EXECUTIVE SUMMARY
Purpose and Methodology
The purpose of this study is to analyze the customer base
for the coffee and doughnut shops given to combine efforts and maximize
potential earnings. Trade areas based on customer base and drive and walk times
for customers are provided along with all competitors in the area.
For each business, a mean center of their respective
customers is calculated from the customer data provided. Using business
analyst, all known coffee shops in the San Francisco area are then plotted. Finally, trade zones were established for each store first based on customer location and then on customer drive and walk distance. A business report was then produced for the customer location trade zones, where a Spending Potential Index (SPI) which is household-based and represents the amount spent for a product or service relative to a national average of 100 was then produced for bakery and cereal items. This report also gave total population and average age.
Findings and Conclusions
While there isn't an abundance of intersecting customers between stores, Store 2 possesses some customers who drift north into Store 1's area. There is a much greater clustering of customers around Store 1 compared to that of Store 2, perhaps because of the vast number of competitors located in the northeast portion of San Francisco as shown by Figure 2. Overall, there are far fewer coffee competitors located in the southern section of San Francisco.
Store 2 has a much larger customer radius where 80% of the customer base nearly reach twice as far as Store 1 in some locations. The business report for these customer trade zones showed a much higher SPI along all three of Store 2's trade zones. This indicates that consumers here are more likely to spend their money on bakery items and would be beneficial to a producer to locate themselves here. The total population was also much higher ,indicating a larger potential market for consumers who are located nearby to existing customers. The average age for Store 2 was also higher, only intensifying the probability that more people in the area would drink coffee.
Recommendations for Combining Efforts
Based on the previous conclusions, it would be far more beneficial to open up a singular store at Store 2's location for the following reasons:
- Wider consumer base
- Far less competition
- More willingness to spend money on bakery items
- Higher potential customer base
Closing Store 1 would run the risk of losing existing customers; However, by combining stores, the new store will have a chance at attracting more customers. It would also most likely not be possible to pay utilities for multiple stores and transport fresh bakery or coffee every day daily from store-to-store.
Contents
EXECUTIVE SUMMARY
Purpose and Methodology
Findings and Conclusions
Recommendations for Combining Efforts
INTRODUCTION
Purpose of study
Scope of study
Sources and Methodology
CONCLUSIONS
RECOMMENDATIONS
FINDINGS & DISCUSSION
REFERENCES
INTRODUCTION
Purpose of Study
The purpose of this study is to analyze the customer base for the coffee and doughnut shops given to combine efforts and maximize potential earnings. Trade areas based on customer base and drive and walk times for customers are provided along with all competitors in the area.
Scope of Study
All customer data was limited to what was provided by both stores and all competitors in the San Francisco area was limited to the database held in Business Analyst.
Sources and Methodology
All mapping was done on ArcMap which was used to perform the mean center function. All customer base data, customer location trade zones, customer drive and walk trade zones, competitors, and the business report was produced using Business Analyst.
CONCLUSIONS
While there isn't an abundance of intersecting customers between stores, Store 2 possesses some customers who drift north into Store 1's area. There is a much greater clustering of customers around Store 1 compared to that of Store 2, perhaps because of the vast number of competitors located in the northeast portion of San Francisco as shown by Figure 2. Overall, there are far fewer coffee competitors located in the southern section of San Francisco.
Store 2 has a much larger customer radius where 80% of the customer base nearly reach twice as far as Store 1 in some locations. The business report for these customer trade zones showed a much higher SPI along all three of Store 2's trade zones. This indicates that consumers here are more likely to spend their money on bakery items and would be beneficial to a producer to locate themselves here. The total population was also much higher ,indicating a larger potential market for consumers who are located nearby to existing customers. The average age for Store 2 was also higher, only intensifying the probability that more people in the area would drink coffee.
RECOMMENDATIONS
Based on the previous conclusions, it would be far more beneficial to open up a singular store at Store 2's location for the following reasons:
- Wider consumer base
- Far less competition
- More willingness to spend money on bakery items
- Higher potential customer base
Closing Store 1 would run the risk of losing existing customers; However, by combining stores, the new store will have a chance at attracting more customers. It would also most likely not be possible to pay utilities for multiple stores and transport fresh bakery or coffee every day daily from store-to-store.
FINDINGS AND DISCUSSION
Figure 1 shows customer locations for both business, including the mean center of customers for each. Store 1 has a greater clustering of customers located nearby and can be represented by the mean center located fairly close to the actual location of the store. Store 2 has a broader customer base and is less clustered with the mean center drifting somewhat north toward Store 1. For the most part, Store 1's customers are located fairly near to the northern side of San Francisco, whereas Store 2 has customers drifting north and mixing with Store 1's area.
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| Figure 1 |
Figure 2 then shows both store's customer base as one and plots all coffee competitors in the San Francisco area. There is a great clustering of competitors in the northeast and disperses gradually moving away from the clustering. There are far fewer coffee shops in the southern part of San Francisco.
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| Figure 2 |
Figure 3 establishes trade areas for each store based on customer data provided. Store 1 has a much smaller radius of customers and a greater clustering of customers located nearby to the store. Store 2 has a much larger customer radius and a far greater dispersion along the San Francisco area. The trade zones do not intersect, meaning that 80% of each store's customers are not located in the same region in San Francisco.
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| Figure 3 |
After these trade zones were established, Business Analyst produced a report for each zone. The focus was then placed on bakery and cereal products where a Spending Potential Index (SPI) which is household-based and represents the amount spent for a product or service relative to a national average of 100, was produced. For trade area 1 the SPI was 130, 151, and 148 for its 40, 60, and 80% customer zones, respectively. For trade area 2 the SPI was 142, 151, and 152 for its 40, 60, and 80% customer zones. Another key statistic was total population and average age for each 80% customer zone for each store. For Store 1, the total population was 136,356 compared to Store 2's much larger 160,365. For Store 1, the average age was 37, compared to that of Store 2's 40-year-old average age.
Figure 4 shows another trade area for both stores, this time based on customer drive and walk distance. Store 1 has a fairly square shape, meaning that from all directions from the store, it is accessed with the same difficulty. The radius is also slightly larger than Store 2, meaning that it's slightly harder to access, but not significantly.
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| Figure 4 |
REFERENCES
ESRI, ArcMap, Business Analyst.
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