Retail Market
Analysis
St.
Paris, Ohio
and
Surrounding Areas
July 2001
Prepared by:
Dr. Elena Irwin
Assistant Professor
Department of Agricultural,
Environmental,
& Development Economics,
Ohio State University
TABLE OF CONTENTS
Summary of Leakage/Surplus Results.......................................................................... 2
Summary of Consumer Survey Results........................................................................ 3
Discussion of Results.................................................................................................. 5
Methodology.............................................................................................................. 7
Table 2: Predicted Surplus/Leakage by Retail
Sector
for St. Paris Trade Area and Surrounding Trade Areas................................ 10
Figure 1: Most Popular Reasons for Shopping
in St. Paris
and Surrounding Business Districts.............................................................. 11
Figure 2: Most Frequent Place of Purchase by
Retail Item........................................... 12
Figure 3: Best Rated Business District by
Category..................................................... 13
Figure 4: Best Rated Mall by Category....................................................................... 14
Map 1: St. Paris Trade Area and Surrounding
Trade Areas......................................... 15
for the St. Paris Trade Area and Surrounding Trade
Areas........................... 16
INTRODUCTION
Retail market analysis is a
tool for identifying market trends within a local community, including the
degree of surplus or leakage of dollars within specific retail sectors. Estimation of retail surpluses and leakages
provides a means to identify the relative strengths and weaknesses of an area’s
retail markets and thereby inform economic development strategies for local
communities. A retail market analysis
is not a detailed plan of action, but rather provides facts and analysis for
input into the community’s decision-making process about future business
development.
This
report is produced by The Ohio State University Department of Agricultural,
Environmental, and Development Economics Department and The Ohio State
University Extension Service. A very special thanks to Dave Faulkner, Champaign
County Community Economic Development Extension Agent, for his dedication, hard
work, and vision, as well as to all the members of the St. Paris economic
development association, each of whom provided valuable input, guidance, and
insights into the analysis. For more
information regarding the research contained in this report, please contact
Elena Irwin at irwin.78@osu.edu or
614-292-6449.
DEFINITION OF TERMS
Retail center: A downtown or regional shopping
district. In this case, the primary
trade center of interest is St. Paris, Ohio and the neighboring trade centers
were identified as Bellefontaine, northeast Dayton, New Carlisle, Piqua,
Sidney, Springfield, Troy, and Urbana.
Trade area: A geographic area that contains most of the
customers that primarily shop in the retail center. The St. Paris trade area is defined as the primary area in which
the majority of customers live who shop in St. Paris. The trade area boundaries are estimated based on the size of the
retail center and distance from this center (see Map 1).
Region: The larger geographic area that includes the
target trade area (in this case, St. Paris) and the neighboring trade areas
(see Map 1 for an illustration).
Potential sales: An estimate of sales that could be achieved
in a trade area if all the population living within the trade area shopped
within the trade area. See the Methodology section for a more detailed
description of this calculation.
Actual
Sales vs. Surplus/Leakage of Sales: A trade area may have a large amount of actual
sales within a certain sector, but still experience a leakage. Vice versa, the amount of actual sales of a
particular sector may be small, but the trade area has a surplus of sales. This is because surpluses and leakages take
into account the average consumption of shoppers within the region. As a result, if the average consumer buys a
large amount and if the population within the trade area is sufficiently large,
then the potential sales within this sector will be high and may be greater
than the actual sales, even if actual sales are high. This is the case in the St. Paris trade area for motor vehicles:
the amount of sales is large ($1.9 million) relative to other sectors, but
there is still a leakage of retail dollars for this sector within the St. Paris
trade area.
SUMMARY OF SURPLUS/LEAKAGE RESULTS
The
population of St. Paris grew very modestly over the past ten years. In 1990, the population was 1,918 and in
2000 has grown slightly to 1,998 (U.S. Census Bureau), which is an increase of
4%. The population of the St. Paris
trade area (see Map 1) was 5,346 in 1990 and is estimated to have increased to
5,651 by 1997, an increase of 5.7%.
This area is projected to grow modestly in the near future: 5,826 in
2002 and 6,001 in 2007.[1]
Retail
sales totaled $15.1 million in the St. Paris trade area in 1998. The average amount of retail sales per
person living in the St. Paris trade area (i.e. per capita retail sales) was
$2,828, which is 27% of the regional average ($10,469) and 26% of the state
average ($10,929). The top three
sectors in 1998 retail sales in the St. Paris trade area were, in order of
total sales, grocery stores ($4.55 million), gasoline stations ($2.11 million),
and motor vehicles ($1.97 million).
Table 1 lists the total amount of sales by retail sector for this trade
area.
Table
2 lists the surplus/leakage calculations for each retail sector by trade area
for the study region. The St. Paris
trade area has four retail sectors for which a surplus was estimated and
twenty-four sectors for which a leakage is estimated. Of these leakage sectors, fourteen sectors had no retail sales
within the trade area. The four sectors
with the estimated surpluses are appliances ($325,309), florists ($239,853),
hardware ($214,689), and bakeries ($95,500).
The sector that is estimated to have the largest leakages is motor
vehicles (-$11.0 million), followed by gasoline stations (-$6.65 million),
department stores (-$6.59 million), and restaurants (-$4.35 million). In comparison to surrounding trade areas, St.
Paris has a lower than average number of sectors that have surplus sales and is
experiencing an overall leakage of retail sales. The St. Paris trade area is estimated to have lost $45.9 million
in total retail sales to other trade areas within the study region. Put in terms of population, this is
equivalent to approximately 76% of the population that live within the St.
Paris trade area shopping outside the trade area.[2] Of the surrounding trade areas, the Piqua
and Sydney trade areas have the largest overall surpluses of retail sales ($172
million and $138 million respectively) within the study region. Of the retail sectors within the St. Paris
trade area that have a surplus, the hardware, appliances, and florists sectors
each have the most competition from other trade areas: three other trade areas
also have a surplus in these sectors.
See Table 2 for a full description of surpluses and leakages for all the
trade areas within the study region.
In
addition to the retail market analysis of surpluses and leakages, the types and
location of businesses within St. Paris trade and downtown areas were
analyzed. A total of 79 businesses were
identified within the trade area, of which 39 were classified as providing
commercial services and 29 as retail stores.
Within the downtown area, 60% of the businesses were classified as
commercial services, 20% as retail stores, 7% as government offices, and 2% as
entertainment (e.g. restaurant). A
spatial analysis of these businesses revealed that businesses are very closely
clustered within the downtown area. 70%
of all the businesses are located within a ½ mile radius of the Main and
Springfield intersection and 90% are within a 2.5 mile radius of this
intersection. Government buildings and
commercial service businesses were found to be the most clustered and
industrial sites were the least clustered.
The bank is an anchor of the downtown area.
SUMMARY OF CONSUMER SURVEY RESULTS
In
March 2000, an intercept survey was conducted by community volunteers in the
downtown St. Paris shopping district. A
total of 31 responses were gathered.
While this is not enough to comprise a representative sample of the
population that lives within the St. Paris trade area, the results can
nonetheless be analyzed and interpreted as anecdotal evidence regarding
individuals’ perceptions of St. Paris and the surrounding shopping areas.
Individuals
were asked about their shopping habits, including the business district where
they most often buy certain consumer goods, the times of the day and week that
they most often shop, and the advertising medium that most often reaches
them. In addition, consumers were asked
about their impressions of the St. Paris and competing business districts and
their opinion regarding needed improvements to the business district at which
they most often shop. Lastly, personal
information was gathered, including the respondent’s gender, age, marital
status, education level, occupation, and place of residence and work.
Figures
1-4 summarize the responses to several of the questions that compare different
shopping destinations. Figure 1
summarizes the responses to the question regarding the most popular reasons
that consumers listed for shopping in St. Paris and the surrounding business
districts of Urbana, Piqua, Troy, and Springfield. Based on these responses, it is clear that St. Paris’ comparative
advantage is location, since most of the respondents live closest to the St.
Paris business district. St. Paris also
compares very favorably in terms of the quality of goods and services; 61% of
respondents who identified St. Paris as their primary shopping destination for
a particular good cited the quality of the product as their reason. In comparison, only 16% of those who chose
to travel to Urbana for a particular good cited quality as the reason and only
12% of those who chose to travel to Piqua cited quality as the reason. On the other hand, the biggest factor
causing respondents to shop outside the St. Paris business district is
selection. Not surprisingly, the larger
business districts, such as Springfield, Urbana, and Piqua, were all ranked
well above St. Paris in terms of the selection and variety of goods and
services that are offered within the business district. Only 7% of those respondents who identified
St. Paris as their primary shopping destination for a particular good cited
selection as the reason.
Figure
2 displays the respondents’ most frequent place of purchase among the same five
business districts for particular retail items. Not surprisingly, St. Paris is by far the preferred location for
some everyday convenience items, including banking, car repair, dry cleaning,
insurance services, and hardware.
Perhaps more surprising is the fact that St. Paris is not the
overwhelming choice for other convenience goods. Most notably, only a third of the respondents chose St. Paris as
their preferred location for groceries and less than 10% chose St. Paris as
their preferred location for drug store and toiletry items. For other more specialty items, including
clothing, furniture, and medical services, it is not surprising that a smaller
business district like St. Paris is far less preferred than some of the larger
neighboring business centers.
Figure
3 illustrates the best-rated business district among three districts (St.
Paris, Urbana, and Piqua) according to different features of the district. St. Paris is the best rated location in
terms of safety, low congestion, convenience, and helpfulness. St. Paris ranks the lowest in terms of
variety, selection, quality, hours, price, and advertising. Except for the low ranking of quality here,
these results are consistent with the responses to Question 1 illustrated in
Figure 1. Despite its strong rating in
several of these categories, St. Paris is rated the lowest overall of the three
districts. This suggests that, although
St. Paris is rated far better according to certain criteria, these features are
not the most important aspects to consumers.
Piqua, which was rated the highest overall, received by far the highest
ratings in variety, selection, parking, and hours and moderately higher ratings
in quality, atmosphere, and advertising.
Figure
4 illustrates the ratings of the Piqua vs. Springfield malls by different
categories. Neither has a clear
advantage in all categories. Piqua is preferred
in terms of safety, convenience, and having less congestion and is overall
moderately preferred over Springfield.
Not surprisingly, the larger shopping area of Springfield is preferred
for its variety, selection, and quality.
Responses
to other questions regarding other aspects of the respondents’ shopping habits
are summarized below:
- The most popular
shopping days by far are Friday and Saturday. 37% of the respondents stated that Saturday is their most
preferred shopping day and 29% chose Friday.
- The most popular shopping times is 7pm;
other popular shopping times are 8pm and 9am, followed by 1pm and 5pm.
- The average duration of
the respondent’s shopping trip is 3 hours. Responses ranged from 15 minutes to 6 hours.
- The most important
improvements that were most often named by respondents as changes that are
necessary for merchants to get more of the respondent’s business were, in
order of frequency: (1) better selection, (2) more competitive pricing,
(3) more variety of stores, (4) more places to eat, (5) improved parking,
(6) better quality of merchandise, and (7) better customer service.
- The types of new
businesses that received the highest priority by the most number of
respondents were, in order of frequency: (1) drugstore, (2) clothes, (3)
discount store, (4) restaurant, (5) fast food, and (6) hobby shop.
- Newspapers were by far
the most noticed form of advertising by local merchants among the
respondents. Other forms of
advertising that reached at least 25% of the respondents were window
displays, flyers, tabloids, and television.
Of
the people surveyed, 66% were female and 52% were married. The majority of the respondents were either
55 to 64 (30%) or 36 to 45 (22%) years of age.
About half of the respondents reported having a high school diploma as
their highest degree (51%) and 26% reported having either an associate’s or
bachelor’s degree. Twenty-five percent
of respondents listed “professional” as their occupation, 10% listed “retired,”
9% listed “clerical,” 9% listed “executive, managerial, or administrative,” and
10% listed “other.” Thirty-two percent
of the respondents came from two person households, 29% from households of
three or four persons, and 19% were living alone. Sixty-three percent of the households lived in or near the St.
Paris business district and 16% lived in the St. Paris area, but outside the
business district. Thirty-two percent
of the respondents had lived in the area for under 5 years, 30% for 5-15 years,
and 32% for 16 or more years. Fifty
percent of the respondents worked in or near the business district, 20% worked
elsewhere in Champaign County, and 10% worked outside Champaign County.
DISCUSSION OF RESULTS
St. Paris is located within a 20-mile drive of major suburban
populations living within the Columbus and Dayton/Springfield metropolitan
areas. Given this relative close
proximity to larger urban centers, St. Paris is expected to experience some
retail leakages. In particular, it is
not surprising that St. Paris has retail leakages in more specialized sectors
that typically require larger population centers to support, such as apparel,
jewelry, optical goods, camera and photography, department stores, and hobby
shops. These goods are non-convenience items; in other words goods that are not
usually bought on a daily or weekly basis.
Businesses that sell these types of goods require a larger number of
people from which to draw their customer base and therefore are typically
located in more populated areas.
Sometimes they are found in rural areas, but only if they are able to
draw customers from a large region. Of
the goods that are generally classified as specialty items, St. Paris does have
estimated surpluses of $325,309 in appliance sales and $239,853 in florist
sales. Relative to the estimated
potential sales in each of these sectors, appliance sales are 256% more than
would be expected given the local population and income in the St. Paris trade
area and florist sales are 114% more than would be expected.
As opposed to specialty goods, convenience or “everyday” goods have
very localized markets (in other words, individuals do not usually travel
longer distances for these goods). These sectors include grocery stores, drug
stores, hardware stores, variety stores, liquor stores, gasoline service
stations, and restaurants. The St.
Paris trade area is estimated to have two surpluses among these types of goods:
hardware (136% surplus) and bakeries (124% surplus). In the other markets for convenience goods, including groceries,
gasoline stations, restaurants, bars, and drug stores, the St. Paris trade area
is estimated to have leakages. This
suggests that the local population is underserved in these sectors.
Based on this initial retail market analysis,
several strategies emerge that may warrant further research and discussion:
(1)
Strengthen the local market for one or more convenience goods for which
the St. Paris trade area has a leakage. Stores that
sell convenience goods include grocery stores, drug stores, hardware stores,
variety stores, liquor stores, gasoline service stations, and restaurants. These are goods and services that have
localized markets that should be able to capture a significant portion of the
local demand from consumers living within the trade area. This is consistent with the consumer survey
results, in which St. Paris was rated the highest by far in terms of convenient
location. Of these everyday goods, the
St. Paris trade area has the largest total leakages in gasoline stations ($6.65
million) and grocery stores ($4.28 million).
In identifying the sector(s) to be targeted, the best opportunity will
be those sectors for which a few small changes would result in a significant
increase in the local customer base.
Based on the results of the consumer survey, groceries are experiencing
more leakages than car repair (see Figure 2).
A more targeted survey effort to identify the specific reasons for why
people are not buying groceries in St. Paris may help to inform marketing strategies
for St. Paris’ existing grocery stores.
(2)
Pursue niche markets that either strengthen or complement existing
surpluses. The St. Paris trade area has surpluses in
hardware, appliances, florist shops, and bakeries. These existing surpluses
could be leveraged by identifying other goods and services that may be
complementary with either hardware or florist goods. Complementary goods or services are different goods that the same
consumer would be likely to buy together.
For example, customers who are buying appliances may also be interested
in shopping for furniture, which currently is experiencing leakages in the St.
Paris trade area. The size of the
surplus in appliances suggests that the St. Paris trade area may be a regional
center for appliances. If appliance
customers are driving from outside the local area to shop in the St. Paris
trade area, then this also creates an opportunity for businesses that are
located along or nearby the customers’ travel routes. For example, customers may stop to eat a meal on their way to or
from the store. This strategy of
pursuing the right “mix” of businesses within an area is very dependent on the
proximity of businesses to each other and on the major routes along which
customers drive (or walk, if the shopping area is walkable). Only if the businesses are within reasonable
distance of each other or if they are along the customers’ travel route, will
they have potential to complement each other.
A survey of customers that shop at the appliance and hardware stores and
other stores that sell goods that may be complementary would be useful to help
identify the right mix of businesses that could be pursued. Likewise, more investigation into the nature
of the florist businesses in the St. Paris area would identify how much
face-to-face customer service occurs and whether this customer base would
potentially support nearby complementary businesses.
(3)
Pursue the largest leakages. By far the
largest estimated leakage in the St. Paris trade area is motor vehicle sales
($11.0 million), followed by gasoline stations ($6.6 million) and department
stores ($6.6 million). A possible
strategy is to reduce the magnitude of the largest leakages by improving the
marketing of these goods and services.
However, attention must also be paid to the strength of these retail markets
in neighboring trade areas. For
example, as illustrated by the map of motor vehicle surpluses and leakages
included at the end of this report, the neighboring areas of Urbana and Troy
both have surplus sales in motor vehicles.
In this case, regional competition from these areas must be considered
in the development of any marketing strategies to improve the local sales of
this product.
(4)
Pursue niche markets that do not directly compete with larger urban
centers and regional shopping malls. Rural areas
and small towns cannot compete directly with the variety and volume of goods
and services that are offered by their urban and suburban neighbors. For this reason, it is unavoidable that some
leakage of retail dollars will occur in some sectors. However, there may be more specialized markets that are
overlooked or underprovided by the larger retail centers that would appeal to
local consumers. For example, the
consumer survey indicated that St. Paris was most preferred in part because of
quality (Figure 1) and the helpfulness of store employees (Figure 3). Both these areas are aspects that a smaller
business district can successful compete in against the larger supercenter
stores, where the quality of merchandise and service provided is often minimal. A simple strategy of “going the extra mile”
in terms of service and quality of the merchandise may help to increase the
customer base of stores in sectors that are currently experiencing leakages. Other results from the consumer survey
reveal areas in which St. Paris businesses can improve in this regard. In particular, St. Paris received very low
ratings for parking, hours, and advertising (Figure 3), all of which are
features that can be addressed either by individual businesses or through
coordinated efforts with local officials.
(5)
Capitalize on transportation networks and regional attractions. St. Paris is located along a major county route (Route 36) and
therefore is well positioned to attract people who travel along this
route. St. Paris is located five miles
south of Kiser Lake, a regional recreational site. Additional market research regarding the types of consumers who
recreate at the lake would help to identify the type of retail goods and
services that would appeal to these potential visitors.
(6)
Capitalize on historical traditions and the unique aspects of St. Paris
as a place. St. Paris is located within
20 miles of major suburban populations and therefore is well positioned
geographically to attract these consumers to its downtown district if unique
aspects of St. Paris as a traditional rural town can be highlighted. For example, St. Paris used to be the pony
wagon building capital of the US.
Events that build upon St. Paris’ historical roots and “sense of place”
should target nearby suburbanites who are seeking rural experiences. Potential competition with other rural towns
within the region is a consideration in pursuing this strategy.
METHODOLOGY
Determining
the Study Region: The definition of the relevant region surrounding St. Paris is very
important in properly analyzing regional retail market trends. The region should include all surrounding
areas that either help (i.e. are complementary) or hinder (i.e. are competitive) retail sales activity within the
trade area of interest. The relevant
region was identified for this study by calculating an outer boundary that was
20 road miles from the center of St. Paris.[3] This is a distance that is easily driven
within less than an hour. Towns or
cities that fell within this 20-mile radius were then selected as neighboring
retail centers. Using this approach, we
identified the following eight neighboring centers: Urbana, Springfield, New
Carlisle, Troy, Piqua, Sidney, Bellefontaine, and the northeastern portion of
Dayton.
Defining
Trade Area Boundaries: The boundaries for each of the trade areas were determined based on
several factors: (1) population of the retail center, (2) distance to the
retail center, and (3) U.S. Census block group boundaries. In general, the larger the population of the
retail center, the larger the trade area that corresponds to the center. However, because our data is available at
the block group level, the delineation of trade areas was constrained to
correspond to block group boundaries.[4]
Calculating
Retail Sales:
Estimated data on retail sales is available at the block group level. Once the trade areas were determined using
the procedure outlined above, sales for each retail sector within each trade
area were calculated by summing over all the block groups that fall within that
trade area.
Estimating
Surplus/Leakages: Surplus and leakage calculations were performed for each retail
sector within each trade area. For the
purposes of this report, potential sales of retail sector R in trade area A is
defined as:
Potential Sales =
(Population of A) x (Income ratio of A) x (Regional per capita consumption of
R)
The
income ratio is the ratio of per capita income in trade area A to the regional
per capita income. This gives an
indication of the relative spending power of residents in trade area A. The regional per capita consumption is the
total regional sales of sector R divided by the population of the region. Because these values are dependent on the
geographic extent of the regional boundary, they are relative measures that are
specific to the St. Paris study region.[5]
Sources
of Data:
Retail sales data comes from Applied Geographic Systems, a private market
research company that compiles estimates of retail sales data on a yearly
basis. These data are estimated at the
block group level using several sources of data, including a geocoded business
list file from Acxiom and retail data from the Bureau of Labor Statistics and
County Business Patterns. Because these
data are estimates, they do not always capture all retail sales activity within
an area. However, they are accurate
enough to provide an overall description of retail sales activity at a
relatively detailed level of geography.
For more information on these data, see: http://www.appliedgeographic.com/BusinessCounts%201999.pdf.
1997
estimates of housing, income, and other U.S. Census of Population variables
were taken from Community 2020 GIS software, a program developed by the
Department of Housing and Urban Development.
Geographic files used to determined and map the trade areas also came
from Community 2020.
Table 1: Total
Retail Sales by Sector for St. Paris Trade Area (1998)
|
RETAIL GOOD/SERVICE |
ST. PARIS SALES (1998) |
|
GROCERY |
4,555,023 |
|
GAS STATIONS |
2,114,206 |
|
MOTOR VEHICLES |
1,971,562 |
|
RESTAURANT |
1,147,941 |
|
RECREATIONAL VEHICLES |
914,958 |
|
FURNITURE |
652,525 |
|
LUMBER |
588,767 |
|
OTHER |
525,092 |
|
DRUG STORES |
452,707 |
|
APPLIANCES |
452,016 |
|
FLORIST |
449,210 |
|
HARDWARE |
372,341 |
|
ELECTRONICS |
344,714 |
|
NURSERY |
216,324 |
|
SPORTING GOODS |
191,478 |
|
BAKERY |
172,287 |
|
PAINT |
0 |
|
DEPARTMENT STORES |
0 |
|
VARIETY |
0 |
|
CANDY |
0 |
|
APPAREL |
0 |
|
SHOES |
0 |
|
BARS |
0 |
|
LIQUOR |
0 |
|
BOOKS |
0 |
|
JEWELRY |
0 |
|
HOBBY |
0 |
|
CAMERA |
0 |
|
CATALOG |
0 |
|
OPTICAL GOODS |
0 |
|
TOTAL |
15,121,151 |