7.0. HRSR 06-28-1999 - Laserfiche WebLink

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STEP 8. WHAT ARE 'ELLE RETAIL SALES POTENTIALS? Retail sales potentials are measured by comparing: g 1. the amount of retail sales in local stores in the local trade area;and 2. the amount of goods the consumers in the trade area are buying. This calculation is called the measurement of sales"leakage,"because often communities find potential sales are larger than actual sales and sales are"leaking"out of town to competing shopping areas. Of course,no one makes every purchase in his or her local trade area.People drive to nearby cities and malls,shop while traveling,and buy things from catalogs.However, the local trade area should be able to attract a large amount of local consumers' dollars. 7 A retail sales potential calculation will show either a surplus or leakage of sales.A surplus of sales means that the trade area is capturing more sales than would be expected for its population. A leakage of sales means that sales are"leaking"out of the trade area. Sales Surplus.If the retail sales in the trade area total a lot more than the customers in the trade area are probably buying,it could mean: • that people from outside the trade area(tourists)are coming to the community to shop; • that the community is a regional center,drawing from a larger area than first estimated;or III • that people in the trade area spend more than the average household. Sales Leakage.If the retail sales in the trade are a lot less than the consumers in the trade area are probably buying, it could mean: • that downtown and the trade area are losing sales to other shopping centers; • that the trade area is smaller than originally estimated; or • that trade area households spend less than the"average"household. Sales Balance.If the retail sales in the trade area are approximately equal to what consumers could be expected to buy,it does not necessarily mean that the trade area is capturing most of its potential sales.For example, it could mean that the sales lost to neighboring cities are being replaced with sales to tourists. Careful analysis of the results by the team is important. Sales leakage is not an exact measurement and should only be used to check assumptions or identify areas for further research.Accuracy problems often result from the fact that the numbers used in the calculations are: • from different years; • not completely comparable—for example, various sources of data categorize retail types in different ways; STEP BY STEP MARKET ANALYSIS-33