First law of geography: distance decay: the amount of interaction decreases
with Distance relative to the source
Retail Deregulation in China
o 92’ they tested trading with china by allowing 15 retailers to come
into china ( 4 of them were Japanese)
o 99’ Experiment expanded to all the capitals
o 01’ open up all trades with the World Trade organization within 3
o 04’ foreign retail is now opened.
o Most western retailers are big box stores because they have little
competition buy product and stock all over the world.
This is completely different from eastern retailers which buy
most the product locally
Japanese retail in china: didn’t do too well
o Formats of penetrting the chinese market didn’t work
o There were financial diffiulties with the parent companies back in
o And the rigidity of the business planning and structure limited them.
International Retailers: movers and shapers of the world economy
o Western Retailers have more power which help them penetrate the
asian / chinese market
o Asian Retailers: starting to adopt the supermaket style which have
provided promising results.
1.3 Public and Private Sector perspective
Public: subject to direct Public control, usually via a local government
1. Primary interest: size of faciliteis, relative spatial locations and extent of
2. Centers on the operational implications of the alternative strategies in
terms of efficiency with which the service is provided.
3. Social implications are also conidered
Public Sectors serve as large ove a population with the smallest costs.
Chapter 2: Spatial concepts and the value of geographical perspective
Retail evolution in Canda
Small shifts in income demographic, lifestyle and competition can lead to
rapid and large changes in structure of retail environment.
With decreased mobility increased retail condensation
With Increased mobility decreased retail condensation
o WW2: most retail was downtown cause not many had cars to venture
out. o 60’s shopping center was recognized as a focal point of developing
communities ( all shopping centers looked the same)
o 70’s catalytic stage of retail: plant a mall on the outskirts and 3-5
years later there will be houses all around it.
o 80’s Malls / retailers were seens as entertaining and touristy
o 90’s zero shopping center growth due to Big box retailers like
Walmart/ costco / bestbuy…they changed the market dramatically.
The role of positioning
some groups markets needed to cluster to attract a specific set of consumers:
galleries/ antiques etc.
1. Specialty Product areas: comparison shopping
2. Fashion and fatory outlet centers: designer ( high prices)
3. Factory Outlet/ Discount places because less glamourous malls and end
of line product
4. Historic redeveloped properties/Theme malls: revitalizes older parts of
city : Distillery district.
5. Ethnic Strips: point of origin for immigrants in a city, certain products
dominate these areas.
* In areas of low population, Market Killers ( Big Box retailers) tend to group
together. one parking lot with Walmar, Bestbuy, Michaels etc.
Planned: Very controlled, planned out ( Eg. Shopping malls)
Unplanned: uncontrolled, not managed ( Eg. Retail strip
Retail chain: 4+ stores under the same owner ship ( most retail money from
Independent Stores: Most stores are in this category ( traditional /family
Site: physical attribute of a location
2.1: Distance Decay
With increasing distance from a location, interaction with the location
Friction of distance: the deterrent of inhibiting effect of distance on human
activity is that it provides a frictional force. The farther the distance the more
Disincentive nature of distance: economic cost, time , money and distance to
cover go up with distance less appealing.
Utility: the level of usefulness or attraction of a cente to customers.
2.2: Gravity Model
Spatial attraction depends on not only distance but also attraction ( size) of
The larger the size the higher the attractiveness = increased gravity
o Powernode Vs. Regional mall. Intervening opportunity: alternative origins and or destinations that will affect the
volume or pattern of customer behaviours. This usually occurs between two related
Range: point at which demand falls to 0 because of travel costs ( this is due to the
distance decay effect)
Diffusion: the way things spread through space and over time
Relocation diffusion: eg Immigration
Contagious Diffusion: spread due to the proximity of carriers or agents of
cahnge ( spread of ideas or disease)
Demand and Distance: the spatial demand Curve
The demand curve: Quantity purchased Vs. Price
Cost and Distance: As distance increases, costs go up due to added travel.
Spatial Demand curve: distance Vs. Quantitiy purchased per household.
The Hotelling Model
Compettitive: each vendor pushes their location toward the line of
indifference ( worst case for everyone)
Now they are literally in direct competition
Their customers have to now travel further to get any product. decreases
Cross shopping: this is the process of shopping at different stores for different items
in different classes. So one might go shopping for retail items to later go to a
different store to obtain entertainment.
Comparing Power Nodes Vs. Regional malls
Power Node: Open shopping centers
o Attract groups from farther away, the opposite of the distance decay
model most people come from outside 10 k
o Mostly 30-40 Yr olds
o Asians Regional malls
o Italians Power Nodes
Regional Malls: closed shopping centers
o Attract groups from closer, follows the distance decay model most
customers are inside 10k
Conclusion: most cross shopping is done at Power Nodes ( good
entertainment facilities), however Power Node customers tend to be older.
Also: There is delayed Cross shopping effects at Power Nodes, this means
that each trip to the node is specific for a certain thing, this is not the case for
Regional malls, where we can see cross shopping happening all at once.
Chapter 4: Trade Area analysis *Trade area analysis draws from Geographic analysis. Why are places where they
are and where will they be in the future
Normative and behavioural approach to retail analysis
o Normative: what should be certain assumptions, where the trade
area boundaries are and to where they extend.
o Behavioural: Costomer spotting: Identify where customers are
coming from to define the trade area.
Costomer Spotting: Surveys or asking for your postal codes
upon purchase will help them figure out where people are
Normative approaches: Theoretical in basis
o Normative may be the only way to go sometimes because there Is no
market to establish a behavioural pattern to the target customers.
They have to infer or extrapolate in these cases.
o Distance decay
o Gravity model: larger might be better
o Nature of distance: increased distance = increased costs
o Location and competitions: this is essential for understanding where
potential intervening opportunities may be.
o Utility: how usefull can they make it to the costomer
What are the main 3 Normative Techniques?
1. Thiessen Polygon Model
2. Converse Breakpoint Method
3. Huff Model.
1. Thiessen Polygon Model: the key here is Distance
a. Based on the line of spatial indifference: line between two retailers of
exactly the same qualities, such that either way choice is exactly the
b. Consumers are fully informed ruly ration decision makers.
c. There is uniform travel plain.
i. If partial Census tracts with in Polygon: Centroid method or
proportional grid method.
ii. Centroid method: two largest diagnols in a census tract , where
they intersect is the Centroid. If the centroid falls outside of trade
areas then it is divided.
iii. Proportial Grid method: Assumes that the census tracts are
2. Converse Breakpoint method: the key is now distance and size which
a. Gravity is key in this model: this will shift the line of indifference
depending on how much gravity each retailer generates. The larger the retailer the more gravity the more the line of indifference will shift
towards the smaller retailer in order to balance the choice. distance and
b. If size doesn’t change then you have the same result as Thessien
Dy: distance of breakpoint from Y
Dxy: distance between centers X and Y
Ax: attraction size of X
Ay: attraction size of Y
*the previous 2 made 1 key assumption: that there was a Spatial monopoly
market: which means that all of the customers on one side of the line of indifference
go to that respective retailer, this is hypothetical. Are these assumptions accurate?
3. The Huff Model: the key is Distance/Size and probability all key factors in
reality. What is the probablility that a consumer will come here based on our
a. this model takes into account that there might be consumers that cross
the line of indifference for certain reasons that we might not
understand, maybe they just like the other area more.
b. Assumptions: all stores in the area are possible destinations (