Integrated analysis of retail trade areas : (1) techniques

Abstract

Traditional techniques for the analysis of trade areas (per capita approach, residual approach and analogue or share approach) oversimplify the relationship between population and expenditure, while pertinent variables that influence demand and potential are left unaccounted for. Inappropriate model specification, incomplete portrayal of market realities and faulty market analysis give rise to poor investment decision making. An integrated analysis of retail trade areas is proposed in this, the first of two papers. The analysis incorporates four proposed techniques, namely the Multi-Criteria Saturation Index (MCSI), Retail Diversification Index (RDI), Demand Density Analysis (DDA) and Growth Matrix (GM). Improvements to the analogue method are also proposed, including economic indicators to account for the time value of money. In Part 2 of this paper a test for validity is developed, based on a comparison of actual versus forecast shopping centre sales data for twelve shopping centres in South Africa. The negligible difference observed between actual and forecast sales validates the proposed integrated approach.