This document discusses retail market segmentation and factors to consider when choosing a retail location. There are various location options for retailers, including freestanding isolated stores, being part of a business district, or being part of a shopping center. When choosing a location, retailers should consider the target audience, merchandise, traffic, accessibility, competition, and amenities. Several theories can be used to evaluate potential trade areas, including the Herfindahl-Herschman Index, Index of Retail Saturation, Reilly's Law of Retail Gravitation, Central Place Theory, and Huff's Model. Market segmentation involves dividing the market into distinct groups based on characteristics like geography, demographics, psychographics, and behaviors.

1. Retail market segmentation Prof. Raghavendran V

2. Retail Location One of the important decisions that a retailer has to make is on location of the retail outlet. TYPES OF RETAIL LOCATIONS: Various options are available to the retailer for choosing the location of his store. The Choice of the location of the store again depends on the target audience and the kind of merchandise to be sold. A store location may be classified as: Freestanding/ Isolated store Part of a business district Part of a shopping center 2 Prof. Raghavendran V

3. Isolated store or a Freestanding Location: Prof. Raghavendran V 3 A freestanding location is a store located along a major traffic artery, without any other competitive retailers around. The biggest advantages of such a location is that is no competition around. Due to above rentals are always low, parking facilities are available

4. Part of a Business District Prof. Raghavendran V 4 A retail store can be located as a part of a business district. A business district is a place commerce in the city. A CBD is the main centre of commerce and trade in the city. It is characterized by peak land rates and intense developments SBD is one, which has evolved over a period of time, with the spread of population within the city. It is characterized by a good mix of retailers, the stores are generally smaller than those in the CBD & public

5. Part of a Shopping center Prof. Raghavendran V 5 A shopping center id defined by International council of shopping centers as a group of retail & other commercial establishments that is planned, developed, owned and managed as a single property. They has defined 8 basic types of shopping centers, they are: Neighborhood SC, Community SC, Regional SC, Super Regional center, Fashion/ Specialty center, Power, Theme and Outlet center

6. Steps involved in choosing a retail location Prof. Raghavendran V 6 Step1: Market Identification Step2: Deterring the market potential Demographic features of the population The characteristics of the households in the Area Competition & compatibility Laws & Regulations Trade Area Analysis

8. Accessibility of the market is also a key factor

9. The total number of stores and types of stores that exist in the area

10. Amenities available

11. To buy or to lease

13. The Herfindahl-Herschman Index Prof. Raghavendran V 9 It is commonly as HHI, is a commonly accepted measure market concentration. The HHI is determined by adding the squares of the market shares of each competitor within the relevant product & geographic market. For Ex: HHI is 2600 (302+302+202+202= 2600) It takes account of a large number of firms of relatively equal size.

14. Prof. Raghavendran V 10 The regulatory authorities in the US, believe that markets are concentrated when the HHI is above 1800, moderately concentrated when the HHI is between 1000 & 1800, and unconcentrated when is below is 1000.

15. The index of retail saturation Prof. Raghavendran V 11 Another commonly used measure of market attractiveness is the Index of retail saturation. This index is based on the assumption that if market has a low level of retail saturation, the likelihood of success is higher. This theory considers the number of stores exist in a market. If a few stores are there, then it unable to satisfy the customers

16. Prof. Raghavendran V 12 Saturation is calculated in terms of existing retail facilities and their use. IRS= (H*RE)/ RF H= No of Households in that area RE= Annual retail expenditures for a particular line of trade/ household in that area RF= The total Square footage of that particular line of trade in that area, including the proposed store.

17. Reilly’s Law of Retail Gravitation Prof. Raghavendran V 13 When two cities complete for retail trade area from the immediate rural (suburban) areas, the breaking point for the attraction of such trade will be more or less in direct proportion to the population of the cities and inverse proportion to the square of the distance from the immediate area of each city. Mathematically it is denoted as… (Ba/Bb)= (Pa/Pb)*(Da/Db)2 Ba & Bb are cities which draws for business. Pa & Pb are population density from a & b city respectively Da & Db are the distance to the intermediate place.

18. Central Place Theory Prof. Raghavendran V 14 It describes that central place as centre of commerce of a village, town or city, which comprises of a cluster of retail organization. In this theory there are 2 important concepts– the range and the threshold Range is distance, wherein customer is willing to travel to for particular product. Threshold is the minimum amount of consumer demand that exist for a store to survive. So technically, Range should be > threshold for store to economical

19. Huff’s Model of trading Area Analysis Prof. Raghavendran V 15 Its popularity and longevity can be attributed to its conceptual appeal, relative ease of use and applicability to wide range of problems, of which predicting consumer spatial behavior is the most commonly known. The probability (Pij) that consumer located at ‘I’ will choose to shop at store ‘j’ is calculated according to formula. Pij=Aαj Dij–β / ∑ nj=1 Aαj – Dij-β

20. Prof. Raghavendran V 16 Aj= measure of attractiveness of store j, such as square footage Dij= Distance from i to j α= attractiveness parameter estimated from empirical observations β= distance decay parameter estimated from empirical observations N= total number of stores including store j

21. Market Segmentation Prof. Raghavendran V

23. it is homogeneous within the segment (exhibits common attributes)

24. it responds similarly to a market stimuli

27. reached and served.

30. Segmentation: Geographic Criteria Geographic variables region of the world or country, East, West, South, North, Central, coastal, hilly, etc. country size/country size : Metropolitan Cities, small cities, towns. Density of Area Urban, Semi-urban, Rural. climate Hot, Cold, Humid, Rainy.

31. Demographic Criteria Demographic variables age gender sexual orientation family size family life cycle education income occupation education socioeconomic status religion nationality/race language

32. Psychographic Criteria Psychographic variables personality life style value attitude

33. Behavioral Criteria Behavioralvariables benefit sought product usage rate brand loyalty product end use readiness-to-buy stage decision making unit profitability income status

34. Segmentation Criteria Geographic Nations, states, regions or cities Demographic Age, gender, family size and life cycle, or income Psychographic Social class, lifestyle, or personality Behavioral Occasions, benefits, uses, or responses

35. Market Segmentation Process Determine the characteristics of segments in the target market & separate these segments in the market based on these characteristics. Verify the market segments size if adequate enough to support the organization's product. Develop a marketing strategy to target this market.

36. 6. Develop Marketing Mix for Each Target Segment Market Positioning 5. Develop Positioning for Each Target Segment 4. Select Target Segment(s) Market Targeting 3. Develop Measures of Segment Attractiveness 2. Develop Profiles of Resulting Segments Market Segmentation 1. Identify Bases for Segmenting the Market Market Segmentation Process

37. Mass Marketing Same product to all consumers (no segmentation) Segment Marketing Different products to one or more segments (some segmentation) Levels of Segmentation Niche Marketing Different products to subgroups within segments ( more segmentation) Micromarketing Products to suit the tastes of individuals or locations (complete segmentation)

38. ASSIGNMENT TIME to be submitted on 30-sept-2011 Prof. Raghavendran V 29 Explain the steps involved in identifying a retail location? Discuss all retail theories for setting up a retail store Imagine that you are setting up a retail store at hometown. Identify which theory will be beneficial to evaluate your store location and why? Describe briefly purpose of market segmentation in retails List out briefly the criteria's of segmentation Explain with examples, levels of segmentation Identify any product of your own & try analysing the product for favourable of the consumers from levels of segmentation.

39. End of the Module 6 By Prof. Raghavendran V Prof. Raghavendran V 30