Study Areas, Customers and Trade Areas and Geocoding

Study Areas, Customers and Trade Areas and Geocoding 

Introduction:

The purpose of this report is to provide two businessmen in San Francisco who own similar businesses with information that will allow them to maximize trade areas without competing against each other. For the purpose of this report, the store in the northern section of the city will be referred to as store 1 and the store in the south will be store 2. The customers have provided customer data which has been analyzed using ESRI Business Analyst GIS software. The results of this analysis have been displayed through four maps depicting the locations of both stores and their customers, the customer derived trade area for each store, the walk/drive time for each customer and the location of competitors. Each of these maps will be individually explained in further detail.

I.                Customer Location

  

This map displays the location of customers for both stores as well as the mean centers where the largest concentrations of customers exist. The two coffee shops are represented by the coffee cup symbol with the customers being represented by the small colored dots and the mean centers by the large singular circles located near each store. Store 1 has customers represented in green. Store 2 has customers represented in blue. Both stores have a strong customer base in their immediate vicinity with not much customer overlap. The location with the greatest potential for customer overlap would be in the Mission District, which is centrally located between the two stores. Given this information, it would not be recommended that the stores attempt to expand their customer base in this area as it would create the potential for competition.

II.            Customer Derived Trade Areas

This map displays the current trade areas based on customer location. The yellow, orange and blue rings represent where forty, sixty and eighty percent of customers are located. According to data obtained from a generated business analyst report, the customers within the derived trade area for store 1 spent on average $991.39 on bakery and cereal products, items typically sold in coffee shops. Customers for store 2 on average spent $1024.49. Based on this information, it can be inferred that customers at store 2 are likely to spend more money on these products than customers in store 1. Additionally, store 2 has a larger trade area, which is partially contributed to the geography of the city, as store 1 does not have room to expand to the north without either running into a park or body of water.

III.        Competitors

This map displays the locations of competitors in relation to both stores. As can be seen, there is a large concentration of competitors in the northeast section of the city, part of which lies in the trade area for store 1. As a result, it will be more difficult for this store to draw in new costumers as they need to compete with other locations for business. Many of these stores are chains such as Starbucks, so store 1 may pull in more customers who are looking to support local small business. Also, the majority of store 1’s customers reside outside of this area of competition, which would be a benefit to the store. Store 2 is much more fortunate in that the majority of its competitors are outside of the immediate trade area. As a result this location will likely draw in more customers and have larger profits.

IV. Drive Time 

This is a map indicating how far customers need to travel in order to reach the store. The yellow, orange and blue rings represent .5, 1 and 1.5 miles respectively. As can be seen in the map, store 1 is in a more ideal location as the majority of its customers need to walk one mile or less to reach the store. As for store number 2, there are a large number of customers who need to walk more than 1.5 miles to reach the store. That fact that the customers are willing to travel this distance may be a testament to the quality of the product, however this location needs to take caution to prevent losing customers to competitors who take less time reach.

Conclusion:

These four maps provide costumer information that will benefit both stores and allow them to maximize their trade areas. Store 1 is in a more ideal location as its customers need to travel a shorter distance to reach the store.  The customers for store number 2 need to travel further, however they are likely to spend more on products typically sold in coffee shops. Both stores have competitors in their trade areas, however store 1 is much more likely to experience competition due to the high concentration of rival stores. Store number 2 is in a more ideal location in terms of potentially expanding its trade area as store 1 is more geographically limited for expansion.  The stores are in good locations to prevent competing for customers, however there is potential for customer overlap in the Mission district area.