Multi-unit retail site selection processes: incorporating opening delays and unidentified competition

Abstract

Multiunit site selection models have long ignored the impact of time delays in store openings. To determine the effect of this limitation and to identify a solution, we compare three multiunit site selection procedures. The first is a sequential procedure that selects sites and then opens them one at a time. The second is a global approach that selects all future sites in a single decision process. Third, is a proposed anticipated-delay procedure that incorporates opening delays, firm planning horizons and discount rates in determining appropriate sites for multiunit retail systems. We further compare the results of these site-selection procedures to similar procedures that incorporate leakage to unidentified competitors when seeking locations for new outlets. We make the comparisons based upon discounted revenues by using a two-party, game-like simulation. The simulation estimates revenue results under the various alternatives while allowing for reactive and preemptive competitive store openings. Our results indicate that the anticipated-delay procedure incorporating leakage produces a significantly better revenue stream than either the standard sequential or global approach procedures.