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Trade Area Analysis

Trade Area Data – Why It’s Becoming Business Critical

Trade Area analysis determines the trade area (or catchment area) of a given place, defined as the area where visitors live or work. This can inform brands on how well their stores cover a surrounding area, how stores may be “cannibalizing” business from each other, and how visitation rates compare to the competition.

How Is Trade Area Data Derived?

The Trade Area application, currently available within the Spectus Data Cleanroom, utilizes the visits table and the home-work table. By selecting a set of places and a period of time, we are able to consider all visitors to a given place and where they live and work at the time of visit. Trade Area analysis provides valuable insight into your customers’ demographics and spending potential, surrounding transportation networks, and demand by store location. This data can inform site selection, inventory planning, and competitive intelligence.

All Trade Area analysis is done in a privacy-safe way by using only the Census Block Group level, rather than the exact location.

In order to define the “cannibalization index”, we use Trade Area polygons which allow us to evaluate how much the trade area polygon of a given POI intersects with the trade area polygons of other POIs by computing the area of the intersection of two trade areas. This can be valuable to understand the extent to which different POIs may be cannibalizing the business of one another.

Interactive Trade Area Analysis
Interactive Trade Area Analysis

Interactive Web App to Demonstrate Trade Area Use Case

Our team analyzed a multi-location retailer that has a presence in the Dallas-Fort Worth metro area and developed an interactive web app for 25 locations. The size of the markers is proportional to their trade area—stores located farther from the city centers have larger trade areas.

The metrics used in the web app are as follows:

  • Visitors Score: a measure of the number of visitors to the store
  • Trade Area Range: the approximate size of the trade area, in miles
  • Cannibalization Index: An index measuring to which extent the trade area of the store overlaps with the trade areas of other stores of the same brand. For example, a value of 5 means that the selected store has a trade area that overlaps the trade areas of around 5 other stores of the same brand. The values can be non-integer because also partial overlaps are considered.

Learn more about Trade Area Analysis and how easy this is to add value to your business:

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Or, explore the library of Spectus Web Apps here.