5.4B. SR 07-22-2002 - Laserfiche WebLink

Home Browse Search

Elk River, Minnesota Market Study (CRO002 ~ February 2002) Page 27 Methodology The sales forecasts generated in this report are based on the use of a gravity model (LOCUSTM 2000). This is done via a market simulation of a site's primary trade area using important demand and supply information. Once a simulation is created, changes to equilibrium can be introduced for redistributing sales, forming the basis of a sales forecast. Demand information includes determining retail potential by defining where consumers live and what they spend for food-at-home purchases. Population sectors (combinations of census block groups) form the basic grouping of population. Sectors normally range in size between 1,500 and 3,500 people. Sector boundaries fall within the boundaries of census tracts and usually follow geographic features such as major roads, rivers, city limits and the like. Each population sector is assigned a retail liquor expenditure level. Major determinants include family sizes and household incomes. Income is assumed to have a positive relationship with retail liquor spending and family size is assumed to have an inverse relationship with spending. Combining a sector's population with its expenditure level yields liquor potential, typically formulated on a per week basis. The supply components of the gravity model are store sales and an estimate of how much business a particular store generates from inside the trade area. Based on a store's location, relative to an identified trade area and store size or format, the unit will receive a certain percentage of its business from this defined area. In the case of Northbound Liquor, the existing store has 80% of its business shown coming from the trade area, and the projected site (Site 1000) is estimated to receive 85% of their business from the identified trade area. The gravity model distributes store sales throughout the trade area based on certain parameters assigned to the store. These include store size, volume, draw (business inside the trade area), pulling power and image. Stores such as specialty stores have "flatter" market shares over distance than normal mainstream supermarkets. Store image is based on customer acceptance of a unit as exhibited by store performance. This value is fairly subjective and relates heavily to the strength of other competitors in the area, their distances to one another and their distances to the various population sectors. An image of 100 represents an average image. Stores with above average images are attracting more business than average, and those with below average images exhibit a weakness in consumer acceptance. The projected Northbound Liquor site is simulated with a 150 store image to reflect its performance, uniqueness and acceptance in the community/trade area. This compares with the established existing unit with a 161 image. Dakota Worldwide Corp. 4801 81~ Street, Suite 105 · Minneapolis, MN 55437 Telephone 800.475.4505 · Fax 952.835.4461