Strategic Retail Location

2—Retail Site Selection Models

CLEO encircles the competition
CLEO allocates demand to existing and
planned stores to estimate sales. Coloured
centres are stores. Lines show allocation
and volume of dominant flow from each
CLEO leaves behind simplistic circular trade area concepts, and instead applies two potent families of models that exploit the analytical power of modern GIS and operations research. One is the spatial interaction models (or gravity models) that predict shopping behaviour. CLEO predicts the likely customer expenditure at one or more existing or planned locations, belonging to the client store chain or competing chains. A number of retail forecasting systems do this.

Now's when CLEO distinguishes itself and takes you two critical steps further. First, at the heart of its engine are a pair of location allocation models, designed to rationalize and to optimize your network of stores relative to the competition.

Say there are 12 sites available, and you wish to develop four of them. Which four would work best with your existing configuration, and hem in the competition to your advantage? Which existing outlets should be closed to make way for the new locations? Recall the encircling strategy in the illustration on the previous page. CLEO evaluates hundreds or thousands of permutations and selects the optimal set of 4, 5, 6 or whatever number of locations you like, to serve the market best.

Maybe you're not sure where in the city to search for new sites. How do you know the available sites are in promising locations? Turn on Scout mode, and CLEO scans the territory and recommends the best neighbourhoods in which to look.  For one, two or ten sites.

Next, the models are tied into a decision support system that evaluates scenarios and looks at the balance of competing objectives. Performance measures appear in tables and charts, and maps show who shops where, how neighbouring stores compete for business, and which markets remain poorly served or at risk from new competing offerings. Extensive tabular reports show performance details and catchments for each store, and give you numeric measures of competition and cannibalization, systemwide and for each store.

Bottom line: before you make a decision on the important matter of store location, you have all the pertinent information at your disposal. You know the theoretical optimum, and if you choose not to go with it, you know how far off you are.

Despite its technical sophistication, CLEO recognizes and accommodates the important contributions of local experts in the location decision. It is designed for the decision maker rather than the technician. Its intricacies are mostly transparent, yet it offers exceptional control over model choices and parameters, for those who prefer to dig deep.

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