Quantifying the art of retail site selection : a retail case study

Abstract

Although there have been great strides in attempting to identify the locations that will yield the highest sales, the opinion among retailers remains that once the demographic, market, and sub-market analysis is complete, the choice of where to open a store within a sub-market is a matter of "feeling". Science can help a retailer pinpoint an optimal intersection that will enable it to place its goods and/or services in front of the largest number of potential customers, but it is the "art" of site selection that will enable a retailer to choose the best of the available locations surrounding the targeted intersection. There are invariably a number of appropriate alternative sites within a qualified trade area. Choosing the best location among these alternative sites is subjective. This "feeling" or "art" of selecting the relatively better location is something that is usually refined through years of developing the intuition for what will work the best. The purpose of this paper is to look at and then quantify the real estate variables that affect the relative attractiveness of available locations that exist within a delineated trade area. This is in an attempt to replace the subjectivity or "art" of selecting the best location with that of quantifiable results that prove that one site will result in higher sales than that of another. The results of the analysis show that the independent variables fail to predict sales per square foot with a requisite statistical significance. While the data failed to prove the hypothesis that the "art" of selecting retail locations can be replaced with quantitative analysis, the authors believe that with a larger sample size real estate factors can provide valuable insight into sales per square foot forecasts.