Chapter 9

Trading-Area
Analysis
RETAIL
MANAGEMENT:
A STRATEGIC
APPROACH,
10th Edition

BERMAN EVANS
 Trading-Area Analysis

A trading area is a
geographic area containing
the customers of a
particular firm or group of
firms for specific goods or
services

9-2
 Benefits of Trading Area Analysis

 Discovery of consumer  Assessment of effects of

demographics and trading area overlap i.e
socioeconomic whether new store will serve
characteristics new customers or it will take
 Opportunity to determine biz of existing firm
focus of promotional
activities  Discovery of ideal number of
outlets,
 Review of other issues, such
as transportation

9-3
 Figure 9-2: The Trading Areas of
Current and Proposed Outlets

9-4
 Figure 9-5: The Segments of a
Trading Area

9-5
 The Size and Shape of
Trading Areas
 Primary trading area - 50-80% of a
store’s customers
 Secondary trading area - 15-25% of a
store’s customers
 Fringe trading area - all remaining
customers

9-6
 Destinations Versus Parasites
Destination stores have Parasite stores do not
a better assortment, create their own traffic
better promotion, and have no real trading
area of their own
and/or better image
• These stores depend on
• They generate trading people who are drawn to
areas much larger the area for other
than competitors reasons
• BIG Bazaar at wazir • South indian corner near
pur jawahar book store

9-7
 The Trading Area of a New Store

Different tools to analyse

– Trend analysis
– Consumer surveys
– Computerized trading area analysis
models- gravity model etc

9-8
 Reilly’s Law

Reilly’s law establishes a point of

indifference ( customers can go to
any city or community) between two
cities or communities, so the trading
area of each can be determined

9-9
 Huff’s Law

Huff’s law
trading areas on the basis of product assortment
travel times from the shopper’s home to
alternative locations
the sensitivity of the kind of shopping to travel
time

9-10