January 31, 2006 Co-op 500 Webinar 1 LOCATION RESEARCH AND SITE ANALYSIS FOR NEW FOOD CO-OPS A Presentation for “Co-op 500” by Peter C. Davis Location

January 31, 2006January 31, 2006 Co-op 500 WebinarCo-op 500 Webinar 11

LOCATION RESEARCHLOCATION RESEARCHAND SITE ANALYSISAND SITE ANALYSIS

FOR NEW FOOD CO-OPSFOR NEW FOOD CO-OPS

A Presentation for “Co-op 500” byA Presentation for “Co-op 500” byPeter C. DavisPeter C. Davis

Location Research ConsultantLocation Research ConsultantCooperative Development Cooperative Development

ServicesServices


Location Research DefinedLocation Research Defined

The body of knowledge and research The body of knowledge and research methodologies used for:methodologies used for:

The development of strategies for market The development of strategies for market entry or expansionentry or expansion

The evaluation of retail locations and sitesThe evaluation of retail locations and sites The forecasting of expected sales levels The forecasting of expected sales levels

given alternative scenarios/assumptionsgiven alternative scenarios/assumptions


Site Analysis ExplainedSite Analysis Explained

The major location research activity The major location research activity associated with the evaluation of a associated with the evaluation of a retail food store site:retail food store site:

The market at largeThe market at large The trade area served by the storeThe trade area served by the store The competitive environmentThe competitive environment The location (in the marketing sense)The location (in the marketing sense) The site (in the physical, real estate sense)The site (in the physical, real estate sense) The facility The facility


Three Levels ofThree Levels ofResearch AnalysisResearch Analysis

First Level: Basic Q & D StudyFirst Level: Basic Q & D Study

Second Level: Enhanced Q & D StudySecond Level: Enhanced Q & D Study

Third Level: Full Market StudyThird Level: Full Market Study


First Level: Basic Q & DFirst Level: Basic Q & D

An in-office assessment of the level of An in-office assessment of the level of market potential availablemarket potential available

A macro-level estimate of sales potential A macro-level estimate of sales potential available to a retail food co-opavailable to a retail food co-op

Based totally on secondary, in-office dataBased totally on secondary, in-office data

No local input of data or observationsNo local input of data or observations

Results in a 1-2 page summary that helps Results in a 1-2 page summary that helps determine the likelihood of go/no-godetermine the likelihood of go/no-go

Price: $1,000 - $1,200Price: $1,000 - $1,200


Second Level: Enhanced Q & DSecond Level: Enhanced Q & D

Everything included in the Basic Q & D StudyEverything included in the Basic Q & D StudyAlso provides for local input regarding:Also provides for local input regarding:

• Trade area size and configurationTrade area size and configuration• Population history and growthPopulation history and growth• CompetitionCompetition• Site/Location characteristicsSite/Location characteristics• Any other insights into the local marketAny other insights into the local market

No fieldwork is conductedNo fieldwork is conductedProvides for a somewhat more reliable evaluation of Provides for a somewhat more reliable evaluation of

a natural food store opportunity, presented in a 2-a natural food store opportunity, presented in a 2-3 page summary report3 page summary report

Price: $1,500 - $1,800Price: $1,500 - $1,800


Third Level: Full Market StudyThird Level: Full Market Study

Utilizes both primary and secondary dataUtilizes both primary and secondary dataIncludes extensive fieldwork in order toIncludes extensive fieldwork in order to

• Evaluate site & location characteristicsEvaluate site & location characteristics• Evaluate competitive environmentEvaluate competitive environment• Evaluate patterns of accessibilityEvaluate patterns of accessibility• Evaluate extent of retail synergyEvaluate extent of retail synergy

Utilizes detailed analog sales forecastingUtilizes detailed analog sales forecastingGenerally acceptable by potential lendersGenerally acceptable by potential lendersResults in full report (25-50 pages) with Results in full report (25-50 pages) with

tables, charts, mapstables, charts, mapsPrice: $7,500 - $8,500 plus expensesPrice: $7,500 - $8,500 plus expenses


Some DefinitionsSome DefinitionsTrade AreaTrade Area::

The geographic area from which a store The geographic area from which a store obtains most of its sales volume (dollars)obtains most of its sales volume (dollars)

Usually defined as that area within which Usually defined as that area within which the store obtains 65% - 85% of its sales the store obtains 65% - 85% of its sales volumevolume

Defined in terms of geographic sectors Defined in terms of geographic sectors (usually Census Tracts)(usually Census Tracts)

Affected by population density, Affected by population density, competition, retail synergy, trade area competition, retail synergy, trade area access, barriers, etc.access, barriers, etc.


Some DefinitionsSome Definitions

Capture RateCapture Rate::

The percentage of a store’s sales volume The percentage of a store’s sales volume that is derived from a specific geographic that is derived from a specific geographic area such as a trade area or trade area area such as a trade area or trade area sectorsector

The amount of sales derived from an area, The amount of sales derived from an area, divided by the total sales achieved by the divided by the total sales achieved by the storestore

Usually totals 65% - 85% for a store’s Usually totals 65% - 85% for a store’s trade areatrade area


Some DefinitionsSome Definitions

Sales Penetration RateSales Penetration Rate::

Also defined as Average Sales/CapitaAlso defined as Average Sales/Capita The sales derived from a specific trade The sales derived from a specific trade

area sector, divided by the relevant area sector, divided by the relevant population of that sectorpopulation of that sector

An indicator of a store’s strength with An indicator of a store’s strength with respect to the population base that exists respect to the population base that exists in the trade area sectorin the trade area sector


Some DefinitionsSome DefinitionsDemographyDemography::

The characteristics of a population baseThe characteristics of a population base With respect to natural food stores, usually With respect to natural food stores, usually

includes race or ethnicity, age, education, includes race or ethnicity, age, education, type of employment, and incometype of employment, and income

Certain demographic characteristics are Certain demographic characteristics are positively related to a natural food store’s positively related to a natural food store’s sales penetration rates while others are sales penetration rates while others are negatively related to a natural food store’s negatively related to a natural food store’s sales penetration ratessales penetration rates


Some DefinitionsSome DefinitionsMarket Potential:Market Potential:

The The annual food-at-home expenditure annual food-at-home expenditure potentialpotential for a population base for a population base

Determined by the prevailing trade area Determined by the prevailing trade area socio-economic and demographic socio-economic and demographic characteristicscharacteristics

For For conventional foodconventional food, it generally ranges , it generally ranges from about $2,200 to $2,600 per person, from about $2,200 to $2,600 per person, per yearper year

For For natural foodnatural food, it generally ranges from , it generally ranges from about $225 to $450 per person, per yearabout $225 to $450 per person, per year


Phases of a Market Study for aPhases of a Market Study for aProposed New Retail Food Co-opProposed New Retail Food Co-op

Phase I - CAT Survey (existing store)Phase I - CAT Survey (existing store) Phase II - Market Area FieldworkPhase II - Market Area Fieldwork Phase III - Data Analysis and the Phase III - Data Analysis and the

Preparation of a Sales ForecastPreparation of a Sales Forecast Phase IV - Preparation of ReportPhase IV - Preparation of Report Phase V – Presentation (if desired)Phase V – Presentation (if desired)


Phase I: What is a CAT SurveyPhase I: What is a CAT Survey

Defined as a Defined as a Customer Address and Customer Address and Transaction SurveyTransaction Survey of shoppers at an of shoppers at an existing retail food co-op, conducted existing retail food co-op, conducted in order to identify in order to identify where they live where they live and and how much they spenthow much they spent at the at the storestore



CAT Survey Results are used toCAT Survey Results are used to:: Allocate a store’s salesAllocate a store’s sales to the specific to the specific

geographic sectors from which they geographic sectors from which they are derivedare derived

Define a store’s Define a store’s trade areatrade area Calculate a store’s Calculate a store’s sales penetration sales penetration

ratesrates in the various sectors in its in the various sectors in its trade areatrade area



A CAT Survey serves as a means of A CAT Survey serves as a means of measuring a store’s performancemeasuring a store’s performance in in each of its trade area sectors, under each of its trade area sectors, under certain certain conditions and assumptionsconditions and assumptions with respect to its with respect to its facilityfacility, , sitesite and and locationlocation characteristics, its characteristics, its competitive environmentcompetitive environment, and its , and its merchandising and operating merchandising and operating practicespractices



Because CAT Surveys are interpreted Because CAT Surveys are interpreted in light of the facility, location, site, in light of the facility, location, site, market and competitive conditions market and competitive conditions that exist, they form the basis for an that exist, they form the basis for an analog sales forecasting system. analog sales forecasting system. Completed CAT Surveys thus Completed CAT Surveys thus comprise a comprise a database of analogsdatabase of analogs


Phase II: FieldworkPhase II: Fieldwork

FieldworkFieldwork - an important part of a - an important part of a market study, for it allows a trained market study, for it allows a trained location research or site analyst to location research or site analyst to supplement population, demography supplement population, demography and CAT Survey data with and CAT Survey data with personal, personal, impartial observationsimpartial observations regarding regarding facility/site/location characteristics, facility/site/location characteristics, the competitive environment, the competitive environment, patterns of retail synergy and trade patterns of retail synergy and trade area access, etc. area access, etc.


Phase II: Fieldwork Phase II: Fieldwork Facility CharacteristicsFacility Characteristics

Evaluation of:Evaluation of: Size and shape of the facilitySize and shape of the facility Its layout and position on the siteIts layout and position on the site Its conditionIts condition Its appearanceIts appearance Its applicability as a food storeIts applicability as a food store


Phase II: FieldworkPhase II: FieldworkLocation CharacteristicsLocation Characteristics

Evaluation of:Evaluation of: Population DensityPopulation Density in the trade area in the trade area Demographic CharacteristicsDemographic Characteristics of the of the

population in the trade area and population in the trade area and surrounding the sitesurrounding the site

Retail SynergyRetail Synergy – type, amount, proximity – type, amount, proximity Trade AreaTrade Area AccessAccess

• Distance and DirectionDistance and Direction• Types of streets/roadsTypes of streets/roads• Barriers – geographic/man-made/perceivedBarriers – geographic/man-made/perceived


Phase II: FieldworkPhase II: FieldworkSite CharacteristicsSite Characteristics

Evaluation ofEvaluation of:: VisibilityVisibility – direction and distance, – direction and distance,

signagesignage Ingress/egressIngress/egress – ease or difficulty, – ease or difficulty,

number of points, speed limits, lanes, number of points, speed limits, lanes, etc.etc.

ParkingParking – both configuration of the – both configuration of the parking lot, and its capacityparking lot, and its capacity


Phase II: FieldworkPhase II: FieldworkCompetitive EnvironmentCompetitive Environment

Direct Competition:Direct Competition: Similar merchandise mix Similar merchandise mix Primary appeal toward same shopper Primary appeal toward same shopper

clienteleclientele Includes other natural food stores, Includes other natural food stores,

co-ops and specialty food storesco-ops and specialty food stores


Phase II: FieldworkPhase II: FieldworkCompetitive EnvironmentCompetitive Environment

Indirect Competition:Indirect Competition: Strong Strong – usually with a natural foods “store within – usually with a natural foods “store within

a store;” a readily-defined and identified a store;” a readily-defined and identified department including dry grocery, bulk, HBC, department including dry grocery, bulk, HBC, frozen, refrigerated, and perhaps meat/seafoodfrozen, refrigerated, and perhaps meat/seafood

MediumMedium – usually 4, 8 or 12-foot sections of – usually 4, 8 or 12-foot sections of natural food set in conventional gondola runs, natural food set in conventional gondola runs, and identified by shelf-talkers, banners, etc.and identified by shelf-talkers, banners, etc.

WeakWeak – limited amount of natural food, usually – limited amount of natural food, usually integrated with conventional groceries without integrated with conventional groceries without any major product identificationany major product identification


Phase II: FieldworkPhase II: FieldworkCompetitive ImpactCompetitive Impact

AdjacentAdjacent – Where the competitor is in close – Where the competitor is in close proximity to the study storeproximity to the study store

InterceptingIntercepting – Where the competitor exists – Where the competitor exists between a population sector and the study between a population sector and the study storestore

ImpactingImpacting – Where the competitor is closer – Where the competitor is closer to a population sector than is the study to a population sector than is the study storestore

A single competitor may be rated differently A single competitor may be rated differently with respect to different population sectorswith respect to different population sectors


Phase III: Data AnalysisPhase III: Data Analysis PopulationPopulation – history, trends, projections – history, trends, projections DemographyDemography – characteristics of trade – characteristics of trade

area population including race, age, area population including race, age, education, employment, and incomeeducation, employment, and income

Per-capita Expenditure PotentialPer-capita Expenditure Potential CompetitionCompetition – direct and indirect, and – direct and indirect, and

adjacent, impacting, or interceptingadjacent, impacting, or intercepting Patterns of access Patterns of access – local and regional– local and regional Retail SynergyRetail Synergy – amount, type, effect – amount, type, effect


Phase IV: Analog Sales ForecastPhase IV: Analog Sales Forecast

An An AnalogAnalog (derived from analogous, (derived from analogous, meaning similar) represents meaning similar) represents performance data about a store performance data about a store (given its facility, site, location, (given its facility, site, location, market and competitive market and competitive characteristics) that can be used to characteristics) that can be used to forecast the performance of another forecast the performance of another store with similar facility, site, store with similar facility, site, location, market and competitive location, market and competitive characteristics.characteristics.


Phase IV: Example of an AnalogPhase IV: Example of an Analog


Phase IV: Trade Area MapPhase IV: Trade Area Map


Phase IV: Analog ExplainedPhase IV: Analog Explained

Can be a Can be a storestore (in terms of its performance (in terms of its performance at the trade area level)at the trade area level)

Can be a Can be a sectorsector of a store’s trade area. of a store’s trade area.

An Analog that represents a good match An Analog that represents a good match with respect to characteristics of the study with respect to characteristics of the study store or site can thus be used to forecast store or site can thus be used to forecast sales penetration levels for the study store sales penetration levels for the study store or site – either at the trade area level, or or site – either at the trade area level, or at the population sector level.at the population sector level.


Phase IV: Analog SelectionPhase IV: Analog Selection

By Location TypeBy Location Type Free-standingFree-standing Strip/Community Shopping CenterStrip/Community Shopping Center CBD/SBD/FBDCBD/SBD/FBD Downtown/Suburban/Edge of TownDowntown/Suburban/Edge of Town Neighborhood/Regional/HighwayNeighborhood/Regional/Highway



By Store Size/Specialty By Store Size/Specialty DepartmentsDepartments

Sales Area SizeSales Area Size Presence or Absence ofPresence or Absence of

• Meat/Seafood DepartmentMeat/Seafood Department• Deli (service/self service)Deli (service/self service)• BakeryBakery• Café Seating AreaCafé Seating Area• Coffee bar/juice barCoffee bar/juice bar



By Population DensityBy Population Density UrbanUrban SuburbanSuburban RuralRural The greater the density of population, The greater the density of population,

the lower sales penetration levels tend the lower sales penetration levels tend to beto be



According to DemographyAccording to Demography EthnicityEthnicity Age GroupsAge Groups Educational AttainmentEducational Attainment Employment TypeEmployment Type Income Level (MHI, % HH with Income Level (MHI, % HH with

incomes $50 - $150 K)incomes $50 - $150 K)



According to CompetitionAccording to Competition Direct Competition – number, type, Direct Competition – number, type,

locationslocations Indirect CompetitionIndirect Competition

• StrongStrong• MediumMedium• WeakWeak



According to DistanceAccording to Distance Other things being equal, Other things being equal,

sales/capita levels tend to decrease sales/capita levels tend to decrease as distance from the store increasesas distance from the store increases

Because of the importance of Because of the importance of demography in the performance of a demography in the performance of a natural food store or co-op, distance natural food store or co-op, distance alone is not enoughalone is not enough


Phase V: Market Study ReportPhase V: Market Study Report

Introduction and BackgroundIntroduction and BackgroundSummary of Findings and ConclusionsSummary of Findings and ConclusionsReview of Study MethodologyReview of Study MethodologyReview of Facility, Site, Location Review of Facility, Site, Location

CharacteristicsCharacteristicsDefinition and Description of Relevant Trade Definition and Description of Relevant Trade

AreaAreaReview of the Competitive EnvironmentReview of the Competitive EnvironmentMarket Analysis of Relevant ScenariosMarket Analysis of Relevant ScenariosMaps, Tables, ChartsMaps, Tables, Charts


SO WHY DO A MARKET STUDY?SO WHY DO A MARKET STUDY?

It Provides a Reliable Method It Provides a Reliable Method for Defining the Relevant for Defining the Relevant Trade Area to be Served, and Trade Area to be Served, and the Levels of Sales the Levels of Sales Penetration to Be Achieved in Penetration to Be Achieved in itit



It Provides an Objective Review It Provides an Objective Review of the Location, Site and of the Location, Site and Facility Characteristics that Facility Characteristics that Impact a Store’s Sales Impact a Store’s Sales PerformancePerformance



It Provides an Impartial It Provides an Impartial Review of the Competitive Review of the Competitive Environment that Affects the Environment that Affects the Store’s Sales PerformanceStore’s Sales Performance



It Provides an Advanced Sales It Provides an Advanced Sales Forecasting Technique with Forecasting Technique with Respect to the Anticipated Respect to the Anticipated Sales to be Achieved during Sales to be Achieved during First Few Years of the Store’s First Few Years of the Store’s OperationOperation



It provides a means for It provides a means for evaluating the financial evaluating the financial implications of opening a new implications of opening a new retail food co-op, by providing retail food co-op, by providing the top line number to be the top line number to be used in the pro-forma used in the pro-forma operating statementoperating statement


SO WHY DO A MARKET STUDY?

It Serves as a Tool – It Serves as a Tool –

for Managementfor Management

for Marketingfor Marketing

for the for the MembershipMembership

for the Bankfor the Bank


THANK YOUTHANK YOU

Documents

January 31, 2006 Co-op 500 Webinar 1 LOCATION RESEARCH AND SITE ANALYSIS FOR NEW FOOD CO-OPS A Presentation for “Co-op 500” by Peter C. Davis Location