When communities market to attract retailers or to help local retailers expand, they must provide information that is relevant to the retailer and will be helpful in making location decisions. A basic piece of information and one that is the foundation for building an effective retail sales presentation is the delineation of the community’s retail trade area.

In the previous issue of this newsletter, we discussed the importance of communities defining trade areas the way retailers define them. We mentioned how trade areas as defined by retailers do not follow political boundaries, and they do not form concentric or circular patterns. In other words, as a municipality, your trade area is not simply the boundaries of your city limits, but it is also not a 10-mile circle surrounding downtown or some other site.

When a retailer maps its trade area, the retailer delineates the shape in terms of drive time to the location. It makes sense to define the trade area not as the crow flies, but as the car drives.

The automobile has been changing retailing for some time now. By the 1920s, retailing was adapting to the automobile. San Francisco’s Crystal Palace, one of the first supermarkets, opened in 1923. The existence of the automobile made innovations like the supermarket possible. As supermarkets replaced the corner grocery store the automobile became more of a necessity.

Just as the automobile changed retailing, the automobile changed the way we evaluate trade areas. One of the major influences in determining a trade area is the drive time it takes to get to a store location from either home or place of work. Smart retailers know how many minutes their target customers will travel to reach their store. This drive time varies among retailers. The drive-time trade area for a grocery store or a dry cleaning establishment may be four or five minutes. The trade area for a destination retailer, such as Bass Pro Shops, can be measured in hours.

When determining drive times, communities must analyze physical barriers and street conditions. Factors that increase drive times include rivers, poor roads, railroad tracks and poor driving conditions. Increased drive times shrink the size of the trade area. Factors that reduce the drive time, and therefore expand the drive time polygon, include interstate highways and major thoroughfares.

Because there can be significant differences between retailer’s trade areas, it is difficult for a community to exactly know what drive time to use. As a general rule of thumb a community should consider developing drive times from a given location in increments of 5 and 10 minutes. Obviously these drive times may not correspond exactly to a given retailer’s customer profile, but they will allow the community to present their advantages in a more accurate format than using boundaries such as city limits.

In less densely populated areas, your drive times may be larger than 10 minutes and may even stretch into hours. For instance, when Elko, Nev., (population 17,000) began a quest to lure retailers to their city, they commissioned a study to analyze their trade area. The study determined that Elko’s trade area consists of more than 67,000 square miles and encompasses seven cities. Now that’s a big trade area. Obviously, some retailers would not be able to lure customers from out of town, but other retailers, such as the Home Depot that opened in Elko, must have decided that customers were willing to drive in from outlying areas.

Once a community has the retail trade area delineated, it can analyze the density and demographics of the households inside the trade area and determine the psychographics and buying habits of the residents in the area as well. By using the trade area and not political jurisdictions as the geographic boundaries, the community can present a relevant picture of the community’s retail potential and one that is useful to the retailer.