Two friends own separate coffee and doughnut shops in San Francisco and want to maximize their trade areas in order to benefit both businesses. They want to make sure they are not taking each others business and want to know where they are in relation to other coffee and doughnut shops in the area. They each have a few questions about local market. What is the market like for both stores? Are they competing for the same customers? Is one store in a better position than another? Who are their customers? With the implementation of mapping these questions can be answered and visualized.
Methods:
To help the store owners understand who their customers are and where they come from four maps of the local San Francisco area were created. The first map shows each store, its customers and the average customer location. The second map shows the two stores, their customers, and competing coffee and doughnut shops in the area. The third map shows the customer trade areas and the fourth map shows distance from each coffee shop. The four maps are used together to understand who their customers and competitors are.
ESRI Business Analyst in ArcMap was the perfect platform to create these maps. The first step was creating a study area. This allows for the data to be localized to the San Francisco area as well as speed up the processing times. Once the study area was defined, geocoded locations for the coffee shops and customers were imported into the software. The next step was finding the average customer location for each of the shops. The mean center tool was used in Arcmap to find this. To further understand how each coffee shop fits into the local economy, all other competing coffee shops were added to the map. This is where Business Analyst comes in handy. A simple Add Business Listing search, allowed for other coffee shops in the area to be imported. To further understand the customer dynamics of the area, a customer trade area was created. This is a Business Analyst function that creates buffers around the coffee shops showing where 0-40%, 0-60%, and 0-80% of their customers come from. Business Analyst also creates detailed reports for these trade areas. The last step was to create a buffer around the stores with the drive and walking times. This was done by creating a new trade area.
Map 1
Map 2
Map 3
Map 4
Analysis:
At first glance it does not appear that store 1 and store 2 share much of the same customer base, this can be seen from looking at map 1. To understand each of the stores customer areas, map 3 provides a useful visual. It can be seen that 80% of each of the stores customers do not overlap eliminating the question if the two stores compete against one another. To further understand the customers in each of the trade areas, the trade areas report can be utilized. From the report, store 1's customer trade area has a population of 136,356 and an average household salary of $116,235. Store 2's trade area has a population of 160,009 and an average household income of $125,394. That is important to know because it allows the store owner to know how many people it can potentially market to. The next map that is important to look at is map 2, this provided spatial information on competing stores in the area. It appears that store 1 is surrounded by many competitors, especially to its east. Store 2 appears to be in a spot that is relatively void of competition compared to store 1. The location of competitors is very valuable information to local business owners. More competing stores in the vicinity, means more customers will go there instead of their coffee shop. The fourth map shows that a large percent of each stores customers are located within a 1.5 mile radius of the stores. A majority of customers do not want to travel far in order to get their coffee.
Conclusions:
Store 2 is located in a better spot with less competition and more population. The two stores are not competing for the same customers but store 1 has more competing coffee shops near it. The market is similar for the customer bases of each store but store 2 has a customer trade area with almost 30,000 more people and its trade area has a higher average household income of $125,394 compared to $116,235. With all the facts laid out, it is clear that store 2 is at an advantage in terms of its location, customer base, and lack of competition. It can be expected that store 2 will see have more customers and do better business. Store 1's customer base is located in a smaller area than store 2 and can utilize marketing to gain an advantage over the local competition. Store 1 will have to work harder to gain customers because of all the competition in the surrounding area, lower population and a slightly lower average income per household.
