This article appeared in the 1995 Summer edition of The Strategic Solution, the newsletter of The Strategic Edge.
MARKET SCREENING
In today’s retail environment, many successful retailers are discovering that they have saturated their current markets. These retailers often turn to new markets that may provide opportunities for growth. Unfortunately, while a retailer may understand their own markets, they may have limited knowledge of which new markets offer the greatest potential.
The Strategic Edge provides retailers with answers they need to ensure successful expansion. Through the use of Geographic Information Systems (GIS), The Strategic Edge has the capability to screen markets on local, regional, and national levels.
A successful screening typically begins with the creation of a database developed on the retailer’s existing stores. Trade areas are defined for the stores and then literally hundreds of demographic and lifestyle characteristics are compiled. The database is then analyzed to identify the key variables in predicting success.
Based on the key variables from the database analysis, markets or areas are identified which have high concentrations of the key demographic and lifestyle characteristics. These markets can then be prioritized for expansion efforts, or if necessary, eliminated from consideration.
The Strategic Edge has recently applied screening methodologies for several clients. One screening was for a farm supply company that was looking for new market opportunities in a specific region of the country. Through a database analysis, a combination of demographic, lifestyle, and agricultural data were determined to be the key variables for predicting success of the stores. Markets were then identified which had the necessary combination of these success factors.
Another screening performed by The Strategic Edge was for a junior department store. Markets were identified based on certain demographic thresholds. Once a market was identified, a regression-based forecasting model was applied to each market. These forecasts provided a "first look" at several hundred markets that would otherwise not be possible through typical real estate investigations.
As the two examples illustrate, the goal of a market screening is to identify markets with high opportunities. Any definitive real estate decisions should be based upon more in-depth analyses. Such analyses include base economic analysis, developing expenditure potential, analyzing competition, identifying specific sites, and forecasting sales. The Strategic Edge offers a full array of market research services to supplement GIS market screenings and ensure successful expansion decisions.
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