Burt M. Polson - Commercial Real Estate Broker

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The secret is in the demographics

Have you ever ask yourself, "Why doesn't Napa have an Apple store or a Costco?" One hurdle could be insufficient evidence of market demand. Another hurdle, called "barriers to entry" could be the fact that in Napa we have a lack of available development land and available space to lease. There are many reasons why a retailer or restaurant may not be in Napa. It is difficult to overcome a shortage of land for development, but an in-depth analysis of market demand starts with demographics.

Most national retailers use detailed and proprietary site analyses to establish their site

selection criteria of demographic data. They use their site selection criteria to locate viable locations where they can establish a store. Retailers have in-house staff or broker representation who seek out viable locations. The criteria used for site selection in most cases is closely guarded as these retailers would not want their competitors to learn of their site selection criteria.

There is a plethora of demographic data that can used to research potential sites. Most demographic data can be purchased from third-party providers. Demographic data is used as the basis of analysis and encompasses a wide range of variables, such as age, income, occupation and employment, gender, race and ethnicity and educational background. The data derived is for the retailer's trade area, which is a geographic region where customers are drawn from which could be expressed as distance from a store in miles or travel time. The trade area is determined by an in-depth analysis using parameters such as store convenience, price points, traffic patterns or hours of operation.

A retailer will compile the data using their own formulas, with the outcome of the analysis being used to evaluate the buying behaviors of customers, establish customer profiles, target prospects, reveal potential market opportunities and conduct predictive analytics. One underlying question retailers ask is how would this neighborhood look one, two or five years from now?

Let's look at an example of a well known retailer, CVS/Pharmacy. CVS likes to place stores in high traffic locations with a minimum of 18,000 people in the trade area. Their desire is for high traffic, signalized corner locations. Again, much of this is proprietary in nature and not readily shared, but let's say a trade area for our example has a 10 minute travel time. We can plot on a map a sample location and through software plot an area around the location allowing for a 10 minute travel time. Detailed demographics can then be plotted for this area. If we have a minimum of 18,000 we are off to a good start.

This is a very simple and basic list of criteria as many retailers could have expansive criteria ranging from income levels and education levels to an in-depth analysis of spending trends for a particular area. There are many more criteria used in determining a viable location, but this will give you a general idea why Napa would have a clothing store like Chico's, but not a Nordstroms.

What retailers and restaurants do you wish we had in Napa? Leave your comments or suggestions for future posts below.

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