Retail Trade Area Modelling

In exploring reports on the retail shopping landscape in the US, a fascinating trend came to light — according to Inc. Africa, e-commerce businesses were embracing physical retail spaces to foster customer loyalty.
A Capital One Shopping Research statistic showed that in-store shopping still made way more sales than online shopping (in the first six months of 2023, only 13.8% of retail sales were from e-commerce).
To corroborate this, an insightful Deloitte perspective also suggested that more online shoppers were opting to pick up orders in-store and shoppers were generally returning to physical stores.

In essence, traditional retail spaces still play a key role in the retail industry.

These suggest that e-commerce brands still have much to gain from establishing a physical presence. This can be done in one of two ways — either by opening standalone physical outlets or by forming strategic partnerships with existing retail stores (in the US, these will be stores like Walmart, Target, and so on). Physical retail stores also have the opportunity to expand their presence by opening new branches in additional locations.
Choosing the right location for the physical outlet(s) is far from an arbitrary process. Key factors are at play, such as the proximity of the store to the customers and the overall attractiveness of the location.
Questions about the road accessibility, traffic conditions, local business environment, store size, and availability of parking spaces contribute to gauging the store location attractiveness.

In data analytics, this is called trade area modelling, and the goal is straight-forward: pinpoint the optimal location by choosing where customers are most likely to visit.

Leveraging a trade area model involves three key steps:

1. Utilizing KYC (Know Your Customer) data to find customer communities.
2. Compiling a list of available store location options.
3. Assessing each location based on its distance from customer communities and its overall attractiveness.

This strategic approach can help e-commerce brands successfully integrate into the physical retail landscape and can also help existing physical retail stores expand their presence.

Exciting news! To show how a trade area model works, I built a Streamlit web app that uses the Google Maps API from GCP and Open Street Map data to create a trade area model using an e-commerce company looking to establish a physical presence as a case study.

Dive into the world of retail analytics and explore the app here. If the app has “gone to sleep”, simply wake it up.
If you’re more curious, you can check out the model source code here and the data mining processes here.