Abstract
Choosing where to open a new outlet is a critical decision for retail firms. Building on the multiplicative competitive interaction model from retail location theory, this paper develops a geomarketing model that can be used to devise supermarket location strategies. First, attributes that explain a supermarket’s pull on consumers were determined. These attributes included objective (taken from databases and empirical observation) and subjective (based on managerial judgements) variables relating to the supermarket and its trade area. Then, geographic information system tools were used to analyse real data at a highly detailed level (road section). From a geomarketing viewpoint, the model shows that sociodemographic characteristics of the supermarket’s trade area affect firms’ location strategies. The paper also discusses improvements for calibrating and validating this model. Adding the spatial organization of supermarkets to the model yields a different consumer behaviour pattern. This geomarketing model can help managers to design supermarket location strategies according to shop features, competitors and environment, whilst estimating supermarket sales.
Highlights
Opening a new retail outlet is expensive
Results for the correlation coefficient and mean absolute percentage error (MAPE) imply that the best calibration technique was generalized least squares (GLS) (Table 2)
Main findings fall into two groups: conceptual and methodological
Summary
Opening a new retail outlet is expensive. A firm that opens a new outlet is exposing itself to financial risk (Alarcón 2011). Location affects retail consumer experience, which influences consumer loyalty (Kim, Choi 2013). If a shop fails because of a poorly chosen location, this failure may damage the parent firm’s image. Location analysis is vital for retail firms (Roig-Tierno et al 2013). Choosing a location for a retail outlet has always been difficult, the state of the current environment has made decision-making even more challenging. Firms are facing greater competition, which reduces margins
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