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Geomarketing and the search for the ideal store location

If you are considering opening a new bike store or wanting an objective way to measure the performance of your current stores, Geomarketing using Geographical Information Systems (GIS) gives you an unparalleled view of the area around your store and helps you make more informed decisions about which locations offer the greatest potential.  Before we zoom down to the local level, let’s start with a bird’s eye view of the whole country.

How many bikes stores are there in Australia?
There is no one correct number; the answer depends on how you define a bike store.  If you include any store that sells bikes you come up with one number, if you limit your list to stores whose main source of income is from cycle sales you get another number.  Bike stores also seem to pop up and disappear as quickly as mushrooms, so any list requires regular maintenance to be accurate.  In the GfK list used in the Australia Bike Stores map below, we have removed the stores which don’t specialise in bikes. This means the total for Australia is 1119 bikes stores, spread across all states and territories.

bike stores map

Despite NSW being the most populous state, Victoria topped the list with the most bike stores. To try and come up with a very basic measure of opportunity, we created a simple ‘Persons per store’ measure by dividing state population figures from the 2016 census by state store numbers.  You can do the same calculation at a local level and compare one area to another, to better understand what population potential is in your area versus other locations.

On the face of it, the numbers would suggest that Tasmania may be the toughest place to have a bike store, with only 14,570 people per store, compared with NSW, where there are 25,101 people per store. While high ‘People per store’ looks great for NSW, there’s much more to consider.  The 2017 cycling participation survey published by the Australian Bicycle Council, found that in NSW, people who have ridden in the last month, was down significantly from a year ago, which would undoubtedly make trading conditions tougher. While in the same survey, Tasmanian cycle monthly participation had a marginal increase versus the prior year. Any detailed analysis of a site needs to also include other data sources such as competitors, employment, wages, expenditure and disposable income to form a better understanding of factors which may influence store performance.

census

How much money do people in your area have to spend?
Trying to figure out within a state where you should set up shop is an important step.  The opportunities each location offer is going to vary greatly and this will have an impact on your store’s overall sales potential.  In order to understand prospects at a local area, GfK calculates household Purchase Power; using income, expenditure and other statistical data to create a predictor of disposable income. In the map below, the postcodes are shaded based on their GfK Purchase Power, with the ‘warmer’ colours indicating areas with higher household disposable income.  Across Australia, 32% of postcodes have higher than average disposable income, while from our list of bike stores, 43% were located in postcodes where households had higher disposable income. We are able to say that bike stores are more likely to be located in suburbs with higher disposable incomes.

purchasing power

Understanding your local area
Locating your store in an area with high Purchase Power is good start. The next piece in the puzzle is to understand the local potential for a store by looking at its catchment. A store catchment can be mapped using customer address data for existing stores or for new stores; the catchment is calculated by estimating the drive time from the store in all directions as illustrated in the example below. Using the GIS tool, population data and Purchase Power was distributed to the store’s catchment area. For the store’s catchment below, each inhabitant has annual disposable income of just over $60K and almost $150K of disposable income per household. There are no competitive stores in the catchment and the area is densely populated. The combination of Purchase Power and other available government information gives you an objective way to make comparisons between new or existing sites.

store catchment

From understanding your store’s immediate area, to getting a big picture view of the country, Geomarketing and GIS tools offer you a structured way to make informed decisions about where to open a store and what its prospects are.  However, as important as location is, running a successful store requires much more.  Your continued success will depend on; great staff, having the right range and service offerings, your ability to connect and communicate with your potential customers and finally to deliver value to your customers that they are prepared to pay for.  However, you’ll have to wait for future articles to explore these topics.

 

ABOUT DARREN VARNEY & GFK GEOMARKING SERVICES

Darren Varney is the Director of Market development at GfK, Australia’s trusted source of relevant market and consumer information.  GfK is working with cycle retailers and distributors to develop a Point of Sales tracking measure for eBikes in the Australian market.

GfK Geomarketing provides services for regional market analyses, sales territory planning, and digital maps, purchasing power as well as appraisals of locations and sales networks for retail and manufacturing sectors. For more information on GfK Geomarketing or eBike sales tracking contact Darren at darren.varney@gfk.com