per share had risen to $3.14 and dividends per share were $.92.
3. Register for the HauteLook website and evaluate if you think Nordstrom should put more of
its emphasis on growth sales via e-tailing and less on its brick-and-mortar stores. Do the
same for Nordstrom’s online store (www.nordstrom.com).
Suggested Answer:
Students will enjoy viewing and studying these e-tailing businesses. Most will conclude that
e-tailing should be a prominent part of Nordstrom’s future growth strategy.
4. Should Nordstrom expand to markets outside the United States? If so, what markets do you
think would be most attractive?
Suggested Answer:
Many tourists from abroad visit and shop at Nordstrom. Since many tourists are from Asia,
and Nordstrom has had a U.S. West Coast presence for many decades, the Asian tourist has
had good exposure to the Nordstrom brand. Also, Asians are experiencing increases in
household income. Nordstrom should consider opening stores in Japan, South Korea, China,
Singapore, and Malaysia. In addition, it might consider Canada for market expansion,
especially Vancouver, Toronto, and Montreal.
TEACHING TIPS:
30
1. This is one of the more conceptually difficult chapters and therefore using some activity-based
learning exercises may prove helpful. Usually the topics addressed in this chapter require three
lectures: one on target market selection, another on the different types of locations that are
available, and a final lecture on the steps in selecting the best available retail location. In
advance of each of these three lectures you might give the following assignments or pose the
following questions that can then be used to commence class discussion.
a. Select your favorite restaurant. Identify what you believe to be its target market. How
important is the restaurant’s location to attracting its target market? How important is the
restaurant’s target market to the locations of future restaurants that it might open?
b. List and describe the non-store based retailers you have encountered in the last month.
Do they pose a threat to traditional store based retailers?
c. If you were to locate a Laundromat in your community where would it be located? This
question should get your students actively involved in considering demand and supply
factors and how they interact to influence the best site for a new retail enterprise.
2. Pose the question, “Given the wide variety of locations available to target specific consumer
groups, what new locations will provide the greatest opportunities for the retailers of
tomorrow?” to generate class discussion. This question, which poses the issue of future
locations, asks students to think beyond traditional brick-and-mortar retail locations and even
nonstore-based locations. For example, what type of retailing lies beyond the Internet? Much
like the new product development process, standard techniques can be applied here to answer
this question. For example, one could use attribute listing to stimulate this discussion. First, an
instructor would have students develop a list of all of the shortcomings/limitations of current
retail locations. Next, a list of “ideal” benefits retailers could provide via their location choice
would be developed. These lists can then form the basis of a new type of retail location. Focus
groups and forced relationships can also serve as methods to stimulate ideas.
3. It is conventional wisdom in shopping center management that anchor stores draw traffic to
shopping centers. The authors have found that this is not necessarily so for the under-25 age
segment. Students can be asked to identify their favorite regional shopping center. Next,
students can be asked what stores attract them to visit this shopping center. Almost invariably it
will be the smaller non-anchor specialty apparel and shoe stores and not the large department
stores.
4. If you have students who have lived outside the U.S., having them discuss the typical retail
store locations they have experienced helps broaden the class’s view of retailing. The
31
discussion can be especially interesting if you focus on groceries and restaurants.
6. To reinforce an international perspective to the course, the instructor may want to consider
having the students do some additional analysis regarding some developing nations. Then,
the students can be assigned the task of developing a plan to attract investors to a particular
region of the country. This project will emphasize the need to identify a target market and
the impact that the major components of market demand and the supply-side factors have on
attracting investors to a particular location.
7. The concept of Geographic Information Systems (GIS) is difficult. Have your students visit a
GIS website (MapInfo at www.mapinfo.com (http://www.pbinsight.com/welcome/mapinfo/) or
Environmental Systems Research Institute, Inc. at www.esri.com). Touring one of these
websites during class can help your students better understand the use and benefits of GIS
(please make sure to check each website prior to class as URLs change continually).
Environmental Systems Research Inc. (www.esri.com) is an excellent website with much
information that can serve as a basis for fruitful discussion.
8. For a more advanced class, using some extra time to better explain and work through some
problems using Reilly’s law or the index of retail saturation (IRS) can be informative. Exhibit
7.13, “Checklist for Site Evaluations,” is also a helpful teaching tool. Have your students
identify a failed and/or vacant retail store in your community. Using the checklist in Exhibit
7.13, have them identify potential causes of failure. Of course, remind your students that failure
may have not been due to location but other factors such as poor management or
merchandising. Nonetheless, the old adage that location, location, location are the three most
critical factors in determining retail success does have a lot of validity most of the time.
9. Similar to the activity above, the instructor can discuss the applicability of a checklist for
site evaluations, such as the one found in Exhibit 7.13. There are over 40 different criteria
listed in this exhibit. However, simply knowing the population and/or household base will
not ensure the success of a particular site. The retailer must look for criteria that will support
its endeavors as a profitable business. Therefore, the instructor can pre-select a type of store
that the members of the store have hypothetically decided to open (a flower shop, a bakery, a
music trading store, etc.). Then, the class can identify a target market that they desire to
serve through their offering. Given these two pieces of information (the type of store and the
desired target market); the instructor can have the students put parameters on the criteria for
site evaluation and discuss its usefulness.
10. The Internet is often one of the most popular topics for students to discuss. To help demonstrate
the importance of location online is to select a specific product category, such as coffee beans.
Ask students to independently find the “best” source of fresh coffee beans. Ask the students to
32
detail their exact steps on finding the best coffee beans online. Then, have students compare
their search process and relate it to the issue of what “location” means for an e-tailer.
11. One fun activity that an instructor may wish to use as a class exercise relates to determining the
best location for a new retailer. The instructor can indicate to the students that a new retailer is
considering opening a store in their area (the type of store selected should be something that
would be interesting to the students, but distinct from other retailers in the area—for example,
instead of another restaurant or night club, a unique retail idea should be used, such as a movie
theater where everyone is in a pool). The instructor may wish to direct student attention to
Exhibit 7.5 relating to selecting a retail location. Next, students are asked to put together a
presentation that will identify the relevant trading area and site selection criteria they will be
using. Finally, students are asked to present the chosen site and the rationale for its selection.
TEACHING IN ACTION:
No Men Allowed—Targeting Women Travelers in the Hotel Industry
For women business travelers, hotels are not always the most restful of retail institutions. Women
travelers are well aware of the dangers of going out alone in a strange city after putting in a hard day
at the office and as such often decide to spend an evening alone in the hotel instead. However, many
have found that while physically safe in the confines of their hotel, the experience is often less than
optimal. Dining alone is lonely, and a trip to the hotel bar often leads to advances from men
(ranging from typical pick-up lines to those mistaken encounters when the business traveler is
mistaken for a “professional” of another trade) most women would rather do without. As such, most
women take sanctuary in their hotel rooms, dining from room service, mini-bars, and the small
snacks left over from the day’s business lunches.
Enter Lady’s First, Zurich’s first hotel for women only. Recognizing the market opportunities
available due to the increasing number of women business travelers and their requisite needs,
Lady’s First opened in January of 2001. Clearly an example of segmenting and targeting a market,
Lady’s First understood that the travel needs of business women were unique from those of their
male counterparts. As such, the retail mix at Lady’s First not only includes the traditional amenities
offered by hotels targeting business travelers, but also included a women’s wellness center.
The wellness center operates more as a spa than as a traditional fitness center one would most likely
find in standard business hotels. Located on the top floor of the hotel, the wellness center offers a
variety of health and beauty treatments (e.g., massage, facials, etc.). Through matching retailer
product and services to the needs of this well-defined target market, Lady’s First has positioned
itself unlike any other.
33
INTEGRATIVE CASE:
Zumiez: Where to Expand Next?
Zumiez, a publicly traded retailer, is a specialty retailer focusing on the market comprising teens
to early 20s who are seeking the action sports or “rider” lifestyle. These sports include
snowboarding, skateboarding, surfing, BMX, and motocross. The merchandise mix reflects
brands which support and are symbols of this lifestyle. Zumiez has been successful in creating a
store format that gives the store an independent specialty shop feel, despite the fact that it is a
large chain. The company was founded in 1978, and by 2011 had grown to over 400 stores with
a presence in 37 states.
Zumiez has been growing rapidly over the past five years, opening 233 new stores from 2006 to
2011. In 2011, Zumiez expanded into the Canadian market with the opening of stores in Toronto
and Vancouver areas for a total of five Canadian locations. In addition to store expansion,
Zumiez has an opportunity to grow its e-commerce sales. Currently e-commerce represents a
small portion of Zumiez’s business, especially for a target age range that is more likely to shop
online than some others. E-commerce represented 1.7 percent, 2.5 percent, and 4.7 percent of
Zumiez’s sales in fiscal years 2008, 2009, and 2010.
Questions
1. Should Zumiez continue to expand in the United States and Canada or now try to enter other
foreign countries? What foreign countries might represent viable markets?
Suggested Answer:
Students should be encouraged to search the Internet and online library sources regarding
the market potential and growth of boarding sports, BMX, and Motocross. They are likely to
find many sources to support the global growth of these markets. One source is found at:
http://www.prweb.com/releases/summer_boardsports/snowboarding/prweb8286170.htm
(accessed on November 21, 2012) and provided good background and statistics on the
growth of board sports. Several countries that look attractive for expansion include
Australia, New Zealand, Norway, U.K., and France. The BMX and Motocross market is
also growing, and students should find information to specifically support growth prospects.
It should be noted that there are many small manufacturers of BMX, Motocross and
products in the board sports market, so, if Zumiez enters foreign markets, they also need to
be familiar with the supply chains for these products and any preferences for specific
brands.
2. Would Zumiez be better off focusing its growth strategy around enhancing its e-tailing
34
venture?
Suggested Answer:
Growth through e-tailing is a clear possibility. This is especially true due to the growth of
social media mostly among youth. Youth are the biggest market for the merchandise
offering of Zumiez. Another advantage of e-tailing is that when merchandise is shipped to
the customer, Zumiez gains information that would be valuable for locating future retail
outlets.
3. Identify an area in the state or country you live in where you would see the potential for
opening a Zumiez store. Explain your rationale.
Suggested Answer:
Students should always suggest geographic areas with a high proportion of children and
teenagers. They should also recognize that the market potential is a function of household
income. Ideal locations are those with above average household income with many children.
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and they are here arranged in general conformity with the procedure
in succession.
I. Causation. The initial cause of a succession is the formation

or appearance of a new habitat, or the efficient change of an
existing one.
II. Reaction. Each stage reacts upon the habitat in such a way
as to produce physical conditions more or less unfavorable
to its permanence, but advantageous to the invaders of the
next stage.
III. Proximity and mobility.
(1) The pioneers of a succession are those species

nearest at hand that are the most mobile.
(2) The number of migrants from any formation
into a habitat varies inversely as the square of the
distance.
(3) The pioneer species are regularly derived from
different formations, as the latter nearly always
contain permobile species capable of effective
ecesis.
(4) The plants of the initial stages are normally
algae and fungi, with minute spores, composites,
and grasses, which possess permobile fruits, or
ruderal plants, on account of their great seed
production.
IV. Ecesis.
(1) All the migrants into a new, denuded, or greatly

modified habitat are sorted by ecesis into three
groups: (1) those that are unable to germinate or
grow, and soon die; (2) those that grow normally
under the conditions present; (3) those that pass
through one or more of the earlier stages in a
dormant state to appear at a later stage of the
succession.
(2) Wherever ruderal vegetation is present, it
contributes a large number of the pioneer species
of each succession, on account of the thorough
ecesis. In other regions this part is played by
subruderal native species.
(3) Annuals and biennials are characteristic of the
early stages of secondary successions, on account
of their great seed production and ready ecesis.
(4) In layered formations, heliophytes appear before
sciophytes; they ultimately yield to the latter,
except where they are able to maintain a position
in the primary layer.
(5) Excessive seed production and slight mobility
lead to the imperfect ecesis of individuals in dense
stands, and in consequence usually produce great
instability.
(6) Each pioneer produces about itself a tiny area of
ecesis and stabilization for its own offspring, for
the disseminules of its fellows, or of invaders.
(7) Species propagating by offshoots, or producing
relatively immobile disseminules in small
number, usually show effective ecesis, as the
offspring appear within the area of the reaction of
the parent forms.
V. Stabilization.
(1) Stabilization is the universal tendency of

vegetation.
(2) The ultimate stage of a succession is determined
by the dominant vegetation of the region. Lichen
formations are often ultimate in polar and niveal
zones; grassland is the final vegetation for plains
and alpine stretches, and for much prairie, while
forest is the last stage for mesophytic midlands
and lowlands, as well as for subalpine regions.
(3) Grassland or forest is the usual terminus of a
succession; they predominate in lands
physiographically mature.
(4) The limit of a succession is determined in large
part by the progressive increase in occupation,
which makes the entrance of invaders more and
more difficult.
(5) Stabilization proceeds radiately from the pioneer
plants or masses. The movement of offshoots is
away from the parent mass, and the chances of
ecesis are greatest near its edges, in a narrow area
in which the reaction is still felt, and the
occupation is not exclusive.
VI. General laws.
(1) The stages, or formations, of a succession are

distinguished as initial (prodophytia),
intermediate (ptenophytia), and ultimate
(aiphytia).
(2) Initial formations are open, ultimate formations
are closed.
(3) The number of species is small in the initial
stages; it attains a maximum in intermediate
stages; and again decreases in the ultimate
formation, on account of the dominance of a few
species.
(4) The normal sequence of vegetation forms in
succession is: (1) algae, fungi, mosses; (2) annuals
and biennials; (3) perennial herbs; (4) bushes and
shrubs; (5) trees.
(5) The number of species and of individuals in each
stage increases constantly up to a maximum, after
which it gradually decreases before the forms of
the next stage. The interval between two maxima
is occupied by a mixed formation.
(6) A secondary succession does not begin with the
initial stage of the primary one which it replaces,
but usually at a much later stage.
(7) At present, successions are generally mesotropic,
grassland and forest being the ultimate stages,
though many are xerostatic or hydrostatic. If
erosion continue until the sea level is reached, the
ultimate vegetation of the globe will be
hydrophytic. Should the heat of the sun decrease
greatly before this time, the last vegetation will be
xerophytic, i. e., crymophytic.
(8) The operation of succession was essentially the
same during the geological past as it is to-day.
From the nature of their vegetation forms, the
record deals largely with the ultimate stages of
such successions.
CLASSIFICATION AND NOMENCLATURE
325. Basis. New or denuded habitats arise the world over by the
operation of the same or similar causes, and they are revegetated in
consequence of the same reactions. Similar habitats produce similar
successions. The vegetation forms and their sequence are usually
identical, and the genera are frequently the same, or corresponding
in regions not entirely unrelated. The species are derived from the
adjacent vegetation, and, except in alpine and coast regions, are
normally different. The primary groups of successions are
determined by essential identity of habitat or cause, e. g., aeolian
successions, erosion successions, burn successions, etc. When they
have been more generally investigated, it will be possible to
distinguish subordinate groups of successions, in which the degree of
relationship is indicated by the similarity of vegetation forms, the
number of common genera, etc. For example, burn successions in
the Ural and in the Rocky mountains show almost complete
similarity in the matter of vegetation forms and their sequence, and
have the majority of their genera in common. A natural classification
of successions will divide them first of all into normal and
anomalous. The former fall into two classes, primary and secondary,
and these are subdivided into a number of groups, based upon the
cause which initiates the succession.
Fig. 69. Aspen forest formation (Populus-hylium), the typical stage of burn
successions in the Rocky mountains; it is sometimes an anomalous stage in
primary successions, interpolated in place of the thicket formation.
326. Nomenclature. The need of short distinctive names of

international value for plant formations is obvious; it has become
imperative that successions also should be distinguished critically
and designated clearly. From the very nature of the case, it is
impossible to designate each formation or succession by a single
Greek or Latin term, as habitats of the same character will show in
different parts of the world a vegetation taxonomically very different.
It may some day be possible to use a binomial or trinomial for this
purpose, somewhat after the fashion of taxonomy, in which the
habitat name will represent the generic idea as applied to
formations, and a term drawn from the floristic impress the specific
idea. Such an attempt would be futile or valueless at the present
time; it could not possibly meet with success until there is more
uniformity in the concept of the formation, and until there has been
much accurate and thorough investigation of actual formations, a
task as yet barely begun. At present, it seems most feasible as well as
scientific to designate all formations occupying similar habitats by a
name drawn from the character of the latter, such as a meadow
formation, poium, a forest formation, hylium, a desert formation,
eremium, etc. A particular formation is best designated by using the
generic name of one or two of its most important species in
conjunction with its habitat term, as Spartina-Elymus-poium, Picea-
Pinus-hylium, Cereus-Yucca-eremium, etc. Apparently a somewhat
similar nomenclature is adapted to successions. The cause which
produces a new habitat may well furnish the basis for the name of
the general groups of successions, as pyrium (literally, a place or a
habitat burned over), a burn succession, tribium, an erosion
succession, etc. A burn succession consists of a sequence of certain
formations in one part of the world, and of a series of quite different
ones, floristically, in another. A particular burn succession should be
designated by using the names of a characteristic facies of the initial
and ultimate stages in connection with the general term, e. g.,
Bryum-Picea-pyrium, etc. A trinomial constructed in this way
represents the desirable mean between definition and brevity.
Greater definiteness is possible only at the expense of brevity, while
to shorten the name would entirely destroy its precision. The
following classification of successions is proposed, based upon the
plan outlined above. The termination -ium (εῖον) has been used
throughout in the construction of names for successions, largely for
reasons of euphony. If it should become desirable to distinguish the
names of formations and successions by the termination, the locative
suffix -on (-ών) should be used for the latter. The terms given below
would then be hypson, rhyson, hedon, sphyron, prochoson, pnoon,
pagon, tribon, clyson, repon, olisthon, xerasion, theron, broton,
pyron, ecballon, camnon, ocheton, ardon.
I. Normal successions: cyriodochae (κύριος, regular, δοχή, ἡ,
succession)
a. Primary successions: protodochae (πρῶτος, first,

primary)
1. By elevation: hypsium (ὔψος, το, height, elevation,
-εῖον, place)
2. By volcanic action: rhysium (ῥυσίς ἡ, flowing,
especially of fire)
3. In residuary soils: hedium (ἔδος, τό, a sitting base)
4. In colluvial soils: sphyrium (σφύρον, τό, ankle,
talus)
5. In alluvial soils: prochosium (πρόχωσις, ἡ, a
deposition of mud)
6. In aeolian soils: pnoium (πνοή, ἡ, blowing, blast)
7. In glacial soils: pagium (πάγος, ὁ, that which
becomes solid, i. e., a glacier)
b. Secondary successions: hepodochae (ἕπω, to
follow)
8. In eroded soils: tribium (τρίβω, wear or rub away)
9. In flooded soils: clysium (κλύσις, ὁ, a drenching,
flooding)
10. By subsidence: repium (ῥέπω, incline downwards,
sink)
11. In landslips: olisthium (ὄλισθος, ὁ, slip)
12. In drained and dried out soils: xerasium (ξηρασία,
ἡ, drought)
13. By animal agencies: therium (θήρ, ὁ, wild animal)
14. By human agency: brotium (βροτός, ὁ, a mortal)
a. Burns: pyrium (πῦρ, τό, fire)
b. Lumbering: ecballium (ἐκβάλλω, cut down
forests)
c. Cultivation: camnium (κάμνω, cultivate)
d. Drainage: ochetium (ὀχετός, ὁ, drain)
e. Irrigation: ardium (ἄρδω, irrigate)
II. Anomalous successions: xenodochae (ξένος, strange,

unusual)
327. Illustrations. The following series will illustrate the
application of this system of nomenclature to particular successions,
and their stages, or formations.
Thlaspi-Picea-sphyrium: pennycress-spruce talus succession

Thlaspi-Eriogonum-chalicium: pennycress-eriogonum gravel slide
formation
Elymus-Gilia-chalicium: wildrye-gilia half gravel slide formation
Quercus-Holodiscus-driodium: oak-fringewood dry thicket
formation
Pinus-xerohylium: pine dry forest formation
Picea-Pseudotsuga-hylium: spruce-balsam forest formation
Bryum-Picea-pyrium: moss-spruce burn succession
Bryum-telmatium: moss meadow formation
Aster-Chamaenerium-poium: aster-fireweed meadow formation
Deschampsia-Carex-poium: hairgrass-sedge meadow formation
Salix-Betula-helodrium: willow-birch meadow thicket formation
Populus-hylium: aspen forest formation
Picea-hylium: spruce forest formation
Lecanora-Carex-hedium: lichen-carex residuary succession
Lecanora-Gyrophora-petrium: crustose lichen rock formation
Parmelia-Cetraria-chalicium: foliose lichen gravel slide formation
Paronychia-Silene-chalicium: nailwort-campion gravel slide
formation
Carex-Campanula-coryphium: sedge-bluebell alpine meadow
formation
Eragrostis-Helianthus-xerasium: eragrostis-sunflower drainage
succession
Eragrostis-Polygonum-telmatium: eragrostis-heartsease wet
meadow formation
Helianthus-Ambrosia-chledium: sunflower-ragweed waste
formation
INVESTIGATION OF SUCCESSION
328. General rules. The study of succession must proceed along

two fundamental lines of inquiry: it is necessary to investigate
quantitatively the physical factors of the initial stages and the
reactions produced by the subsequent stages. This should be done by
automatic instruments for humidity, light, temperature, and wind, in
order that a continuous record may be obtained. Water-content is
taken daily or even less frequently, while soil properties, and
physiographic factors, altitude, slope, surface, and exposure are
determined once for all. It is equally needful to determine the
development and structure of each stage with particular reference to
the adjacent formations, to the stage that has just preceded, and the
one that is to follow. For this, the use of the permanent quadrat is
imperative, as the sequence and structure of the stages can be
understood only by a minute study of the shifting and rearrangement
of the individuals. Permanent migration circles are indispensable for
tracing movement away from the pioneer areas by which each stage
reaches its maximum. Denuded quadrats are a material aid in that
they furnish important evidence with respect to migration and ecesis,
By means of them, it is possible to determine the probable
development of stages which reach back a decade or more into the
past. In the examination of successions, since cause and effect are so
intimately connected in each reaction, it is especially important that
general and superficial observations upon structure and sequence be
replaced by precise records, and that vague conjectures as to causes
and reactions be supplanted by the accurate determination of the
physical factors which underlie them.
Fig. 70. Alternating gravel slides on Mounts Cameron and Palsgrove, from the
comparison of which the initial development of the talus succession has been
reconstructed.
329. Method of alternating stages. The period of time

through which a primary succession operates is usually too great to
make a complete study possible within a single lifetime. Secondary
successions run their course much more quickly, and a decade will
sometimes suffice for stabilization, though even here the period is
normally longer. The longest and most complex succession, however,
may be accurately studied in a region, where several examples of the
same succession occur in different stages of development. In the
same region, the physical factors of one example of a particular
succession are essentially identical with those of another example in
the same stage. If one is in an initial stage, and the other in an
intermediate condition, the development of the former makes it
possible to reestablish more or less completely the life history of the
latter. The same connection may be made between intermediate and
ultimate stages, and it is thus possible to determine with
considerable accuracy and within a few years the sequence of stages
in a succession that requires a century or more for its complete
development. In the Rocky mountains, gravel slides (talus slopes) are
remarkably frequent. They occur in all stages of development, and
the alternating slides of different ages furnish an almost perfect
record of this succession. This method lacks the absolute finality
which can be obtained by following a succession in one spot from its
inception to final stabilization, but it is alone feasible for long
successions, i. e., those extending over a score or more of years.
When it comes to be universally recognized as a plain duty for each
investigator to leave an exact and complete record in quadrat maps
and quadrat photographs of the stages studied by him, it will be a
simple task for the botanists of one generation to finish the
investigations of succession begun by their predecessors.
330. The relict method of studying succession is next in
importance to the method of alternating areas. The two in fact are
supplementary, and should be used together whenever relicts are
present. This method is based upon the law of successive maxima,
viz., the number of species and of individuals in each stage
constantly increases up to a certain maximum, after which it
gradually decreases before the forms of the next stage. In accordance
with this, secondary species usually disappear first, principal species
next, and facies last of all. There are notable exceptions to this,
however, and the safest plan is to use the relict method only when
principal species or facies are left as evidence. An additional reason
for this is that secondary species are more likely to be common to
two or more formations. In the majority of cases, the relict is not
modified, and is readily recognized as belonging properly to a
previous stage. This is true of herbs in all the stages of grassland, and
in the initial ones of forest succession. The herbs and shrubs of
earlier stages, which persist in the final forest stages, are necessarily
modified, often in such a degree as to become distinct ecads, or
species. The facies of the stages which precede the ultimate forest are
rarely modified. The application of the relict method, together with
the modification just described, is nicely illustrated by the balsam-
spruce formation at Minnehaha. Of the initial gravel slide stage, the
relicts are Vagnera stellata and Galium boreale, the one modified
into Vagnera leptopetala, and the other into G. boreale hylocolum.
The thicket stage is represented by Holodiscus dumosa, greatly
changed in form and branching, and in the shape and structure of
the leaf. The most striking relict of the aspen formation is the facies
itself, Populus tremuloides. The tall slender trunks of dead aspens
are found in practically every balsam-spruce forest. In many places,
living trees are still found, with small, straggling crowns, which are
vainly trying to outgrow the surrounding conifers. Of the aspen
undergrowth, Rosa sayii, Helianthella parryi, Frasera speciosa,
Zygadenus elegans, Castilleia confusa, Gentiana acuta, and
Solidago orophila remain more or less modified by the diffuse light.
It is still a question whether the aspen stage passes directly into the
balsam-spruce forest, or whether a pine forest intervenes. The
presence of both Pinus ponderosa and P. flexilis, which are scattered
more or less uniformly through the formation, furnishes strong
evidence for the latter view.
Fig. 71. Relict spruces and aspens, showing the character of the succession
immediately preceding the burn succession now developing.
The lifetime of forest and thicket stages of successions is

ascertained by counting the annual rings of the stumps of facies. This
is a perfectly feasible method for many woodland formations where
stumps already abound or where a fire has occurred, and it is but
rarely necessary to cut down trees for this purpose. When trees or
shrubs are present as relicts, the same method is used to determine
the length of time taken by the development of the corresponding
stages.
THE STRUCTURE OF THE FORMATION
331. Since all the structures exhibited by formations, such as
zones, layers, consocies, etc., are to be referred to zonation or
alternation, these principles are first considered in detail. This, then,
constitutes the basis for a consideration of the structure of a normal
formation, with special reference to the different parts that compose
it. The investigation of formational structure, since the latter is the
result of aggregation, invasion, and succession, is accomplished by
instruments, quadrats, etc., in the manner already indicated under
development, and no further discussion of it is necessary here.
ZONATION
332. Concept. The recognition of vegetation zones dates from
Tournefort[40], who found that, while the plants of Armenia occupied
the foot of Mount Ararat, the vegetation of the slopes above
contained many species of southern Europe. Still higher appeared a
flora similar to that of Sweden, and on the summit grew arctic plants,
such as those of Lapland.
As the historical summary shows, the concept of zonation is the
oldest in phytogeography. Notwithstanding this, it has never been
clearly defined, nor has there been any detailed investigation of the
phenomenon itself, or of the causes which produce it. Zones are so
common, and often so clearly marked, that they invite study, but no
serious attempt has heretofore been made to analyze zonation, or to
formulate a definite method of investigating it. Zonation is the
practically universal response of plants to the quantitative
distribution of physical factors in nature. In almost all habitats, one
or more of the physical factors present decreases gradually in passing
away from the point of greatest intensity. The result is that the plants
of the habitat arrange themselves in belts about this point, their
position being determined by their relation to the factor concerned.
Close investigation will show that there is hardly a formation that is
entirely without zonation, though in many cases the zones are
incomplete or obscure for various reasons. Zonation is as
characteristic of vegetation as a whole as it is of its unit, the
formation, a fact long ago recognized in temperature zones. A
continental climate, however, often results in the interruption of
these, with the consequence that these belts of vegetation are not
always continuous.
CAUSES OF ZONATION
333. Growth. The causes that produce zones are either biological
or physical: the first have to do with some characteristic of the plant,
the second with the physical features of the habitat. Biological causes
arise from the method of growth, from the manner of dissemination,
or from the reaction of the species upon the habitat. The formation of
circles as a result of radial growth is a well-known occurrence with
certain plants, but it is much more common than is supposed. In the
case of agarics, this phenomenon has long been known under the
name of “fairy-rings.” It is found in a large number of moulds, and is
characteristic of early stages of the mycelium of the powdery
mildews. It occurs in nearly all maculicole fungi, and is exhibited by
certain xylogenous fungi, such as Hysterographium. Among the
foliose lichens, it is a common occurrence with the rock forms of
Parmelia, Placodium, Physcia, and Lecanora, and with the earth
forms of Parmelia and Peltigera. The thalloid liverworts show a
similar radial growth. The flowering plants, and many mosses also,
furnish good examples of this sort of growth in those species which
simulate the form of the mycelium or thallus. These are the species
that form mats, turfs, or carpets. Alpine mat formers, such as Silene
acaulis, Paronychia pulvinata, Arenaria sajanesis, etc., are typical
examples. Xerophytic, turf-forming species of Muhlenbergia,
Sporobolus, Bouteloua, Festuca, Poa, and other grasses form
striking ring-like mats, while creeping species of Euphorbia,
Portulaca, Amarantus, etc., produce circular areas. Rosettes, bunch-
grasses, and many ordinary rootstalk plants spread rapidly by
runners and rhizomes. The direction of growth is often
indeterminate in these also, and is in consequence more or less
bilateral or unilateral. Growth results in zonation only when the
older central portions of the individual or mass die away, leaving an
ever-widening belt of younger plants or parts. This phenomenon is
doubtless due in part to the greater age of the central portion, but
seems to arise chiefly from the demands made by the young and
actively growing parts upon the water of the soil. There may possibly
be an exhaustion of nutritive content, as in the case of the fungi, but
this seems improbable for the reason that young plants of the same
and other species thrive in these areas. It must not be inferred that
these miniature growth zones increase in size until they pass into
zones of formations. Growth contributes its share to the production
of these, but there is no genetic connection between a tiny plant zone
and a zone of vegetation.
Radial and bilateral growth play an important part in formational
zones in so far as they are related to migration. The growth of the
runner or rhizome itself is a very effective means of dissemination,
while the seeding of the plants thus carried away from the central
mass is most effective at the edge of the newly occupied area. This
holds with equal force for plants with a mycelium or a thallus. The
circular area becomes larger year by year. Sooner or later, the
younger, more vigorous, and more completely occupied
circumference passes into a more or less complete zone. This will
result from the reaction of the central individuals upon the habitat,
so that they are readily displaced by invaders, or from their
increasing senility and dying out, or from the invasion of forms
which seed more abundantly and successfully. This result will only
be the more marked if the radiating migrants reach a belt of ground
especially favorable to their ecesis. In this connection it must be
carefully noted that vegetation pressure, before which weaker plants
are generally supposed to flee, or by which they are thought to be
forced out into less desirable situations, is little more than a fanciful
term for radial growth and migration. It has been shown under
invasion that disseminules move into vegetation masses, as well as
away from them, the outward movement alone being conspicuous,
because it is only at the margin and beyond that they find the
necessary water and light for growth.
334. Reactions. Certain reactions of plants upon habitats
produce zonation. The zones of fungi are doubtless caused by the
exhaustion of the organic matter present, while in lichens and
mosses the decrease in nutritive content has something to do with
the disappearance of the central mass. In the mats of flowering
plants, the connection is much less certain. The reaction of a forest
or thicket, or even of a tall herbaceous layer, is an extremely
important factor in the production of zonation. The factor chiefly
concerned here is light. Its intensity is greatest at the edge of the
formation and just below the primary layer; the light becomes
increasingly diffuse toward the center of the forest, and toward the
ground. In response to this, both lateral and vertical zones appear.
The former are more or less incomplete, and are only in part due to
differences in illumination. The vertical zones or layers are
characteristic of forest and thickets, and are caused directly by
differences in light intensity.
Fig. 72. Zones of Cyperus erythrorrhizus produced by the recession of the shore-
line.
335. Physical factors. The physical causes of zonation are by far

the most important. They arise from differences in temperature,
water, and light. In the large, temperature differences are the most
important, producing the great zones of vegetation. In a particular
region or habitat, variations of water-content and humidity are
controlling, while light, as shown above, is important in the reactions
of forest and thicket. Physical factors produce zonation in a habitat
or a series of habitats, when there is either a gradual and cumulative,
or an abrupt change in their intensity. Gradual, slight changes are
typical of single habitats; abrupt, marked changes of a series of
habitats. This modification of a decisive factor tends to operate in all
directions from the place of greatest intensity, producing a
characteristic symmetry of the habitat with reference to the factor
concerned. If the area of greatest amount is linear, the shading-out
will take place in two directions, and the symmetry will be bilateral, a
condition well illustrated by rivers. On the other hand, a central
intense area will shade out in all directions, giving rise to radial
symmetry, as in ponds, lakes, etc. The essential connection between
these is evident where a stream broadens into a lake, or the latter is
the source of a stream, where a mountain ridge breaks up into
isolated peaks, or where a peninsula or landspit is cut into islands.
The line that connects the points of accumulated or abrupt change in
the symmetry is a stress line or ecotone. Ecotones are well-marked
between formations, particularly where the medium changes; they
are less distinct within formations. It is obvious that an ecotone
separates two different series of zones in the one case, and merely
two distinct zones in the other.
Fig. 73. Regional zones on a spur of Pike’s Peak (3,800 m.); the forest consists of
Picea engelmannii and Pinus aristata, the forewold is Salix pseudolapponum, and
the grassland, alpine meadow (Carex-Campanula-coryphium).
336. Physiographic symmetry. The physical symmetry of a

habitat depends upon the distribution of water in it, and this is
profoundly affected by the soil and the physiography. The influence
of precipitation is slight or lacking, as it is nearly uniform throughout
the habitat; the effects of wind and humidity are more localized.
Differences of soil rarely obtain within a single habitat, though often
occurring in a zoned series. The strikingly zonal structure or
arrangement of habitats is nearly always due to differences in water-
content produced by physiographic factors, slope, exposure, surface,
and altitude. The effect of these upon water-content and humidity is
obvious. Wherever appreciable physiographic differences occur,
there will be central areas of excess and deficiency in water-content,
between which there is a symmetrical modification of this factor.
Peaks are typical examples of areas of deficiency, lakes and oceans of

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Market Selection and Retail Location Analysis

1. Explain the criteria used in selecting a target market.

I. Selecting a Target Market

Market segmentation is a method retailers use to segment, or break down, heterogeneous

B. Identifying a Target Market

II. Reaching Your Target Market

A. Location of Store-Based Retailers

Strengths of the CBD include:

• Variety in images, prices, and services

Weaknesses of the CBD include:

Shopping Centers and Malls

Shopping-center image, preferences, and personality all attract various subsets of

However, freestanding retailing does have some limitations including:

Increasingly, retailers are identifying nontraditional locations that offer greater

III. Geographic Information Systems

Geographic Information System (GIS) is a computerized system that combines physical

Exhibit 7.4 shows the key components of geographic information systems.

IV. Market Identification

A. Retail Location Theories

Retail Gravity Theory

Retail gravity theory rests on two assumptions:

Retail gravity theory does have several limitations:

Research on outshopping by residents of rural areas—that is, leaving your community to

A possible indicator of understored versus overstored markets is the index of retail

Where, IRS = the index of retail saturation for an area,

potential for significant profits.

Other Demand and Supply Factors

B. Market Demand Potential

C. Market supply Factors

A. Size of Trading Areas

B. Description of Trading Area

• Some are race-oriented\

VI. Site Selection

B. Terms of Purchase or Lease

REVIEW AND DISCUSSION QUESTIONS:

[LO01] What criteria are used in selecting a target market?

2. What three criteria should be met to successfully target a market?

6. Why isn’t Walmart a good choice to be an anchor at a mall?

A geographic information system (GIS) is a computerized system that combines physical

in the marketplace for a particular line of retail trade.

IRS (Market A) = (126,000 x $739) / 610,000

Fast-food Restaurant Supermarket

[LO06] How is the best geographic site selected?

17. Why is it so hard to find that 100-percent retail location?

WRITING AND SPEAKING EXERCISE:

houseplants. These other items make up 25 percent of Kathy’s gross sales.

1. Current sales: $452,000

PLANNING YOUR OWN ENTREPRENEURIAL BUSINESS:

Next do some sensitivity analysis.

Square Miles in Household Penetration Frequency Traffic

Nordstrom Market Selection

Growth Through Market Expansion

conclusions on the effectiveness of the market expansion strategy.

discussion can be especially interesting if you focus on groceries and restaurants.

No Men Allowed—Targeting Women Travelers in the Hotel Industry