Site Selection

Introduction:

Site selection is the process of determining where to locate a retail shop. As location is often the key to a store's success, this process is of utmost importance. This is done by first identifying the most attractive markets in which to operate. Next, attractive sites within that market are identified and assessed by the density of supply and demand within the market. After the sites have been assessed, the best site is chosen as the new retail location.

I am going to use this process in order to find the best location for a future Trader Joe's grocery store in Hennepin and Ramsey counties in Minnesota.

Methods:

First, I conducted a market penetration report in order to see how much of an impact Trader Joe's had on the markets of the Minneapolis-St. Paul metro area. The resulting values ranged from <2% of the population to 28%. This result shows how well specific stores are reaching their markets. Areas with higher market penetration don't necessarily need additional stores, as they would only be cannibalizing from their own customer base (Figure 1).

Figure 1: The market penetration of Trader Joe's in Hennepin and Ramsey Counties.

Next, I located the ideal customers by analyzing demographic data throughout the study area. Trader Joe's is a more upscale grocery store, and as a result requires a more affluent customer base in order to thrive. To account for this, I limited the "ideal customer" search filter to only show zip codes with median household incomes greater than $60,000 per year (Figure 2). I also added another filter to only show areas with population growth between 2010-2025 in order to ensure a strong future for the new store location (Figure 3).

Figure 2: Median incomes greater than $60,000

Figure 3: Areas with positive growth rates

After the attractive markets were located, three sites were selected. One of the sites is in Excelsior, in an empty lot in the town's downtown area (Figure 4). The next site is in Wayzata, just down the block from a new lifestyle center. The third location is in Eden Prairie, just outside of Eden Prairie center, a large mall.

Figure 4: The Excelsior site.

After the sites were selected, the Wayzata, Excelsior, and Eden Prairie sites were ranked by their total populations, median household incomes, how likely persons were to spend >$150 dollars per week at food stores, and how many people shop at Trader Joe's. The Excelsior site was ranked highest, followed by the Wayzata site, with the Eden Prairie site ranked third (Figure 5).

Figure 5: The sites, with their resulting ranks.

Excelsior was ranked the highest because of its extremely high median household income of >$107,000. As Trader Joe's market penetration is lower in Excelsior than in Wayzata, adding a store in Excelsior will increase the size of Trader Joe's market without cannibalizing customers from the existing stores.