Retailers should periodically redefine the trade area size

Market_SchrinksWhen the 1st store of a foreign new brand have “Gyouretsu” (long customer waiting line) in front of the store, trade area size of the store is spread through a wide area.

However, “Gyouretsu” will disappear sooner or later, and eventually, trade area size per store shrinks – smaller and smaller, day by day – until it falls into a certain size.

Many people standing in “Gyouretsu” upon the 1st store opening are coming from outside of the market; some traveled 3 hours by train or might even took an airplaine to get to the store just to become the brand’s honored initial customer. So even if they fall in love with the brand, they cannot come back often. This explains why trade-area size for the store shrinks as the brand grow older.

Therefore, retailers have to periodically redefine the standard trade area size for its own store. By doing so, the retailer can decide store development potential of each local market.

The most difficult part with the chain store store development planning is that the trade area size may differ among different local markets. Trade area size is large in new markets where the brand entered recently, but it is small in matured markets where the brand has long been present and better penetrated. This also means that the expectation of customers toward the store might be different.

Store and customers should be segmented by new standards integrating time axis into the analytic framework.