Retail location modeling of supermarket chains in Taipei city

Abstract

This study collected the annual revenue data of the top three supermarket chains in Taiwan (PX Mart, Simple Mart, and Wellcome), shopping frequency in supermarkets, and the average expenditure of the general public in order to construct models for simulating supermarket revenue by calibrating model parameters to the actual data. This study employed the competing destinations model (CDM) to designate supermarket shoppers' shopping areas and simulate supermarket sales. The CDM calculated the probability of consumers selecting each supermarket, simulated the total revenues of supermarkets and the average daily revenue of a single store using the expenditure equation, and added spatial competition and agglomeration effect parameters to the model to observe variations in revenue with changing parameter values. The study results revealed profitable expansion opportunities and highly competitive locations not advised for new outlets. Beitou district had the lowest population density in Taipei City yet a high-sales cluster, making it an area suitable for new PX Mart stores. Shilin and Xinyi districts could also be considered suitable areas for new stores because they had insignificant distributions of stores, high-sales clusters, and competition was not yet severe. The study extends the use of analytical revenue and spatial models to empirically study the agglomeration forces between supermarket chains, analyzes the influence of distance variation on supermarket revenues, and determines the most suitable locations for the future inauguration of supermarket stores in Taipei City.