DOWNTOWN TRADE AREA DEFINITION
Of critical importance to any downtown market research project is the trade area. A trade area is the geography from which approximately 60% to 80% of your patrons' sales originate. There are a variety of ways to define trade areas, and they differ in their accuracy and statistical integrity.
A trade area can be defined based on an estimate of a downtown's draw or by using different patron data collection methods.
The most accurate estimated trade areas take into account factors such as population densities, competitive locations, demographic, housing and lifestyle characteristics, physical and psychological barriers and access patterns. Other less accurate methods are radii, drive-time, or county based trade area definitions. Estimated trade areas should only be used for proposed developments or redevelopment situations. Estimating trade areas requires skilled judgment and experience.
The best way to define a trade area is to base it on patron intercept surveys or by obtaining point of sale (POS) data from a sample of merchants. Intercept surveys are conducted by Strategic Edge staff and consist of short interviews of patrons walking throughout a downtown district. Patron location information is gathered during the interview that becomes the basis for trade area creation. An additional benefit of intercept surveys is that interviewers can ask questions that are not related to location that can determine shopping habits, demographics, and customer penetration. POS information is also a good data source when defining a trade area but may require cooperation from a number of merchants. At checkout, the merchant records the customer's Zip Code and the dollar amount of their purchase. In all cases, the information collected is processed to an electronic format and analyzed in a Geographic Information System (GIS).
Trade area definition is a very important step in the downtown market research process. Using intercept surveys or POS data collection methodologies is far superior to other, usually anecdotal, techniques.
The Strategic Edge, Inc.
1899 Orchard Lake Road, Suite 105
Sylvan Lake, MI 48320