This document discusses several methods for estimating potential sales for a new retail store, including Huff's gravity model, regression analysis, and the analog approach. Huff's model estimates sales probabilities based on store size and customer travel time/distance. Regression analysis uses factors like household demographics and site characteristics. The analog approach matches a potential site to the characteristics of an existing successful store. Formulas and examples are provided for estimating sales using Huff's model and regression analysis.

1. ESTIMATING POTENTIAL SALES FOR
A RETAIL STORE

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METHODS FOR ESTIMATING DEMAND
Huff’s Model
Analog Approach
Regression Analysis
Royalty-Free/CORBIS

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Based on the premise that the probability which a given
customer will shop in a particular store
or shopping center becomes larger as the size
of store or center grows and distance or
travel time from customer shrinks
HUFF’S GRAVITY MODEL

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HUFF’S MODEL FORMULA
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5. APPLICATION OF HUFF GRAVITY MODEL
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6. APPLICATION OF HUFF GRAVITY MODEL CONTINUED
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PRC = 10,000/5 2 = .889
10,000/52 + 5,000/52
POH = 10,000/152 = .182
10,000/152 + 5,000/52
.889 x $3 million + .182 x $3 million = $4,910,000

7. REGRESSION ANALYSIS AND ANALOG APPROACH
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Multiple Regression Analysis = Factors affecting the sales of existing stores in
a chain will have the same impact upon the stores located at new sites being
considered.
Analog Approach = retailer describes the site and trade area characteristics
for its most successful stores and attempts to find a similar site.

8. REGRESSION MODEL FOR ESTIMATING STORE SALES
 Stores sales = 275 x number of households in trade area (15
minute drive time)
 + 1,800,000 x percent of household in trade with children
under 15
 + 2,000,000 x % of households in trade area inTapestry
segment “aspiring young ”
 + 8 x shopping center square feet
 + 250,000 if visible from street
 + 300,000 ifWal-Mart in center
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9. APPLICATION OF REGRESSION MODEL
Store Sales A = $7,635,000
= 275x11,000 + 1,800,000 x 0.7 + 2,000,000 x 0.6
+ 8 x 200,000 + 250,000 + 300,000
Store Sales B = $6,685,000
= 275x15,000 + 1,800,000 x 0.2 + 2,000,000 x 0.1
+ 8 x 250,000
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10. ANALOG APPROACH
Analog Approach
 Do a competitve analysis
 Define present trade area
 Analyze trade area characteristics
 Match characteristics of present area with potential sites
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