Retail Store Location

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Why is retail

store location

so important?

Location is very

important but all

things are relative to

the magic word,

Profit. Even

supermarkets close

down in busy high

scale areas because

the rent, competition

and payroll cost too

high, but the same

supermarket chain a

low volume store in a

poor rural area makes

profit than half the

chain. All things are

relative.

Introduction

THE IMPORTANCE OF RETAIL SITE SELECTION

Retail site selection is a very important decision. First, a location is

usually one of the most important elements customers use in choosinga store. Second, when chosen, a retailer must live with the site for

many years because it is expensive. Lastly, because great sites are

acquired by other retailers, it is mostly hard to find them.

Response to the question of what is the most important three things

in retail is; location, location and location. Location is very important

element for customer to prefer a store. Location is also competition

advantage which is not easy to simulate. For a retail enterprise,

location may result as success or failure. But a good location is related

with target market, rivals and costs at retail business, achievement or

failure is related with the features of trade area surrounding thelocation. Sales in retail stores are not only related with the numbers of

families and people next to the trade area, but also the costumers

come from abroad.

Lastly, the site may be in a shopping center. In such a case, the retailer

can generally be sure that it will have the suitable mix of neighbors,

sufficient parking places, and fine traffic. But, in some cases, the

retailer must realize the situation in which the center is not correctly

planned. It is hard to gain in a shopping center where most of the

places are not hired. The critical side of channel strategy is the location

of store. Proper places give chance to easy transportation, attracts lots

of customers and they change customers shopping and buying

concepts. Among the retail stores which sells almost the same goods,

the ones in different locations, may have a big portion on market

share and profitability.

Retail Store

locationTHE IMPORTANCE OF RETAIL SITE SELECTION

Submitted by-

Gaurav chartterjee 07

Manual Ritesh Minz 08

Mayank Anand 09

Suman Saurabh 10

Amol Ritesh Toppo 11

Megha Sharma 12


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Table of Contents

Why is retail store location so important? ...................................................................................... 0

Location and Retail Strategy ............................................................................................................ 3

Steps involved in choosing a retail location. .................................................................................... 3

Market Identification ....................................................................................................................... 4

Determining the market potential ................................................................................................... 4

Identify alternate sites and select the site ....................................................................................... 6

Type of Goods .................................................................................................................................. 6

Population and Your Customer ........................................................................................................ 7

Accessibility, Visibility and Traffic........................................................................................... 7

Signage, Zoning and Planning ................................................................................................. 8

Competition and Neighbors .................................................................................................... 8

Location Costs.......................................................................................................................... 8

Personal Factors ...................................................................................................................... 9

Special Considerations ............................................................................................................ 9

Three levels of analysis .................................................................................................................. 10

Regional Analysis ........................................................................................................................ 10

Trade Area Analysis .................................................................................................................... 10

Site Analysis ............................................................................................................................... 12

Site analysis is an element in site planning and design. Kevin A. Lynch, an urban

planner developed an eight cycle step process of site design, in which the second step is site

analysis, the focus of this section. ................................................................................................. 12

Process....................................................................................................................................... 12

Element...................................................................................................................................... 13

Factors Affecting Attractiveness of a site- ..................................................................................... 15

Accessibility ................................................................................................................................ 15

Road Pattern And Conditi .......................................................................................................... 15
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2

Natural And Artificial Barriers .................................................................................................... 16Visibility ...................................................................................................................................... 16

Traffic Flow ................................................................................................................................. 17

Pedestrian Traffic Count ......................................................................................................... 17

Automobile Traffic Count ....................................................................................................... 17

Parking .................................................................................................................................... 17

Congestion.............................................................................................................................. 18

Estimating demand for new location ............................................................................................. 19

Analog Approach ........................................................................................................................ 19Regression analysis .................................................................................................................... 20

The Huff Model .......................................................................................................................... 21


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Step 1 Market Identification

Step2 Determining the market potential

Step 3&4

Identify alternate site and select thesite.

CHOOSING STORE LOCATION

Where you choose to locate your retail business will have a major impact on

everything your shop does. The difference between selecting the wrong location and

the right site could be the difference between business failure and success.

Before choosing a retail store location, define how you see your business, both now

and in the future.

What do your customers look like? Can you visualize your building? Do you know what you want to sell and what you want your business to be

known for?

Have you determined how much retail space, storage area, or the size of theoffice you need?

Without the answers to these basic questions, it will be hard to find the perfect

location for generating the maximum amount of profit for your retail store.

Location and Retail Strategy

The selection of the store site can be a non-systematic process, which is based on

gut feeling or environmental observation or an imitation of competitors.

Steps involved in choosing a retail location.


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Market Identification

The first step in arriving at a decision a decision or retail location is to identify the markets

attractiveness to a retailer. This is important as he needs to understand the market well,

especially in a country like India, where every region has its own peculiarities and needs.

Determining the market potential

In order to determine the market potential, the retailer needs to take into consideration various

elements. The chief among them are:

Demographic features of the population The characteristics of the household in the area Competition and compatibility Laws and regulations Trade area analysis

Demographic Features of the Population

Understanding the features of the population is integral to develop a retail marketing strategy.

The retailer also needs to understand the level of literacy and the level of education in the

population.

The characteristics of the households in the area

The retailer needs to have a clear understanding of the average household income and

distribution of income in the area. This is very essential as the level of income largely determines

the kind of retail facilities required.

Competition and compatibility


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While determining the market potential, it is necessary to check the compatibility of the retailerstore with the other retailer outlets in an area. It is necessary to try and evaluate their strengths

and weaknesses, to know the square foot area of the various stores in the area and the kind of

returns that they are able to obtain per employee per square foot.

Laws and regulations

Before opening a retail store in a region, it is essential to have a good understanding of the laws

and regulations for opening a retail shop in the area. Various permissions which are needed, the

hours for which the store can operate, the minimum wages to be offered to persons working,

the holidays required, etc. can affect the profitability of the store.

Trade area analysis

An integral part of determining the market potential is the analysis of the trade areas. A trade

area that generates the majority of the customers for the stores.

Teritary tradingarea

Secondary tradingarea

Primary tradingarea

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Identify alternate sites and select the site

After having determined the market potential and taking a decision on the store, a retailer has to

select the site to locate the store. Through each retailer strives to find the 100% perfect location,

there are various factors which affect his decision. The chief among them are:

Traffic flow Accessibility of the market is also a key factor

Amenities available To buy or to lease The product mix offered Parking Cognitions Visibility

Type of Goods

Examine what kind of products you sell, as some goods will require certain types oflocations. Would your store be considered a convenience store, a specialty shop or a

shopping store?

Convenience goods require easy access, allowing the customer to quickly make a

purchase. A mall would not be a good location for convenience goods. This product

type is lower priced and purchased by a wide range of customers.

Specialty goods are more unique than most products and customers generally won't

mind traveling out of the way to purchase this type of product. This type of store

may also do well near other shopping stores.
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A shopping store usually sells items at a higher price which are bought infrequentlyby the customer. Furniture, cars and upscale clothing are examples of goods found

at a shopping store. Because the prices of theses items are higher, this type of

customer will want to compare prices before making a purchase. Therefore, retailers

will do well to locate their store near like stores.

Population and Your Customer

If you are choosing a city or state to locate your retail store, research the area

thoroughly before making a final decision. Read local papers and speak to other

small businesses in the area. Obtain location demographics from the local library,

chamber of commerce or the Census Bureau. Any of these sources should have

information on the area's population, income and age. You know who your

customers are, so make sure you find a location where your customers live, work

and shop.

Accessibility, Visibility and Traffic

Don't confuse a lot of traffic for a lot of customers. Retailers want to be located

where there are many shoppers but only if that shopper meets the definition of

their target market. Small retail stores may benefit from the traffic of nearby larger

stores.

How many people walk or drive past the location. Is the area served by public transportation? Can customers and delivery trucks easily get in and out of the parking lot? Is there adequate parking?

Depending on the type of business, it would be wise to have somewhere between 5

to 8 parking spaces per 1,000 square feet of retail space.


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When considering visibility, look at the location from the customer's view point. Canthe store be seen from the main flow of traffic? Will your sign be easily seen? In

many cases, the better visibility your retail store has, the less advertising needed. A

specialty retail store located six miles out of town in a free standing building will

need more marketing than a shopping store located in a mall.

Signage, Zoning and Planning

Before signing a lease, be sure you understand all the rules, policies and procedures

related to your retail store location. Contact the local city hall and zoning

commission for information on regulations regarding signage. Ask about any

restrictions that may affect your retail operation and any future planning that could

change traffic, such as highway construction.

Competition and Neighbors

Other area businesses in your prospective location can actually help or hurt your

retail shop. Determine if the types of businesses nearby are compatible you're your

store. For example, a high-end fashion boutique may not be successful next door to

a discount variety store. Place it next to a nail or hair salon and it may do much more

business.

Location Costs

Besides the base rent, consider all costs involved when choosing a retail store

location.

Who pays for lawn care, building maintenance, utilities and security? Who pays for the upkeep and repair of the heating/air units? If the location is remote, how much additional marketing will it take for

customers to find you?

How much is the average utility bill?


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Will you need to make any repairs, do any painting or remodeling to have thelocation fit your needs?

The location you can afford now and what you can afford in the future should vary.

It is difficult to create sales projects on a new business, but one way to get help in

determining how much rent you can pay is to find out what sales similar retail

businesses are making and how much rent they're paying.

Personal Factors

If you plan to work in your store, think about your personality, the distance from the

shop to home and other personal considerations. If you spend much of your time

traveling to and from work, the commute may overshadow the exhilaration of being

your own boss. Also, many restrictions placed on a tenant by a landlord,

Management Company or community can hamper a retailer's independence.

Special Considerations

Your retail shop may require special considerations. Make a list of any unique

characteristic of your business that may need to be addressed.

Will the store require special lighting, fixtures or other hardware installed? Are restrooms for staff and customers available? Is there adequate fire and police protection for the area? Is there sanitation service available? Does the parking lot and building exterior have adequate lighting? Does the building have a canopy that provides shelter if raining? What is the crime rate in the area?


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Three levels of analysis

Regional Analysis

The process of esmang or measuring store trade areas provides a fundamental

Basis for understanding the geographic extent and characteriscs of storePatronage, target markeng, cannibalizaon studies and idenfying market

Opportunies in support of site selecon. Since its incepon, Geographic

Informaon System (GIS) technology has been used to approximate or model retail

trade areas.

Trade Area Analysis

Choosing a retail site in the absence of sound trade area analysis is a lot like flying an

airplane with blinders: It forces a business to commit itself to a course in the

absence of vital information such as store patronage, local market opportunities,

competing businesses, and barriers that would dissuade consumers from visiting the

site.

Geographic Information System technology is a fundamental tool for analyzing retail

trade areas today. This technology removes site selection "blinders" because it


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identifies and illustrates the crucial factors for site selection within a geographic

framework.

Essentially, trade area analysis is a methodology, process or technique that provides

a basis for understanding, visualizing and quantifying the extent and characteristics

of known or approximated trade areas.

Trade area analysis provides the foundation for:

Understanding the geographic extent and characteristics of store patronage. Spatially assessing performance. Performing competitive analysis. Evaluating market penetration and market gap analysis. Target marketing. Merchandising. Identifying/quantifying effects of cannibalization. Developing and exploiting demographic profiles. Site suitability and site selection studies.

Trade area analysis also employs theoretical techniques that are used to

approximate the potential patronage area. These techniques are used in cases

where customer level data is not available. Radial Study is used for Trade area

analysis.

Radial Studies:

Radial or ring based analysis is performed by selecting and evaluating demographic

variables that fall within a pre-defined distance from a store location. This technique

assumes that the trade area is circular, with the store at its center. Ring analysis

does not account for barriers such as rivers or railroad tracks that may cross through

a trade area and restrict access to a retail site. Consequently, radial studies are a

simplistic approach that can result in an incorrect delineation of the trade area and

errors of omission or commission.


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Site Analysis

Site analysis is an inventory completed as a preparatory step to site planning, a form

ofurban planning which involves research, analysis, and synthesis. It primarily deals

with basic data as it relates to a specific site. The topic itself branches into the

boundaries ofarchitecture, landscape architecture, engineering, real estate

development, economics, and urban planning.

Site analysis is an element in site planning and design.Kevin A. Lynch, anurban

plannerdeveloped an eight cycle step process of site design, in which the second

step is site analysis, the focus of this section.

Process

The site design process is divided up into three

sections; research phase, analysis phase, and synthesis phase. These three phases

are divided into the eight chronological steps in the design process.[1]

Research phase: The first step is defining the problem and its definition. This ispart of the research phase. The site design and site planning process begins with

the initial problem to be solved. This is started by a client contracting a planner

to work with a particular site.

Analysis phase : The next step involves programming the site as well as site anduser analysis, which is focused on in-depth below. There are numerous site

elements related to the analysis during this phase. This is part of the analysis

phase in site planning.

Synthesis phase : From the analysis, a program is developed, which is part of thesynthesis phase. The third step deals with schematic design of a site plan as well as a

preliminary cost estimate for the site. Step four involves more developed designs

and a detailed cost estimate. Step five is the construction documents for the plan.

Bidding and contracting for the project follows as step six. Construction then will

take place as step seven. The final step, step eight, in the site design process is

occupation and management of the site.
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Element

Numerous elements go into a given site analysis. These elements

include location, neighborhood context, site and zoning, legal

elements, natural physical features, man-made

features,circulation, utilities, sensory, human and cultural, and climate components.

The following elements typically are considered in most sites:

Location : The site should be related to major streets or landmarks previouslyexisting. Aerial photographs help in this assessment stage. There should be

documentation of distances and time from major places. This should be

completed by either driving or walking the distance first-hand.

Neighborhood context : Zoning of the neighborhood is important andinformation of this type can typically be found at the municipal planning

department of the site. Numerous issues at this stage require direct observation.

Features of this sort include architectural patterns, street lighting, and condition

of existing buildings. This would also include the immediate surroundings of the

site.The reaction of the surrounding buildings towards the site and people

moving around should be analysed.

Size and zoning : Site boundaries can be located by either verifying thedimensions physically or contacting the county tax assessors office. Zoning

classifications, set-backs, height restrictions, allowable site coverage, uses, and

parking requirements are obtained by obtaining zoning classifications from a

zoning map, which can be located from the city planning department.

Legal : Typical legal information can be obtained from the deed to the property.The deed is held by the owner of the title insurance company. In this deed is

information such as the property description, present ownership, and the

governmental jurisdiction the site is located in, and the city or county.
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Natural physical features : Most of this information will be derived from thetopographic features on the site. A contour map of this magnitude can be

located from the survey engineer. Drainage problems as well as existing natural

features of trees, ground cover, ground texture, and soil conditions on the site

should be directly observed.

Man made features : Features located on the site such as buildings, walls, fences,patios, plazas, bus stop shelters should be noted. The site and location of such

features should be directly measured. Documentation of existing historical

districts should be made, some of which may already have reports completed.

Locating this information can be done through the municipal planning

department for the site.

Circulation : The uses of streets, roads, alleys, sidewalks, and plazas areimportant in this inventory step. It is not necessarily an analysis of these

elements but more an analysis of what occurs on these circulation gateways.

Utilities : Information for utilities concerning the site can be found through theutility departments and companies in the local area. Generally this company has

a print of the drawing of this information needed. Information in this print

includes the location of all utilities and their locations around or on the site itself.

Sensory : Much of the sensory information collected will be done through firsthand experience. This type of information is obtained from sketching and

photographs (sometimes aerial photographs). Direct observation of other

sensory elements of noise, odors, smoke, and pollutant areas must also be

completed.

Human and cultural : This information can be obtained through census statisticson the neighborhood. Information regarding these statistics is available from the

local municipal planning agency. This information includes activities among

people on the site and their relationships to these activities.
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Climate : This information can be obtained through the local weather service.Conditions such as rainfall, snowfall, humidity, and temperature over months must

be considered and analyzed. The sun-path and vertical sun angles throughout an

entire year are important to note.

Factors Affecting Attractiveness of a site-

There are various factors that affect the attractiveness and convenience of reaching a

store. These factors are:-

Accessibility

Accessibility of a retail store is an important factor for the profitability of the store. The

area or the shopping centre should be developed in such a way that it gives easy access

to the customers. The location of the store and the ease with which the customer can

reach the retail store, adds to the attractiveness of the store. If the area is served with

public transport, it attracts higher number of customers. Planned business districts werea great place for the customers due to their easy accessibility. Recent development of

malls and shopping centre is a big success due to their accessibility factor. Accessibility

within the store is equally important. The arrangement of products should be done in

such a way that the area is easily accessible to the customers. None of the shoppers

would like to visit a cluttered store.

Road Pattern And Conditi

Stores located near the highways or the intersection of two highways would attract the

customers passing through these highways. If the roads to the store are wide and easilyaccessible, then there would be higher number of customers visiting the store as

compared to a store with an interior location and lesser road accessibility. The easier

the customer finds to drive to a store, the higher would be his frequency of visits. The

pattern of the roads ie. Parallels or circular form makes it easy for the customer to

reach, without facing much of traffic. This makes the place more visited as compared to

others. The condition of the road is also important. 6
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Natural And Artificial Barriers

There can be various natural and artificial barriers for a store. This includes position of

the store, display of the store, behavior of the store staff towards the customer, other

competitor stores in the area and other complimentary store in the area, to name a few.

If the position of the store is such that it becomes difficult to reach or if the store is at

the extreme end of the market where it is difficult to reach, then it becomes a barrier

for the customers

The behavior of the store staff while interacting with the customers should be cordial. If

the staff of the store is not trained properly to deal with the customers, it can become a

big barrier for the shoppers.

If the store is located in such a way that a competitors store is in the way to reach the

destined store then it may affect the store sale adversely.

Visibility

Visibility has a varied impact on a stores sales potential. It is important when a shopper

is trying to find the store for the first or second time. Once a shopper has become a

regular customer, visibility no longer matters. According to a research, one in five family

moves every year. It means that some part of the population is always shopping in anew store. So, if a store cannot be readily seen, new residents of an area or prospective

customers will not choose it. There is another aspect to visibility related to travelers and

passers-by. Generally, a stores trade area accounts for 75-90% of the business. This

means that about 10-25% of the stores business comes from beyond its trade area.

Visibility takes on added importance, with respect to this component. Location of the

site plays an important role as far as visibility of the retail store is concerned.

From the above, it is clear that visibility of the store is an important factor to attract the

customer and thus increase the sales of the store. 7


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Traffic Flow

Knowledge of the volume and character of passing traffic is a very essential parameter

for the selection of a location. Flow of traffic in a particular area is important

determinant for the success of a retail store. Data from a traffic count, not only shows

how many people pass by, but also about the kind of people they are. Analysis of the

characteristics of the passing traffic often reveals patterns and variations not readily

apparent from causal observation

The passing traffic is divided into different classifications according to the characteristics

of the customers who patronize the store. The proportion of passing traffic who can be

potential customers can be known by interviewing these people. This traffic can be

divided into two types:-

Pedestrian Traffic Count

For pedestrian traffic count, it is necessary to decide about who is to be counted, where

the count should take place, and when the count should be made. The season, month,

week, day, and hour influence the traffic flow and should be considered before deciding

about when this counting should be done.

Automobile Traffic Count

This is the drive-in traffic near the retail store. Both the quality and quantity of

automotive traffic needs to be analysed to reach to a conclusion. Deciding upon this we

can make inferences about the potential customers of the store.

Parking

Parking is a characteristic that is especially a cause for concern in densely populated

areas. Evaluating the parking that exists at a retail site, there are two considerations:

parking capacity of the store (ie. The number of cars that can be parked), and the

parking configuration (ie. The layout of the parking area, the direction of the travel lanesand spaces available). There are several ratios used by different retailers to determine

the adequacy of a parking lot. The ideal 8


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ratio for a food store is 7-8 cars per 1000 square feet of the food store. It means that a10,000 sq. feet food store should have an ideal parking lot to accommodate between

70-80 cars. However, an ideal ratio is hardly ever followed in reality, especially in

densely populated areas. Ideally, the more suburban the location, the greater should be

the emphasis on maximizing parking availability. Urban stores generally get a significant

amount of their business from walkers, bikers and shoppers who use public

transportation to and from the store and, can get by with a lower parking ratio.

Parking lot should be laid out in such a way so that the driving lanes are perpendicular

to the storefront, in order to facilitate shoppers to walk between their cars and the

store door. And the food shoppers usually like to park in reasonably close proximity to

the main entrance/exit of the store.

Congestion

When the roads are narrow and the traffic in the area is high, it leads to congestion.

Congestion can be a matter of concern for a store located in a highly populated area.

The roads are so highly populated that it becomes difficult to walk through the area. The

parking of vehicles also becomes a matter of concern in these areas. All this can lower

the interest of the customer to visit the store in turn leading to decrease in sale.


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Estimating demand for new location

Analog Approach

Current trade area is determined by using the customer spotting technique. Based on the density of the customer from the store ,the primary, secondary

and tertiary trade area zone are defined

Match the characteristics of our current store with potential new storelocation,to determine the best site.


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Regression analysisRegression analysis includes many techniques for modeling and analyzing several

variables, when the focus is on the relationship between a dependent variable and

one or more independent variables.

More specifically, regression analysis helps one understand how the typical value of

the dependent variable changes when any one of the independent variables is

varied, while the other independent variables are held fixed.

Most commonly, regression analysis estimates the conditional expectation of the

dependent variable given the independent variables that is, the average value ofthe dependent variable when the independent variables are held fixed.

Less commonly, the focus is on a quintile, or other location parameter of the

conditional distribution of the dependent variable given the independent variables.

In all cases, the estimation target is a function of the independent variables called

the regression function. In regression analysis, it is also of interest to characterize

the variation of the dependent variable around the regression function, which can

be described by a probability distribution.

Regression analysis is widely used for prediction and forecasting, where its use hassubstantial overlap with the field ofmachine learning. Regression analysis is also

used to understand which among the independent variables are related to the

dependent variable, and to explore the forms of these relationships. In restricted

circumstances, regression analysis can be used to infer causal relationships between

the independent and dependent variables.

However, multiple regression models have their drawbacks. They can be expensive;

take a longtime to develop; and be compromised by the introduction of a new

concept, merchandise mix, or competitor. Time, or change, is the worst enemy of a

multiple regression model. These models must be rebuilt at least annually to retain

their predictive capabilities. Changes over time in any of the variables affect the

overall interaction of all the variables and, thus, the predictive power of the model.
http://en.wikipedia.org/wiki/Dependent_variablehttp://en.wikipedia.org/wiki/Independent_variablehttp://en.wikipedia.org/wiki/Conditional_expectationhttp://en.wikipedia.org/wiki/Average_valuehttp://en.wikipedia.org/wiki/Quantilehttp://en.wikipedia.org/wiki/Location_parameterhttp://en.wikipedia.org/wiki/Function_(mathematics)http://en.wikipedia.org/wiki/Probability_distributionhttp://en.wikipedia.org/wiki/Predictionhttp://en.wikipedia.org/wiki/Forecastinghttp://en.wikipedia.org/wiki/Machine_learninghttp://en.wikipedia.org/wiki/Causalityhttp://en.wikipedia.org/wiki/Causalityhttp://en.wikipedia.org/wiki/Machine_learninghttp://en.wikipedia.org/wiki/Forecastinghttp://en.wikipedia.org/wiki/Predictionhttp://en.wikipedia.org/wiki/Probability_distributionhttp://en.wikipedia.org/wiki/Function_(mathematics)http://en.wikipedia.org/wiki/Location_parameterhttp://en.wikipedia.org/wiki/Quantilehttp://en.wikipedia.org/wiki/Average_valuehttp://en.wikipedia.org/wiki/Conditional_expectationhttp://en.wikipedia.org/wiki/Independent_variablehttp://en.wikipedia.org/wiki/Dependent_variable


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The Huff Model

The Huff model was introduced by David Huff in 1963 (Huff 1963). Its popularity and

longevity can be attributed to its conceptual appeal, relative ease of use, and

applicability to a wide range of problems, of which predicting consumer spatial

behavior is the most commonly known. The probability (Pij) that a consumer located

at iwill choose to shop at store jis calculated according to the following formula.

Where:

Ajis a measure of attractiveness of store j, such as square footage Dijis the distance from itoj is an attractiveness parameter estimated from empirical observations is the distance decay parameter estimated from empirical observations n is the total number of stores including store j.

The quotient received from dividing by is known as the perceived utility of

storejby a consumer located at i. The parameter is an exponent to which a

stores attractiveness value is raised, and enables the user to account for nonlinear

behavior of the attractiveness variable. The parameter models the rate of decay

in the drawing power of the store as potential customers are located further away

from the store. Increasing the exponent would decrease the relative influence of astore on more distant customers.

Retail Store Location

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