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TEP- _
- BY-STEP
- MARKET
... ANALYSIS
♦ .
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A Workbook
for Downtown
Business Development
By Kate Joncas
Liveable Oregon, Inc.
Published by the
National Trust Main Street Center
Washington, DC _ ' cpc r-..---L--'
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P--1 Main Street NATIONAL TRUST
• Fi-hsroluc PRESERVATION.
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TABLE OF CONTENTS
INTRODUCTION i
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ABOUT THIS WORKBOOK iv
STEP 1. WHO Is DOING BUSINESS DOWNTOWN Now? 1
Business Inventory 1
MOP Property Inventory 2
LaK,
STEP 2. WHAT Is THE CURRENT BUSINESS ENVIRONMENT? 3
14- Community Workshop 3
0 pig-4Physical Environment 3
Downtown Anchors 4
Business Clusters 6
STEP 3. WHAT IS THE TRADE AREA FOR THE BUSINESS DISTRICT? 9
Primary Trade Area 9
�4 Market Competition 10
{ STEP 4. WHO LIVES IN THE TRADE AREA? 13
' • ►3,io 040' Demographic Comparison of Trade Areas 16
Demographic Trends 18
1 Demographic Trends Comparison 19
1
•X STEP 5. WHO ARE THE CUSTOMERS AND WHAT DO THEY WANT? 20
Current and Potential Downtown Customers 20
' Business Owner Survey 21
► Customer Intercept Survey 22
I Focus Groups 23
j Telephone Surveys 23
STEP 6. WHAT ARE CURRENT RETAIL SALES IN THE TRADE AREA? 25
Measuring Retail Sales 25
Retail Sales Per Household 26
i Retail Sales Trends 29
) STEP 7. WHAT IS THE PROJECTED POPULATION GROWTH? 31
Demographic Projections 31
)
STEP 8. WHAT ARE THE RETAIL SALES POTENTIALS? 33
Retail Sales Potential Formula 35
) Retail Sales Potential ByNumber of Households 36
) Summary of Retail Sales Opportunities 37
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Future Demand for Retail Space Due to Population Change 38 C
Sales Potential Converted to Space Demand 39
STEP 9. MARKET OPPORTUNITIES 41
Summaryof Current Market Strengths gths and Weaknesses 41 ,�
Summary of Market Opportunities 42
C
STEP 10. MARKET POSITION STATEMENT 43 G
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NEXT STEPS 46
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SOURCES OF INFORMATION 47 C
1990 Census of Population and Housing 47
Census of Retail Trade 47 C
Standard Industrial Classification(SIC)Manual 47
Consumer Expenditure Survey 47 C
Consumer Price Index 48
Dollars and Cents of Shopping Centers 48
Private Data Sources 48
National Downtown Organizations 48
ExTRA FORMS 49 •C '
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INTRODUCTION
In the past several decades,America's Main Street's have gone through a staggering economic
transition.Once the community's primary(if not only)source of retail goods and services,many
traditional downtown commercial districts found themselves facing intense competition from
shopping malls—competition not only for customers,but for businesses themselves. Lured by
the promises of ample customer parking, unified facades and a steady stream of shoppers
attracted to the mall's anchor stores,some downtown merchants left the traditional business
district for the new development. The vacant spaces they left behind were joined by new
vacancies as other downtown businesses,unable to adapt to sudden changes in the local market,
closed their doors for good.
•
Without tenants,downtown's buildings fell into disrepair and,consequently,the downtown's
image with customers suffered. Property owners need tenants--arid regular rental income—to
maintain and,hopefully,rehabilitate their buildings. But too often,well-meaning downtown
leaders,anxious to simply fill vacancies,grabbed any business in sight,giving little thought to
what the business could contribute to the downtown's retail mix or whether its probable sales
volume could generate the rent levels necessary to support the building's maintenance and, if
needed,its rehabilitation.
•
Today,most Main Streets have many opportunities to bring customers back downtown. But,
the process is a complicated one. Because of the market erosion downtown and neighborhood
commercial districts have suffered over the years, the revitalization group must carefully
examine the district's market possibilities and build an economic development strategy based•
on the most promising options. Consumers' expectations have changed,too. Accustomed to
the high-quality promotion and inviting merchandise shopping malls offer,customers expect
similar benefits downtown. To be competitive, the revitalization organization must make
shopping on Main Street a unique,enjoyable experience.
Understanding the basics of retail market analysis can help guide the revitalization program in
making educated decisions about the types of businesses the commercial district might be able
to support,the customers it can probably attract,the ways it should promote the district's assets,
and the pace at which the district's economy might change.
A retail market analysis is not a detailed blueprint for action. In fact,retail market analysis isn't
an"exact"science at all. For example,there are no ten numbers that can be crunched that will
show with any certainty what kind of businesses will succeed in your community. Even if
research showed that there were no similar stores within 500 miles,a store could still fail if it
didn't have what local customers wanted.The interpretation of market data takes knowledge of
local market trends, customer preferences, local experience, and common sense. Market
analysis is simply a tool for making the best possible educated guesses about an area's potential
STEP BY STEP MARKET ANALYSIS-I
sales and for understanding who its most likely customers might be. Market analysis doesn't
involve difficult numbers of complicated formulas, but it does require patience, diligence, •
attention to detail and an understanding of the district being examined. It won't provide any
ready-made answers,but should serve instead as a starting point for making decisions about the
revitalization program's priorities and activities.
When doing a market analysis,the following three points should be considered: p
• Local involvement in the market analysis process is crucial. Although outside market �.
consultants can conduct most of the research needed for a comprehensive retail market
analysis,much of it can also be done by committed volunteers and staff. Doing some of p.
the work will save the organization a significant amount of money. More importantly,
however,it will give revitalization leaders a better understanding of the local market and
help them make informed decisions that will shape the district's future. Besides,no one
will understand the community better than its own residents; local insight is an essential
ingredient of all successful market development strategies.
• Market analysis is an ongoing process. Because the district's market changes all the
time, it should be measured on an ongoing basis. And, since the revitalization
organization is intentionally trying to stimulate economic change,there is an even greater
need to monitor the district's retail sales,property values and customer base. Once the
organization has gathered and interpreted base-line information about the district,it should °-
update that information every few years, fine-tuning business development and
promotional activities accordingly. p
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• The market analysis should be integrated into all other elements of the downtown
or neighborhood revitalization program. The conclusions reached by the revitalization
organization during the market analysis process should help shape the promotional
programs implemented downtown, the scale of any financial incentive programs the «..
organization offers and many other important elements.
Market analysis can help the commercial revitalization program in a number of ways,including
recruiting new businesses, helping existing businesses expand or add new product lines,
improving the effectiveness of advertising, launching successful promotional events and
designing incentive programs-for building improvements. This workbook outlines some of the
basic steps of the retail market analysis process for a historic commercial district. Using this
process can help a revitalization program make informed decisions about the economic direction
its commercial district might take.
There are many uses for the data that will be collected during the exercises in this workbook.
The following are some of the more common and useful: •
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ii-STEP BY STEP MARKET ANALYSIS
1
• Help existing businesses survive, by sharing the information so they can adjust their
• current merchandise and expand into new lines.
• Share facts with property owners and Realtors so that they can recruit appropriate
businesses that have a good chance of succeeding in your market.
• Work as a partner with the local government,Chamber of Commerce,and local economic
development organizations to share information collection and analysis.
• Develop a business recruitment packet(See the companion publication,the Fill-in-the-
Blank Business Recruitment Workbook).
• Develop and distribute a two-page fact sheet about local customers to local businesses.
• Put market information into the downtown newsletter and other community newsletters.
It will help build the organization's reputation as a source of helpful information.
• Send out press releases on local market facts and opportunities to the local paper and other
news media,and get on local talk shows.
• Hold a town meeting,divide into small groups to develop colored maps describing the
business mix,business clusters,and anchors and then talk about the results.
• Start a resource library shelf with market data for businesses and developers to borrow.
•
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STEP BY STEP MARKET ANALYSIS-III
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ABOUT THIS WORKBOOK
This workbook is designed for use by downtown and commercial district revitalization
organizations who want to improve the mix of businesses in their district by helping existing
businesses thrive,and by recruiting new businesses to fill gaps in the market.The workbook
combines information with a"fill-in-the-blank"style so that a volunteer business development
team can work through the process at their own speed.The exercises are designed so that a
committee can oversee the project,parts can be assigned to volunteers,sections can be done at
community meetings, or all of the above. Because the first step in business development is F.
understanding local market opportunities,this workbook is designed to be the foundation for
business development, and its companion workbook, the Fill-in-the-Blank Business
Recruitment.
This workbook should be viewed as a beginning to an ongoing education about economic
development opportunities in the community.The 10 steps cover the basic components of a
market analysis,.but each community will uncover unique local strengths and problems not
covered here. •
After completing the workbook,the community will have developed the material necessary to
complete a basic market analysis. •
Participants will have learned how to:
• fmd and use sources of market analysis data;
• complete a basic demographic analysis;
• compute retail sales leakage; and
• develop a retail cluster analysis.
NEEDED RESOURCES
Business Development Team
Since this book is geared toward downtown and commercial district revitalization A
organizations,it is making the assumption that the majority of the activities described will be
completed by volunteers from the community. Throughout the book,the group of volunteers
doing the collective work of market analysis is referred to as the business development team,
or simply,the team. The business development team may want to vary its membership over
time or assign specific task groups to each project. People with skills such as sales and
marketing,economic development,real estate or business experience are helpful. Participants
should be willing to work with large amounts of information,some of which may need to be
kept confidential.There is a lot of data available,but only a portion of it is real information. •
Prior knowledge of market analysis or high levels of math ability are not required,but the team
iv-STEP BY STEP MARKET ANALYSIS
should look for useful skills such as experience with surveys, marketing, real estate,
, • computers,or demographics.
)
Team members could include:
• business and property owners
• realtors,accountants,attorneys,bankers
• planning/economic development staff from the city or local utilities
• college professors and their classes
• interested community residents
j The business development team will be made up of five to ten community residents,plus a
number of other volunteers for specific projects like surveys and inventories.The team will need
to meet regularly(allow two to three hours for these meetings)to review information and plan
) the next steps.
3 StaffAssistance
j The team will need assistance from a staff person who can spend several hours a week
coordinating the project.Good resources for staff assistance include the downtown manager or
staff from the city,chamber of commerce,or other economic development organizations.
) •
) Budget
) The team will need a budget for maps,consumer surveys,professional assistance,printing,and
mailing.
About Professional Assistance
The community could hire a professional to provide a complete market analysis.However,the
ability to use and update the data after the consultant is gone is directly related to the amount of
participation in the analysis by the community.By doing some of the data collection and analysis
itself,a community develops the tools to become a pro-active economic development team,
instead of remaining a victim of economic change.
The team could consider seeking the assistance of a professional:
• to assist in the development,administration and analysis of consumer surveys,because
technical expertise is necessary to design good questions and get accurate responses;
• to check the results of calculations and demographic analysis because Census data is easy
to confuse due to its complexity;
• to deal with a market that is particularly complex or is difficult to define,such as that of
a small community in a rapidly growing or shrinking metro area;and
7 • • to provide an expert sounding board to review market opportunity conclusions after the
completion of each step.
STEP BY STEP MARKET ANALYSIS-V
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There are market opportunities for downtowns and neighborhood business districts, but to f
compete successfully in the 1990s, revitalization programs will have to focus on three F
strategies: r
1. Encourage entrepreneurship.Downtown's niche is independent businesses,but they need
a quality environment in which to thrive.
2. Fight to keep downtown a vital mixed-use district,with housing, government,cultural
facilities,retail and office uses contributing to a vibrant community center.
3. Manage downtown professionally,the same way a shopping center does,with an attractive
mix of customer-driven businesses presented in an attractive environment.
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vi—STEP BY STEP MARKET ANALYSIS
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STEP 1. WHO Is DOING BUSINESS DOWNTOWN Now?
BUSINESS INVENTORY
)
The business development team needs an inventory of all businesses in the downtown or
business district.For maximum practicality the list should be kept on computer so that mailing
lists and business directories can be easily put together when needed.
To Do:
1. Complete an inventory of businesses in the downtown or business district.
2. Organize the business list into categories for inclusion in a business directory and in the
recruitment packet.
Things to include in a business inventory:
• Date completed
• Business
1 Name
o Address
• o Phone
ib Owner
• Local Contact(if different than owner)
Name
0 Title •
• Business type
« For this category,smaller communities may want to use a simple categorization such as
traditional retail,government,service retail,housing,restaurant/bar,cultural,office, and
vacant.
Larger communities may want to categorize all businesses on a computer database,using
the Census system of Standard Industrial Classification(SIC)codes(See Sources).This
will allow easier analysis of trends and facilitate sorting the information into a business
4 directory format later on.
• Size of space in square feet
This measurement allows the team to total up square footage of retail,or square footage
by type of business, and to calculate a vacancy rate.
4
PROPERTY INVENTORY
4 STEP BY STEP MARKET ANALYSIS-1
4
t
The business development team needs an inventory of all property in the downtown or business
district.For maximum practicality this data should be kept on computer so that lists of vacancies • e
and a property owner mailing list can be easily put together when needed.
To Do:
1. Complete an inventory of property in the downtown or business district.If resources are
tight,target vacancies first and then add the rest over time.Start with the county property
tax records and ask a volunteer with real estate or title insurance experience to help lead
this project.
2. Prepare a one page information sheet of vacant spaces and buildings to send to prospects.
Things to include in a property inventory: t:
• Date compiled
• Property information E.
o Address
o Lot size,tax lot number,legal description
o Building size-number of stories and square feet of each floor
ir Current tenants
o Rents
o Utilities,elevator
o Loading areas •
o Parking spaces on the property
o Assessed value of land and building R
o Year built
o Taxes assessed
o Zoning
o Historic status
o Photograph,current and historic
• Owner
o Address
o Telephone
• Local Contact/Leasing Agent(if different than owner)
cam.
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2 -STEP BY STEP MARKET ANALYSIS
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STEP 2. WHAT Is THE CURRENT BUSINESS ENVIRONMENT?
)
)
COMMUNITY WORKSHOP
The exercises in this step are fun and very informative when done as a community workshop.
)
Also,a forum where local business and property owners can share information about current
) market trends will help to spur community involvement and investment in the market analysis
) project.To prepare for a workshop the team will need: •
• maps of downtown as described in Physical Environment#1
• the map should have business names noted on the buildings
) • a supply of markers and colored pencils
)
) At the workshop,participants should be divided into five groups using the exercises in this
) section:
• Physical Environment
• Downtown Anchors
) • Business Clusters
) Give the groups maps and markers and 45 to 60 minutes to analyze downtown using their
) • assigned exercise.Have each group present their results,and discuss similarities and differences
) in each group's conclusions. A tremendous amount of good market information will be
discussed,so be sure to video tape the presentations or have a team member act as a recorder.
) PHYSICAL ENVIRONMENT
) Physical characteristics have a great impact on a customer's conscious and unconscious
shopping behavior.For example,customers may not walk past a vacant building to get to the
businesses on the next block,a busy street may divide the community's downtown into two
I separate retail areas,or the pedestrian path between the employee parking lot and city hall may
provide a special business opportunity—such as a coffee shop.
)
To Do:
1. - Find or develop a downtown base map.Include:
) • building footprints
• parking lots,parking structures,on-street spaces
• location of major buildings and institutions
• street patterns and highways
• key physical features such as parks and rivers
•
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STEP BY STEP MARKET ANALYSIS-3
4
4
2. Use markers to plot on the map the elements in the business district that have an impact,
good and bad,on customers'perceptions of the area.(For example,using different colors •
for different features)Use the list below to help get started.
• No on-street parking
• Short and long term parking
• Highway entrances
• Bus stop
• Areas of heavy automobile/truck/rail traffic
• Pedestrian unfriendly areas
• Areas of heavy pedestrian traffic
• Deteriorated sidewalk/no sidewalk
• Deteriorated buildings
• Historic landmarks/historic district/local historic site
• Unique architecture and/or especially attractive buildings
• Good view
• Sculpture,fountains,and murals
• Blank walls/boarded up windows
• Vacant buildings and storefronts,vacant lots,other dead zones
• Entertainment/cultural facilities
• Parks,plazas or other places where people commonly gather
• Waterways
• Run down,dirty areas •
• Areas with good/bad reputations
• Other?
3. Identify the blocks that are the best and worst retail locations based on the physical
environment.
4. Prepare a downtown base map showing the elements listed in No. 1 above for a future
recruitment packet.
5. Develop a prioritized list of physical improvements needed to make downtown a better
place for business and share these ideas with elected officials.
DOWNTOWN ANCHORS
"Anchors" at a shopping center are the department stores that act as attractions, bringing
customers to the center through their name recognition and advertising campaigns.Malls are
designed so that the department stores are spread far apart,causing the customers to pass many
smaller specialty stores on their way between the anchors.
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4-STEP BY STEP MARKET ANALYSIS
BUSINESS CLUSTERS '
IIIAnalyzing the types of business and cluster patterns of businesses that are currently downtown
can reveal a great deal about the market. For example,the business development team may
identify a cluster of services across from the court house such as printing,office supply,coffee
shops and attorneys, or notice that the three women's clothing stores on the same block of
Second Street are doing well while the one on Third Street next to the auto parts store is not,or
III-
fmd that the traditional retail core has dispersed.
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Knowing the current mix of businesses and cluster patterns will also help the team guide new
businesses to the optimal downtown location.Clustering businesses that share customers or have F
complementary goods,such as clothes and shoes,strengthens downtown's perception in the
trade area as a"shopping center."
To Do: ,
1. On a downtown base map color code the buildings by first floor use(retail,service,office,
vacant,government,housing,cultural,other)and look for patterns: t
• Is most of the retail located in one area? t
• Do service uses or government offices break up the retail pattern for customers on t
any streets?
p.
• Are service businesses and offices uses primarily on side streets?
IllQ2. On a downtown base map,color code business types(for example restaurants,jewelry, t
women's clothing stores)and look for patterns: •
• Are there clusters of like businesses? t.
• Are there loners,businesses all by themselves on the wrong street? •
• Are businesses that have similar customers next to each other?
X Choose several specific customer groups,such as tourists or the elderly,color code the
t
businesses that serve them,and look for patterns:
• Are there businesses that primarily serve a particular market,like students,or office f•
workers?
• Are there businesses that primarily serve an upscale market? •
• Are there businesses that primarily serve a downscale market? •
• Are there businesses that serve specific lifestyle needs like bridal goods, historic •
home renovation supplies,or hunting equipment?
4. List each cluster and make a list of the businesses in it on the chart below.More forms can r
be found in the Extra Forms section. '
5. Compare the business clusters base maps and the physical environment map.Are there any
correlations between the business cluster patterns and the environmental factors? r
6. List five factors discovered as a result of the cluster analysis that should guide the {
retention and recruitment effort. •
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6-STEP BY STEP MARKET ANALYSIS
t
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Department stores used to perform this function in downtown,but now there are new anchors.
An anchor may be the post office,a popular restaurant,or any other downtown function that •
draws a substantial number of customers every day.
To Do
1. List several downtown anchors,then estimate the pedestrian traffic they generate and the
times of day when that traffic is highest
2. Plot the anchors on a downtown base map. For each, note the impacts and potential
opportunities on surrounding businesses.
3. Use these numbers to refute the assertion that"Nobody comes downtown anymore."
Anchor Estimated#of daily customers Peak use hours
•
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STEP BY STEP MARKET ANALYSIS-5
Business Cluster Type:
List of Businesses Currently in the Cluster:
•7
Five market factors discovered from the cluster analysis:
•
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STEP BY STEP MARKET ANALYSIS-7
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STEP 3. WHAT IS THE TRADE AREA FOR THE BUSINESS
DISTRICT? •
PRIMARY TRADE AREA
A trade earrea is the geographic area from which a store or shopping area attracts customers.The
primary trade area is the geographic area from which most of downtown's customers and sales
are drawn.For many communities there will also be a secondary trade area,a ring of influence
for downtown beyond the primary trade area.Residents of this area can get to downtown with
relative ease and will make the trip for a special business or a major festival.
Why Determining a Trade Area is Important
The trade area issue is an important factor to investigate because:
• demographic information will be presented for the trade area;
• potential new businesses will want to know where most of their potential customers live;
• the business development team needs to be able to describe the demographics of potential
markets;and
• promotion committees need to know which media(covering what geographic area)to use
for advertising.
Issues to Consider •
Multiple Trade Areas.Every downtown has multiple trade areas. Each downtown business
may have a different trade area—the furniture store may draw from the entire county,while the
video rental shop serves households within a ten block radius.For a downtown that has tourists,
students,a close-in residential neighborhood,or a large number of office workers,the trade areas
may differ by customer groups.However,for purposes of general trends analysis the business
development team needs to define a trade area for the community's downtown shopping center
as a whole. Subsequent analysis can address particular markets.
Trade Areas and Municipal Boundaries.Trade areas are often drawn as a series of concentric
rings around the shopping area.However,trade areas are rarely exact concentric circles, and
often look more like amoeba shapes.As a practical note,retail sales data are published for cities,
counties,zip codes,and metro areas,and the closer the community's trade area corresponds with
one of these jurisdictions the easier it will be to analyze demographics and retail sales.
Natural Boundaries.Despite consumers'mobility,the boundaries of trade areas still tend to
stop at large physical barriers such as rivers,mountains and major highways.For this reason,
it may be easiest to discover potential trade area boundaries using an official state highway map,
because it will probably note mountain ranges, county borders,parks,railroads,and lakes, in
addition to highways. •
STEP BY STEP MARKET ANALYSIS-9
• To Do:
1. Have each team member ask several downtown businesses to draw on a map the area
where the majority of their customers live.State road maps are good for this purpose.Also
include in the sample local banks,major employers,the school district,grocery stores,and
both retail and service businesses.
2. Pinup all of the maps on the wall,and using the information gathered by team members
from the businesses they interviewed,draw a composite primary trade area for downtown.
Take into consideration the trade areas of local businesses and the road network,
geographic boundaries and the market draw of other nearby communities.
3. Develop three solid reasons to defend the trade area boundaries.
4. Develop a map showing the trade area for the recruitment packet. t
t
MARKET COMPETITION r
Potential new businesses will want to know who and where the competition is.To advocate t
downtown as the best location and differentiate it from other choices,the business development t
team needs to make a list of competing shopping areas with a description of their market
To positions.
• f
1. List competing commercial areas within and immediately adjacent to the community trade
area. Include enclosed regional malls, concentrations of highway commercial, strip
shopping centers,other downtowns,neighborhood business districts and the nearest metro •
area.Local telephone books(at the library)can be very helpful.At this point the team does
not have to list each business in the competing trade areas.Later on,when the team has
identified a specific type of business as a potential business opportunity, such as a '•
bookstore,the team can research the region to identify competing businesses that sell
books.
2. Describe the business mix(types of stores&goods)and trade area for each center.For •
example:
• "Specialty retail,antiques,and restaurants,oriented to tourists"
• "Name brand outlets drawing from a five-county market area"
• "Neighborhood shopping center,grocery, and convenience goods"
• "Major strip center with five national chain anchors,regional draw"
3. Prepare a one page summary of competing market areas.An example inventory form
follows.Additional forms can be found in extra forms section at end of book.
•
10-STEP BY STEP MARKET ANALYSIS
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Commercial Area:
Trade Area:
) - Description of Business Mix:
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STEP BY STEP MARKET ANALYSIS-11
)
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STEP 4. WHO LIVES IN'1'.11.N., TRADE AREA?
Explanation
Commonly,a market analysis will look at two areas of demographics:
• an analysis of the basic population characteristics,or demographics,such as numbers of
people,age and income of the trade area and competing market areas;and
• an analysis of demographics over time(is the population growing or declining,becoming
older or younger,richer or poorer?).
Retailers and developers will want to know how the trade area compares to nearby cities,the
county,the surrounding region,and the state,and so the team needs to compile the figures for
each. The team should compare area demographics in several ways, especially if there are
negative factors,like declining population.The team may find that although some factors are
negative,in others the trade area outperforms the region.
These forms will help the team compile the basic demographic facts about the trade area,listed
below.Note that each market area is unique and the team may have to customize the forms to
. fit their needs.
• population and household size
• sex
• income
• age
• education
• race/ethnicity
• housing
• employment
7
To Do:
Fill in the following forms using Census data and local updates, if available.The team should
7 find a volunteer with experience using Census data to help with this section, such as the
city/county manager or planner,or marketing or economic development staff from a local bank
7 or utility.The forms in this section include:
• Demographic Profile of the Trade Area
• Demographic Comparison of Market Areas
• Demographic Trends
• Demographic Trends Comparison
J •
STEP BY STEP MARKET ANALYSIS-13
DEMOGRAPHIC PROFILE OF THE TRADE AREA
Geographic S
Area:
Total Number of
Persons:
Total Number of
Households: •
Average Household Size:
Sem #Persons %of total
female:
male:
Household Income: #households %of total
Less than$10,000
$10,000-$24,999
$25,000-$49,999
$50,000-$74,999
$75,000-$99,999
$100,000 and up
Median Household Income: •
Per Capita Income:
Persons Below Poverty Level: # %of total
Age: #persons %of total
under 5
5- 17
18-24
25-44
45-64
65 and over
median age:
Educational Attainment: #persons %of total
did not complete high school
high school graduate or higher
bachelor degree or higher
•
14 -STEP BY STEP MARKET ANALYSIS
Demographic Profile of the Trade Area,page 2
) •
Geographic Area:
Race: #persons %of total
White:
Black:
Native American,
) Eskimo,or Aleut:
Asian or Pacific Islander:
) Other:
Hispanic origin:
Housing: #units %of total
) owner occupied:
renter occupied:
) median value:
) median rent:
) units constructed, 1980- 1990
)
) • Employment:
)
) top five occupations by employment #employed %of total
)
)
)
)
)
top five industries by employment #employed %of total
)
)
)
)
)
Unemployment: #unemployed %of total
Sources:
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STEP BY STEP MARKET ANALYSIS-15
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DEMOGRAPHIC COMPARISON OF TRADE AREAS
Use this chart to compare the demographic profile of the trade area to other trade areas,such as S
the city,county,nearby metro area,and state.Identify three to five significant strengths and
weaknesses.
Trade Area:
Primary Other trade areas
trade area
Population: (.-
Number of persons:
Number of households:
Average HH size: r
(HH=household)
Sex:
female
male
Household Income:
Less than$10,000 •
$10,000- $24,999
$25,000-$49,999
$50,000-$74,999
$75,000-$99,999
$100,000 and up
Median HE income
Per capita income
Number below
poverty level
Age:
under 5
5 - 17
18 -24
- 25 -44
45 - 64
65 and up
median age
•
16-STEP BY STEP MARKET ANALYSIS
)
)
Demographic Comparison of Trade Areas,page 2
•
) Trade Area:
) primary Other trade areas
trade area
Educational Attainment:
did not complete high school
high schootgraduate
college graduate
Race: • %
White
Black
Native American,
Eskimo,or Aleut
Asian,Pacific Islander
Other
Hispanic origin
)
) Housing: %
• owner occupied
) renter occupied
median value
) median rent
units constructed 1980-90
)
Occupation: %
)
)
)
)
Employment by Industry:
)
)
)
)
% Unemployed:
) Sources:
)
STEP BY STEP MARKET ANALYSIS-17
•
DEMOGRAPHIC TRENDS
Using Census data,analyze the changes in the trade area over time.Is the trade area population •
growing,shrinking or getting richer,poorer,older or younger?
Trade Area:
%increase
1980 1990 or decrease
Population:
Number of persons
Number of HH
average HH size
(BH=Household)
Income:
median HH
per capita
%below
poverty level
Age: •
median age
Sousing:
median value
median rent
Other Special Factors:
Sources:
Conclusions:
1.
2.
3. •
18 -STEP BY STEP MARKET ANALYSIS
DEMOGRAPHIC TRENDS COMPARISON
• Use this chart to compare the demographic trends of the trade area to other trade areas, such as the city,
county and nearby metro areas.How does the trade area compare in population and income growth?
.0
Trade Area:
Primary Other trade areas
trade area
• Population:
Number of persons
Number of households
Average HH size
(HH=household)
Income:
median HH
per capita
%below
poverty level
�• Age:
median age
Housing:
median value
median rent
Other Special Factors:
Sources:
Conclusions:
1.
2.
3.
STEP BY STEP MARKET ANALYSIS-19
•
STEP 5. WHO ARE THE CUSTOMERS AND WHAT DO '1'H I Y WANT?
Ah
CURRENT AND POTENTIAL DOWNTOWN CUSTOMERS
Savvy entrepreneurs know that it is easier to get existing customers to buy more goods than it is
to attract new customers.Similarly,the best opportunities for expanded downtown markets will
come by building on existing markets.Customers who are already patronizing downtown stores
are the best targets for new businesses and for expanded lines of goods and services in existing
businesses.The business development team needs to know who the existing customers are,their
needs,and their perceptions about the shopping district.
To Do:
The best ways to find out this information are to:
1. ask businesses who their customers are(Business Owner Survey),
• 2. survey customers on the street to fmd out who they are and their shopping preferences
(Customer Intercept Survey),
3. go to specific target groups of customers and ask them their perceptions and preferences
(Focus Groups),and
4. survey residents of the trade area(Telephone Survey)to ask them where they currently
shop and why.
•
A general discussion of each of these techniques follows, but consider having a professional
review the survey questions and methodology,and train survey volunteers.Surveying is a highly
technical skill and it is easy to make a mistake that will result in unusable or incorrect data.
Other Methods of Documenting Current Customers
To fmd out where customers live, conduct:
• a zip code survey of customers at the cash register,
• an analysis of business mailing lists; and
• a license plate survey in parking lots downtown,at the strips and at the mall(some states
put county names on their Iicense plates).
To find out more about specific groups of customers,develop:
• EmpIoyee profiles.Major employers may be willing to provide a profile of their workers
with se;age ranges,salary ranges,numbers of persons in types of jobs and summaries of
where they live.
• Tourist profile. The local and state visitor and convention bureaus may have data on
tourists,and local hotel/motel owners may be able to provide some data.Consider working
with the local visitor center to administer a short questionnaire to travelers.
•
20-STEP BY STEP MARKET ANALYSIS
.4)//111>
• Downtown residents profile. The 1990 Census can provide demographic data about
• residents. Check with building managers to see if they would be willing to help with a
survey of their residents.
• Performing arts center patrons profile. If there is a facility located downtown the
managers will have attendance figures and may have a profile of subscription patrons.
• Student profile.There may information on numbers and types of students at downtown
schools and universities. Check also for attendance figures for sports events and
• conferences.
To Do:
1. Develop,administer,and analyze appropriate survey(s).
2. Develop a one page description of results of each survey and a one page summary
description of existing downtown customers.
BUSINESS OWNER SURVEY
This survey should go to every business owner in the business district.Businesses will need to
feel comfortable with who is asking the questions,who will have access to the information,and
how it will be used.The most practical method to get a complete response may be to mail the
survey to businesses and have volunteers follow up and interview the business owners who don't
mail the survey back.Review the results of Steps 1 thru 4 for ideas for questions.Keep the survey
• short for best results.
Things to ask in a business survey:
1. Profile of the business's primary customer
• sex
• age
• household income
• where they live
2. Business operations
• hours of operation
• best sales volume time of day,day of week,month of year
• % increase or decrease in sales over last year
• most effective media
• Number of full and part time employees
.3. Perceptions of downtown as a place to do business.Have respondents indicate whether they
think the following attributes are excellent, good,fair or poor:
• parking
• cleanliness
• traffic
• shopping hours
J • promotions
• • crime
• quality of businesses
STEP BY STEP MARKET ANALYSIS-21
1!
• cost of goods
• selection •
• service
- 4. Other businesses needed in downtown
CUSTOMER INTERCEPT SURVEY
Good planning is the key to getting good results from an intercept survey.The time of day, day
of week, season of year, and location of surveyor all have to be taken into account when
designing this survey to avoid biased results and get an accurate picture of the range of customers
that downtown serves. Technique and skill of the interviewer and question design are also
important to getting quality results,so consult a professional for advice,and get samples from
other communities.
Things to ask in an intercept survey:
1. Profile of customer
• sex
• age
• household income
• place of residence
2. Shopping preferences
• how often come downtown
• purpose of this downtown trip
• where customer usually shops •
• provide a list of types of goods with check offs for downtown, other competing
shopping
centers and a"don't buy this"option
• media used for shopping information
• time of day and day of week most likely to go shopping
3. Perceptions of downtown as a place to shop.Have respondents indicate whether they think
the following attributes are excellent,good,fair or poor:
• parking
• cleanliness
• traffic
• shopping hours
• promotions
• crime
• quality of businesses
• cost of goods
• selection
• service
4. Other businesses needed in downtown
•
22 -STEP BY STEP MARKET ANALYSIS
Focus GROUPS
Focus group research is a type of customer research conducted by large consumer products
companies. For example,Proctor and Gamble may conduct one to fmd out customer preferences
for items such as dishwashing detergent.In this type of research a trained moderator leads a group
of homogeneous consumers,such as homemakers between 35 and 50 with household incomes
between$20,000 and$50,000,through a discussion about their likes,dislikes and feelings about
the product.The session is taped and analyzed by researchers.
The business development team can also use the basic concept of this research technique as a
quick and inexpensive way to fmd out what specific types of customers are thinking about
downtown.The keys to success are:
• homogeneous groups such as:
o women who have clerical jobs in the downtown county building
o male lawyers in practice for five years or more
o retirees over 65 living in the downtown elderly housing project
o university students;
• small groups—no more than a dozen people;
• a neutral and skilled moderator who makes everyone feel comfortable;
• confidentiality of opinions expressed;and
• a brief written summary of results.
This technique can be used to get the opinions of target groups such as office workers, high
school students, and conventioneers.Invite a group of them to share opinions with you over
coffee.
TELEPHONE SURVEYS
One of the best ways to find out how downtown is doing is to ask the people who should/could
be shopping there—the residents of the trade area.A random telephone survey will provide the
most accurate answers. To generate useful and accurate data the team should consult a
professional for advice, and get samples of surveys from other communities. It will be very
important to compare the demographic profile of survey respondents to that of the trade area.The
closer the two profiles match,the more weight the team can give to the results of the survey.
Things to ask in a random telephone survey:
1. Profile of customer
• sex
• age
• household size
• household income
• place of residence
-D • place of work
• occupation
7 STEP BY STEP MARKET ANALYSIS-23
2. Shopping preferences
• frequency of shopping
•where customer usually shops and for what
, : •media used for shopping information
•time of day and day of week most likely for shopping
•for a list of typical shoppers goods,ask whether the customer primarily purchases the
item
downtown;at a competing center or"doesn't buy"this item.
3. Perceptions of downtown as a place to shop.Have respondents indicate whether they think
the following attributes are excellent,good, fair or poor:
•parking
•cleanliness
•traffic
• shopping hours
•promotions
• crime
• quality of businesses
• cost of goods
• selection
• service
4. Other businesses needed in downtown
••
The business development team should also add custom questions based on the analysis to date
and their knowledge of the current market.For example,the team could ask about categories of
businesses over- or under-represented in the business district, or about shopping patterns in
competing shopping areas, or about the use of specific parking lots.
24-STEP BY STEP MARKET ANALYSIS
)
)
)
io
) STEP 6. WHAT ARE CURRENT RETAIL SALES IN THE TRADE
AREA?
)
MEASURING RETAIL SALES
A major indicator of market strength is retail sales patterns.This section contains two ways to
analyze retail sales.The first exercise,retail sales per household,helps the team to compare the
retail sales for the trade area to those of the state as a whole.This helps to begin to put local retail
) sales in perspective and to identify strengths and weaknesses.The second exercise,retail sales
) trends,enables the team to identify sales increases or decreases over time for specific categories
of goods.
)
Note that although this section refers to retail sales,most business districts are a mix of retail and
services.Depending on the local business mix the team may want to include a wide range of both
retail and service businesses in their analysis.See the Census sources below.
In large shopping centers cash registers in each store are linked to the mall management office,
so that the sales performance of each tenant can be tracked.Because downtown is a collection
) of independent businesses,this data resource is not available,but there are other resources that
can be used to complete a retail sales analysis.
) 0
There are four major sources of information about local retail sales:
• Sales tax reports.In states that collect sales tax,reports of sales by types of businesses are
often available locally on a regular basis.
• Census of Retail Trade and the Census of Service Industries,both published by the U.S.
4 government,Department of Commerce(See Sources).
• Retailers.A few communities have been able to work with retailers to anonymously report
their sales to a local accounting firm,who then produced periodic reports that enabled the
downtown association to track sales trends.
4 • Estimates by national companies.Companies like Sales and Marketing Management(see
Sources) and a number of large data firms publish annual estimates of retail sales for
metropolitan areas.
4
4
Z
4
4
J
_ •4
4 STEP BY STEP MARKET ANALYSIS-25
4
4
RETAIL SALES PER HOUSEHOLD
One clue to the retail sales performance of the trade area and the spending habits
of
is to compare the sales per household of the trade area to the sales per household for the state.To
use the form:
1. In the first column fill in the retail sales by kind of business for the entire state from the
Census of Retail Trade or Sales Tax.The Kind of Business labels are keyed to the major
categories in the Census of Retail Trade.
2. To calculate the sales per household statewide,divide the amount of retail sales in column
one by the number of households in the state.
3. For the third column,fill in the retail sales by kind of business in the trade area.
Note:the Census of Retail Trade(CRT)only presents information for metropolitan areas,
counties and municipalities of 2,500 inhabitants or more.The trade area for your downtown
may not match these boundaries. The business development team may be able to
approximate the local trade area sales by combining data from the CRT charts.For
example,the team might add counties,or cities within counties,together.In some cases,the
team may not be able to manipulate CRT data to match local trade area boundaries.In that
situation,the team will need to choose a CRT geographic unit that is the closest match to
the trade area,and note on the form why the choice was made and the possible implications
on the resulting conclusions.
4. To calculate the sales per household in the trade area,divide the amount of retail sales
iocolumn three by the number of households in the trade area.
•
26 -STEP BY STEP MARKET ANALYSIS
)
Example
j •
Trade Area:
)
Number of Households in Trade Area:
)
) Number of Households in the State:
)
) Statewide Trade Area
) Kind of Business .Sales Sales per Sales Sales per
($000s) household ($000s) household
Total Sales
General Merchandise
SIC 53
Apparel and Accessory
SIC 56
Furniture and Home
• furnishings SIC 57
Eating and Drinking Places
SIC 58
Drug and Propriety Stores
SIC 591
Miscellaneous Retail Stores
SIC 59 ex. 591
Sources:
When this community compared their sales per household for their trade area with that of the
state,they found that even though overall sales per household were lower than the state average,
3 in several categories their sales per household were stronger.The team had discovered during
their analysis of the primary trade area,business inventory and market competition analysis that
most of the retail in the trade area was located in downtown. This retail sales per household
calculation confirmed downtown's reputation as a regional center,especially for eating out and
buying furniture. The team hopes to strengthen one niche through developing a restaurant
directory to distribute to visitors and residents.
4111
STEP BY STEP MARKET ANALYSIS-27
RETAIL SALES PER HOUSEHOLD
To Do: •
IIIFill in this chart for the Trade Area, and comparing the results to other
data draw conclusions about the retail sales in various categories.A blank version of collected
o to date,n
Extra Forms. nn is in
Trade Area:
Number of Households in Trade Area:
Number of Households in the State:
Statewide Trade Area
Kind of Business Sales
Sales per Sales Sales per
($000s) household ($000s)
household
Total Sales 1111111111111111111111
Building Materials
and Garden Supplies, SIC 53 1111111111111111111.1
General Merchandise
SIC 53111111111111111111
Food Stores •
SIC 54 IIIIIIIIIIIIIIIIIIIII
Automotive Dealers
SIC 55,except 554 11111111111111111111111
Gasoline Service Stations IIIIIIIIIIIIIIIIII
SIC 554
Apparel and Accessory
SIC 56 IIIIIMIIIIIIIIIIII
Furniture and Home
furnishings SIC 57
Eating and Drinking Places
SIC 58
Drug and Propriety Stores Eimmo=
SIC 591
Miscellaneous Retail Stores MIIIIIIIIIIIallrl
SIC 59 ex. 591
•
28 -STEP BY STEP MARKET ANALYSIS
i
Conclusions:
3
•
RETAIL SALES TRENDS
The Census of Retail Trade,which is taken every five years,provides a good base of comparison.
Potential recruits will want to know if sales are growing or declining in the trade area.In addition,
this type of information can help set priorities for a business retention program. See Sources for
information on the Census of Retail Trade.
)
Example
3 Trade Area:
3
increase %increase
1987 1992 or decrease or decrease
3 ($000s) ($000s) ($000s)
Total Sales
3
Gen.Merchandise
Apparel
3
3 • Furniture
Eating/Drinking
3
Source: Census of Retail Trade
7
From this analysis the local business development team concluded that the downtown had lost
ground in apparel,but had a growing strength in eating and drinking,which confirmed the results
of the retail sales per household analysis.The team also compared 1982 and 1987 data to look
for trends.
STEP BY STEP MARKET ANALYSIS-29
3
•
To Do:
Using the Census of Retail Trade or sales tax numbers,calculate the trends for the trade area.Th•
categories on the chart correspond to types of businesses listed in the Census of Retail Trade.
Compare sales increases to the Consumer Price Index to measure true increases above inflation.
(See Sources for information on the Census of Retail Trade and the Consumer Price Index.)If
the numbers are not favorable,compare to data gathered through customer and business surveys
to identify causes and trends.In addition,the team should compare the trends of the trade area
with those of the nearest large metro area to compare strengths and weaknesses.
Trade Area:
increase %increase
1987 1992 or decrease or decrease
($000s) ($000s) ($000s)
Total Sales
Building Materials
and Supplies
General
Merchandise
Food Stores
•
Apparel and
Accessories
Furniture and
Home furnishing
Eating/Drinking
Drug Stores
Misc.Retail
Source:
Conclusions:
•
30 -STEP BY STEP MARKET ANALYSIS
STEP 7. WHAT IS THE PROJECTED POPULATION GROWTH?
DEMOGRAPHIC PROJECTIONS
Demographic projections may be available from the local Councils of Government,university
centers for population studies,regional planning organizations,and local banks and utilities.
When using these projections it is important to ask what the assumptions were in developing the
numbers.The team should take into account local economic changes.The projected opening or
) closing of a major industry or a major highway change will impact growth.
It is particularly important for communities who have had slow population or income growth in
the 1980s but are projected to improve significantly in the 1990s to show these projections as part
of a recruitment package.
To Do:
Find projections for as many factors as possible and summarize below.
Area:
• Future Year increase or
3 1990 decrease
Population
#Households
11 Median HH
Income
#Housing Units
Median Age
3
3
4
Sources:
Conclusions:
a
a
a
•
STEP BY STEP MARKET ANALYSIS-31
a
STEP 8. WHAT ARE 'ELLE RETAIL SALES POTENTIALS?
Retail sales potentials are measured by comparing:
g
1. the amount of retail sales in local stores in the local trade area;and
2. the amount of goods the consumers in the trade area are buying.
This calculation is called the measurement of sales"leakage,"because often communities find
potential sales are larger than actual sales and sales are"leaking"out of town to competing
shopping areas. Of course,no one makes every purchase in his or her local trade area.People
drive to nearby cities and malls,shop while traveling,and buy things from catalogs.However,
the local trade area should be able to attract a large amount of local consumers' dollars.
7
A retail sales potential calculation will show either a surplus or leakage of sales.A surplus of
sales means that the trade area is capturing more sales than would be expected for its population.
A leakage of sales means that sales are"leaking"out of the trade area.
Sales Surplus.If the retail sales in the trade area total a lot more than the customers in the trade
area are probably buying,it
could mean:
• that people from outside the trade area(tourists)are coming to the community to shop;
• that the community is a regional center,drawing from a larger area than first estimated;or III
• that people in the trade area spend more than the average household.
Sales Leakage.If the retail sales in the trade are a lot less than the consumers in the trade area
are probably buying, it could mean:
• that downtown and the trade area are losing sales to other shopping centers;
• that the trade area is smaller than originally estimated; or
• that trade area households spend less than the"average"household.
Sales Balance.If the retail sales in the trade area are approximately equal to what consumers
could be expected to buy,it does not necessarily mean that the trade area is capturing most of its
potential sales.For example, it could mean that the sales lost to neighboring cities are being
replaced with sales to tourists. Careful analysis of the results by the team is important.
Sales leakage is not an exact measurement and should only be used to check assumptions or
identify areas for further research.Accuracy problems often result from the fact that the numbers
used in the calculations are:
• from different years;
• not completely comparable—for example, various sources of data categorize retail types
in different ways;
STEP BY STEP MARKET ANALYSIS-33
• based on the spending patterns of an"average"household and the local trade area is not
"average"; and/or
• • _ estimates themselves,making the answers estimates of estimates.
Retail sales information takes careful analysis and interpretation.The team should examine these
results in light of what is known about the retail mix,competition,and customer preferences.
However,the results,when taken in the context of other knowledge about the downtown area,
can identify and/or confirm market opportunities.
Whatever the result,the team needs to investigate and identify causes of surplus or leakage.A
place to start is to review the results of the surveys to identify shopping patterns, or discuss the
numbers with local retailers.
Below are sources of information about consumer buying patterns:
• The Consumer Expenditure Survey, compiled by the U.S. Department of Labor and
available from the U.S.Government,documents consumer expenditures on a wide variety
of goods,from fresh fruits to vehicle insurance.(See Sources for information and notes on
use).
• Trade Associations for various business types often have information on consumer buying
trends.Check with a local business owner,state Small Business Development Center or
university business school library.
• To Do:
Calculate the sales potential for all the categories of goods for which the business development
team can find reliable data.Compare the results to conclusions drawn from other data analysis.
Summarize the retail sales opportunities on the form provided, in this section.
110
34-STEP BY STEP MARKET ANALYSIS
RETAIL SALES POTENTIAL FORMULA
Example
Product Category:
Trade Area:
1. Find the actual retail sales for this product in the trade area:
(Source: 1992 Census of Retail Trade,
sales tax or other estimates:)
2. Calculate the potential sales volume for the trade area, for this product:
a)fmd total trade area households:
(Source: 1990 Census of Population)
b)times typical expenditures per
household for this product: X
(Source:Consumer Expenditure Survey)
c)equals potential sales for this product
5 in the trade area:
3. Enter the potential sales(from#2)here
and subtract from actual sales(#1):
4. This equals either surplus or leakage
of sales for this product category in trade area =
• A positive number would indicate a surplus of retail sales.
• A negative number would indicate a leakage of retail sales.
In this case,the surplus of sales confirms the Business Development Teaam's assumption that
their community has a strong niche in restaurants. This builds on the conclusions drawn from
the business inventory,survey of competition,retail cluster analysis,consumer surveys and the
' sales per household compared to the state. Now the team has a better idea how strong the niche
is and the dollar volume of the market.
•
STEP BY STEP MARKET ANALYSIS-35
RETAIL SALES POTENTIAL BY NUMBER OF HOUSEHOLDS
• •
Calculate the sales potential for as many categories of goods as the business development team
can find reliable data for. Compare the results to conclusions drawn from other dataa analysis.
Summarize the retail sales opportunities on the form provided.
Product Category:
Trade Area:
1. Find the actual retail sales for this product in the trade area:
(Source: 1992 Census of Retail Trade,
sales tax or other estimates:)
2. Calculate the potential sales volume for the trade area,for this product
a)find total trade area households:
(Source: 1990 Census of Population)
b)times typical expenditures per
household for this product: X
(Source:Consumer Expenditure Survey)
Sc)equals potential sales for this product
in the trade area:
3. Enter the potential sales(from#2)here
•
and subtract from actual sales(#1): •
4. This equals either surplus or leakage
of sales for this product category in trade area • =
• A positive number would indicate a surplus of retail sales.
• A negative number would indicate a leakage of retail sales.
•
36-STEP BY STEP MARKET ANALYSIS
)
SUMMARY OF RETAIL SALES OPPORTUNITIES
•
To Do:
Sales leakages can equal potential business opportunities.Summarize the results of the retail sales
potentials analysis below. Information can come from the Census or Sales Tax data. The
4 categories are based on those listed in the Census of Retail Sales.Note that data may not be
available for all categories.
Surplus or
Actual Sales Potential Sales (Leakage)
4 Total Retail Sales
)
Building Materials
General Merchandise
Food Stores
Automotive Dealers
Gas Stations •
Apparel/Accessories
4
Furniture
Eating and Drinking
Drug Stores
Miscellaneous Retail
Other
Other
•
4
STEP BY STEP MARKET ANALYSIS-37
7
FUTURE DEMAND FOR RETAIL SPACE DUE TO POPULATION CHANGE
There is a relationship between the numbers ofeo le in the trade area and
P P the square footage
of retail space needed to serve that population.If the population of the trade area is predicted to
grow or decline,the business development team can develop a rough estimate of the amount of
additional retail space that could expect to be developed or lost. The business development
team's challenge will be to capture that new growth downtown,where there is probably retail
space that is vacant or underused,or to minimize vacancy through recruitment.
To Do:
Calculate the amount of potential retail space demand for the trade area.
Estimated Population 2000:
(Cite source: )
-minus 1990 Population: —
(Source: 1990 Census of Population)
equals Estimated Number of New/Lost Persons:
divided by Average Household Size: -
i (Source:1990 Census of Population)
equals Estimated Households in 2000: _
times Typical Expenditures per Household: X
(Source: Consumer Expenditure Survey,
sales tax or other estimate)
equals Estimated New/Lost Retail Sales: _
divided by Average Sales per Square Foot: –
(Source:Dollars and Cents of
Shopping Centers or local estimate)
equals Estimated New/Lost Square Feet of Retail
Space to Accommodate Population Change
Comments:
• -
38-STEP BY STEP MARKET ANALYSIS
SALES POTENTIAL CONVERTED TO SPACE DEMAND
Using the average sales per square foot figures, sales leakage can be converted into estimated
demand for retail square footage.Of course downtown will not be able to capture back all of the
retail sales dollars that are now currently going out of town and to catalogs. However, with
improved designs,quality promotions and an aggressive retail retention and recruitment program,
a percentage of recapture is certainly likely.To be conservative,many communities use 10%as
the estimated capture in this formula.
To Do:
Calculate the potential new retail space demand downtown.
Trade Area:
Product Category:
Leakage of Sales Volume From the Trade Area:
(Source:retail sales potential analysis)
% of Leakage that
Downtown Businesses Could Capture: X
(Source:local estimate) •
equals Potential Additional Downtown Sales: _
divide by Estimated Sales Per Square Foot:
(Source:Dollars and Cents of Shopping Centers
or local estimate)
equals Potential New
Retail Square Footage Downtown =
Comments:
STEP BY STEP MARKET ANALYSIS-39
1
41, STEP 9. MARKET OPPORTUNITIES
•
SUMMARY OF CURRENT MARKET STRENGTHS AND WEAKNESSES
Based on the analysis of current market conditions developed during the completion of Steps 1
thru 8 in this workbook, list the major factors, positive and negative, affecting business
development in downtown.
Strengths
1.
2.
3.
4I)
Weaknesses
1.
2.
"743.
3 STEP BY STEP MARKET ANALYSIS-41
SUMMARY OF MARKET OPPORTUNITIES
Based on the business development team's analysis of current market conditions and potential
market demand, list the best opportunities for business development in downtown.
1.
2.
3.
4.
5.
6. •
7.
•
•
8.
•
9.
10.
C
• C
42-STEP BY STEP MARKET ANALYSIS
)
)
)
STEP 10. MARKET POSITION STATEMENT
) •
)
) A market position statement distinguishes the downtown shopping district from surrounding
) shopping opportunities.It should describe the type of retail mix and indicate the target customer
) market.
) Examples:
• Centerville is the market and service center for a three county region, containing
) government,health,cultural and education facilities.Downtown serves this trade area with
) a wide range of shopping opportunities for residents and visitors.
) • Old Town is a delightful historic business district emphasizing specialty shopping in a
) quaint Victorian setting.
) • Downtown Grapeville is located in the heart of the Vine County wine country.Downtown
offers an outstanding mix of services and restaurants,in a traditional small town setting.
)
) To Do:
)
) Develop a market position statement for the downtown business district and five market facts in
) support of the statement. This statement can be used in marketing material such as the
) • recruitment brochure and image advertising.
) Market Position Statement:
)
)
)
)
)
)
} Facts that back up the market position statement:
)
- 1.
)
e 2.
i
3.
4.
•
9 STEP BY STEP MARKET ANALYSIS-43
4
NEXT STEPS
•
Publish a Brief Market Analysis
By completing this workbook,the business development team will have conducted a basic market
analysis of downtown.The team should organize the information collected into a brief market
analysis document,which records conclusions and provides a basis for future recruitment and
development efforts.
The 10 Steps in this workbook can be used as the sections of a market analysis document.In each
section,the team should describe data sources,assumptions made about how the market operates
and methods used.Pertinent forms should be included as well as several paragraphs discussing
conclusions reached or questions raised by the analysis.
Information that does not go into the market analysis publication,but may need to be referred to
in the future could be organized into a large binder for safe-keeping.
Retention and Recruitment Strategy
The business development team now has the necessary tools to begin a recruitment plan. The
companion to this publication,the Fill-in-the Blank Business Recruitment Workbook,outlines
the steps to developing and testing a list of businesses to recruit,putting together a recruitment
packet and developing a business retention and recruitment strategy to expand downtown's
business base.
4
•
STEP BY STEP MARKET ANALYSIS-45
3
3
3
2 • SOURCES OF INFORMATION
3
3
1990 CENSUS OF POPULATION AND HOUSING
7 Taken every ten years by the U.S.Department of Commerce. 1990 Census data is available in
7 _ a variety of formats,such as CD-ROM;tape;through the Census Bureau's on-line data service,
CENDATA; on CompuServe and DIALOG;and,printed documents.You may be able to get
Census data from city hall,local library,regional planning agency or a local college or university.
The Census covers population factors such as numbers of people, age,sex and race;housing
statistics such as number of units and cost;and economic characteristics such as income and
occupation.The Census Bureau publishes useful reports such as Census ABC's:Applications
in Business and Community. Contact: Customer Service,Bureau of the Census,Washington,
D.C.20233,(301)763-4100 or its location on the World Wide Web: httpi/www.census.gov.
CENSUS OF RETAIL TRADE
Published every five years in years ending in 2 and 7 by the Department of Commerce.The
census covers all retail categories described in the SIC manual.Data are presented for areas from
the U.S. as a whole down to municipalities of 2500 or more. It is one of seven economic
censuses—retail, wholesale, service,transportation,manufactures, mineral and construction
110 industries.The latest retail data is from 1992.Available same as above.
STANDARD INDUSTRIAL CLASSIFICATION(SIC)MANUAL
Published by the Office of Management and Budget, available at U.S. Government Printing
Offices.Lists SIC codes for all types of businesses.The Census of Retail Trade(CRT)reports
2 sales information by SIC,and an abbreviated list of SIC numbers is also included in the CRT.
CONSUMER EXPENDITURE SURVEY
7 Published by the U.S.Department of Labor,and available from the U.S.Government Printing
Office.It documents the expenditures of"consumer units",roughly equivalent to households,
over a period of one year on many major items,and divides the data by geographic area, age
group,and race and income of those surveyed.
In the Survey are national averages and figures for specific metro areas.Note that the figure given
for the closest metro area,while more accurately reflecting the spending pattern of your region
than a national average,may still be too high for accurate use in a small rural community.To
evaluate this,compare the income figures from the 1990 Census for that metro area with those
of the local trade area.If the median household income for the local trade area is significantly
lower than the metro area the Survey number may need to be adjusted downwards accordingly.
• Also,note that the Survey does not cover the same items as the Census of Retail Trade.
STEP BY STEP MARKET ANALYSIS-47
CONSUMER PRICE INDEX
The CPI is published by the Bureau of Labor Statistics and is available for states and metro •
regions from most libraries.The CPI for the U.S.in 1982-84 was 100,and for 1987 was 114.9,
a ratio of 1.149 to one.Therefore, if the retail sales figures in the trade area did not increase
between 1982 and 1987 by at least a factor of 1.149 or 14.9%, sales did not keep pace with
inflation.Use the CPI for the metropolitan area closest to your community.
DOLLARS AND CENTS OF SHOPPING CENTERS
Published by the Urban Land Institute,625 Indiana Avenue,NW,Washington,DC,20004-2930,
(202) 624-7000. This publication reports on typical sales by businesses in neighborhood,
community,regional or super-regional shopping centers.The data shows rent and sales per square
foot of gross leasable area,property taxes,insurance and common area charges,and retail mix
in each type of center.
PRIVATE DATA SOURCES
Many companies publish updates of retail data between censuses. American Demographics
magazine(127 W.State Street,Ithaca,New York, 14850, 1-800-828-1133)publishes lists of a
wide variety of consumer data sources.The Survey of Buying Power is published annually by
Sales and Marketing Management magazine(633 Third Avenue,New York NY, 10017,(212)
986-4800).Also,check with local banks and utilities for data and recommendations.
•
NATIONAL DOWNTOWN ORGANIZATIONS
Both of these membership organizations have information and research on downtown issues.
National Main Street Center
National Trust For Historic Preservation
1785 Massachusetts Avenue,NW
Washington,DC 20036
(202)673-4219
International Downtown Association
915 15th Street NW, Suite 900
Washington,DC 20005
(202)783-4963
•
48 -STEP BY STEP MARKET ANALYSIS
BUSINESS CLUSTERS
• Business Cluster Type:
List of Businesses Currently in the Cluster:
Business Cluster Type:
List of Businesses Currently in the Cluster:
Business Cluster Type:
List of Businesses Currently in the Cluster:
c
• •
a
50-STEP BY STEP MARKET ANALYSIS r
MARKET COMPETITION
Commercial Area: •
Trade Area:
Description of Business Mix:
7 _
Commercial Area:
Trade Area: •
Description of Business Mix:
)
1
•
STEP BY STEP MARKET ANALYSIS-51
DEMOGRAPHIC PROFILE OF TRADE AREA
•
Geographic Area:
Total Number of Persons:
Total Number of Households:
Average Household Size:
Sex #Persons /o o
female: of total
male:
Household Income: #households %
Less than$10,000 of total
$10,000-$24,999 •
$25,000-$49,999
$50,000-$74,999
$75,000-$99,999
$100,000 and up
Median Household Income:
Per Capita Income:
• Persons Below Poverty Level:
# %of total
Age: #persons %
under 5of total
5- 17
18-24
25-44
45- 64 -------
65 and over ----
median age:
Educational Attainment: #persons
%
did not complete high school of total
high school graduate or higher
bachelor degree or higher
e
•
52 -STEP BY STEP MARKET ANALYSIS
C
)
)
) Demographic Profile of the Trade Area,page 2
)
Geographic Area: •
Race: #persons %of total
White:
Black:
Native American,
- Eskimo,or Aleut:
Asian or Pacific Islander:
Other:
Hispanic origin:
Housing: #units %of total
owner occupied:
renter occupied:
median value:
median rent:
units constructed, 1980- 1990
Employment:
top five occupations by employment #employed %of total •
)
)
top five industries by employment #employed %of total
)
) Unemployment: #unemployed %of total
Sources:
I
7
STEP BY STEP MARKET ANALYSIS-53
- r7—
f
DEMOGRAPHIC COMPARISON OF TRADE AREAS
Use this chart to compare the demographic profile of the trade area to other trade
s
• the city, county,nearby metro area, and state.Identify three to five significant strengths such d
weaknesses. gths and
Trade Area:
Primary Other trade areas
trade area
Population: •
Number of persons:
Number of households:
Average HH size:
•
(HH=household)
Sex
female
male
Household Income: %
Less than$10,000
$10,000-$24,999
• $25,000-$49,999
$50,000-$74,999 --
$75,000-$99,999 _
$100,000 and up
Median
HH income _
Per capita income
Number below ----
poverty level
Age:
under 5
5 - 17 ----_
18-24
25-44
45-64
65 and up
median age s
II/
54 -STEP BY STEPr
MARKET ANALYSIS
r
Demographic Comparison of Trade Areas,page 2
Trade Area: •
3
Primary Other trade areas
trade area
Educational Attainment:
did not complete high school
high school graduate
college graduate
3
Race:
White
Black
Native American,
Eskimo,or Aleut
Asian,Pacific Islander
Other
Hispanic origin
Housing:
owner occupied
renter occupied •
median value
median rent
units constructed 1980-90
Occupation:
1
4
Employment by Industry:
% Unemployed:
Sources:
A •
•
STEP BY STEP MARKET ANALYSIS-55
aA
--TT - - ------- --..._-__..-- --►-p— - ---- -----'
i
DEMOGRAPHIC TRENDS
Using Census data, analyze the changes in the trade area over time.Is the trade area
growing,shrinking or getting richer,poorer,older or younger? Population
Trade Area:
1980 %increase
Population: 1990 or decrease
Number of persons
Number of HH
average HH size
(HH Household) ______
Income:
median HH
per capita
%below
poverty level
Age:
median age
•
Housing:
median value
median rent
Other Special Factors:
Sources:
Conclusions:
1.
2.
3.
•
56-STEP BY STEP MARKET ANALYSIS
)
)
DEMOGRAPHIC TRENDS COMPARISON
a Use this chart to compare the demographic trends of the trade area to other trade areas, such as the city, S
county and nearby metro areas.How does the trade area compare in population and income growth?
' Trade Area:
Primary Other trade areas
trade area
Population:
Number of persons
Number of households
1 Average HH size
(HH=household)
Income:
3 median HH
per capita
%below
) poverty level
)
Age: •
median age •
Housing:
median value
1 median rent
a Other Special Factors:
1
I
Sources:
Conclusions:
1.
2.
3.
•
STEP BY STEP MARKET ANALYSIS-57
3
t
RETAIL SALES PER HOUSEHOLD
Fill in this chart for the trade area, and comparing the results to oth
•
conclusions about the sales in various categories. er data collected to date,
Trade Area:
Number of Households in Trade Area:
Number of Households in the State:
Statewide Trade Area
Kind of Business Sales
Sales per Sales Sales
($OOOs) per
household ($000s) household
1111111111111111111111111111111111111
1111111111111111111111111111.11111
11111111111111111111111111111111111
111111111111111111111111111111111
1111111111111111111111111111111111
1111111111111111111111111111111111
111111111111111111111111111111111
Conclusions:
58-STEP BY STEP MARKET ANALYSIS
D •
D
D RETAIL SALES TRENDS
To Do:
•
Using the Census of Retail Trade or sales tax numbers,calculate the trends for the trade area.The
categories on the chart correspond to types of businesses listed in the Census of Retail Trade.
Compare sales increases to the Consumer Price Index to measure true increases above inflation.
(See Sources for information on the Census of Retail Trade and the Consumer Price Index.)If
the numbers are not favorable,compare to data gathered through customer and business surveys
to identify causes and trends.In addition,the team should compare the trends of the trade area
with those of the nearest large metro area to compare strengths and weaknesses.
3
Trade Area:
increase %increase
3 1987 1992 or decrease or decrease
3 ($000s) ($000s) ($000s)
a Total Sales
Building Materials
and Supplies
General II/
Merchandise
) Food Stores
•
3 Apparel and
Accessories
Furniture and
Homefurnishing
Eating/Drinking
Drug Stores
) Misc.Retail
) Source:
Conclusions:
# •
STEP BY STEP MARKET ANALYSIS-59
I
I I
PROJECTED POPULATION GROWTH
Demographic projections may be available from the local Councils of Government,university
centers for population studies,regional planning organizations,and local banks and utilitie
When using these projections it is important to ask what the assumptions were in developing the
numbers.The team should take into account local economic changes.The projected opening or
closing of a major industry or a major highway change will impact P g
P growth.
It is particularly important for communities who have had slow population or income
growth in
the 1980s but are projected to improve significantly in the 1990s to show these projections as part
of a recruitment package.
To Do:
Find projections for as many factors as possible and summarize below.
Area:
Future Year increase or
1990 decrease
Population
• #Households ----
Median HH
Income
#Housing Units
Median Age
Sources:
Conclusions:
•
60-STEP BY STEP MARKET ANALYSIS
RETAIL SALES POTENTIAL BY NUMBER OF HOUSEHOLDS
Calculate the sales potential for as many categories of goods as the business development team
•
can find reliable data. Compare the results to conclusions drawn from other dataa analysis.
Summarize the retail sales opportunities on the form provided.
a
1 Product Category:
Trade Area:
1. Find the actual retail sales for this product in the trade area:
(Source: 1992 Census of Retail Trade,
sales tax or other estimates:)
2. Calculate the potential sales volume for the trade area, for this product:
a)find total trade area households:
(Source: 1990 Census of Population)
1 b)times typical expenditures per
household for this product: X
(Source:Consumer Expenditure Survey)
c)equals potential sales for this product — •
in the trade area:
3. Enter the potential sales(from#2)here
and subtract from actual sales(#1):
4. This equals either surplus or leakage
1 of sales for this product category in trade area
• A positive number would indicate a surplus of retail sales.
• A negative number would indicate a leakage of retail sales.
4
4
I
•
STEP BY STEP MARKET ANALYSIS-61
0
SUMMARY OF RETAIL SALES OPPORTUNITIES
• To Do:
Sales leakages can equal potential business opportunities.Summarize the result o
fthpotentials analysis below. Information can come from the Census or Sales Tax e data SThe
categories are based on those listed in the Census of Retail Sales.Note that data may not be
available for all categories.
Surplus or
Actual Sales
Potential Sales (Leakage)
Total Retail Sales
Building Materials
General Merchandise
Food Stores
Automotive Dealers
Gas Stations
•
Apparel/Accessories
Furniture
Eating and Drinking
Drug Stores
Miscellaneous Retail
Other
Other
• 62 -STEP BY STEP
MARKET ANALYSIS
V
FUTURE DEMAND FOR RETAIL SPACE DUE TO POPULATION CHANGE
There is a relationship between the numbers of people in the trade area and the square footage •
of retail space needed to serve that population.If the population of the trade area is predicted to
grow or decline,the business development team can develop a rough estimate of the amount of
additional retail space that could expect to be developed or lost. The business development
team's challenge will be to capture that new growth downtown,where there is probably retail
7 space that is vacant or underused,or to minimize vacancy through recruitment.
To Do:
7 Calculate the amount of potential retail space demand for the trade area.
Estimated Population 2000:
(Cite source: )
-minus 1990 Population: —
(Source: 1990 Census of Population)
7
equals Estimated Number of New/Lost Persons: _
divided by Average Household Size: -
(Source: 1990 Census of Population) •
equals Estimated Households in 2000:
times Typical Expenditures per Household: X
(Source: Consumer Expenditure Survey,
sales tax or other estimate)
equals Estimated New/Lost Retail Sales: _
divided by Average Sales per Square Foot:
4 (Source:Dollars and Cents of
a Shopping Centers or local estimate)
•
equals Estimated New/Lost Square Feet of Retail
Space to Accommodate Population Change
Comments:
4
4 •
1
STEP BY STEP MARKET ANALYSIS-63
I
A
• SALES POTENTIAL CONVERTED TO SPACE DEMAND
Using the average sales per square foot figures,sales leakage can be converted into estimated
demand for retail square footage.Of course downtown will not be able to capture back all of the
retail sales dollars that are now currently going out of town and to catalogs. However, with
improved designs,quality promotions and an aggressive
ent
a percentage of recapture is certainly likely.To be conservative,many communities u program,
the estimated capture in this formula. se 10%as
To Do:
Calculate the potential new retail space demand downtown.
Trade Area:
Product Category:
Leakage of Sales Volume From the Trade Area:
(Source:retail sales potential analysis)
• % of Leakage that
Downtown Businesses Could Capture: x o
(Source:local estimate)
equals Potential Additional Downtown Sales:
divide by Estimated Sales Per Square Foot: —
(Source:Dollars and Cents of Shopping Centers
or local estimate)
equals Potential New
Retail Square Footage Downtown /o
Comments•
64 -STEP BY STEP MARKET ANALYSIS
SUMMARY OF CURRENT MARKET STRENGTHS AND WEAKNESSES
Based on the analysis of current market conditions developed during the completion of Steps 1 •
through 8 in this workbook, list the major factors, positive and negative, affecting business
development in downtown.
)
) Strengths
1.
2.
)
3.
Weaknesses
1 •
7 -
2.
3.
•
7.4
4
STEP BY STEP MARKET ANALYSIS-65
A
SUMMARY OF MARKET OPPORTUNITIES
Based on the business development team's analysis of current market conditions
market demand,list the best opportunities for business development in downtown and potential
2.
3.
4.
5.
6.
•
7.
8.
9.
10.
• 66-STEP BY STEP MARKET ANALYSIS
.r
MARKET POSITION STATEMENT
Develop a market position statement for the downtown business district and five market facts in •
support of the statement. This statement can be used in marketing material such as the
recruitment brochure and image advertising.
Market Position Statement:
Facts that back up the market position statement:
1.
2.
3 •
4.
a
STEP BY STEP MARKET ANALYSIS-67