Assignment 2: Study Areas, Geocoding, Customers, and Trade Areas

Executive Summary

Purpose and methods of this report

     Two friends who own two different coffee and doughnut shops in San Francisco, CA want to maximize their trade areas in a way that will benefit both businesses, but they also do not want to compete against one another. The purposes of this report are to:

• Recommend ways that each store can maximize their trade areas while avoiding competition between one another
• Produce four maps that show the following in each:

1. Location of each store, their customers, and the mean center of customers for each store
2. Location of the store's competitors (other coffee and doughnut shops)
3. Customer derived trade areas for each store
4. Driving and walking distances for each store

    Using ESRI Business Analyst, a number of analyses will be conducted including:

• Geocoding each store's location who's data is in .txt format 
• Geocoding customer addresses which is available in tabular form, assigning which customers go to which store, and finding the mean center of customers for each store
• Identifying where the store's competitors are located 
• Creating customer derived trade areas and drive time areas of each store
• Generate reports on the customer derived trade areas that contain community profile data and retail goods and services expenditures data 

Introduction

Two friends who own two different coffee and doughnut shops in San Francisco, CA want to maximize their trade areas in a way that will benefit both businesses; they also do not want to compete against each other. Both stores will provide the addresses of their respective customers along the with addresses of their stores. Both store owners want four separate maps that illustrate where customers are located and the customer's mean location of each store, the locations of each store's competitors, customer derived trade areas for each store, and driving/walking distances for each store since most of their customers walk to their shops. Using the generated maps and the data generated from the trade area report containing community profile data and retail goods and services data, recommendations will be made to the two store owners on how to maximize their trade areas in a beneficial way while also not competing against one another. Several questions must be answered in order to assist with making the proper recommendations including:

1. What is the market like for both stores?
2. Are the stores competing for the same customers?
3. Is one store in a better position compared to the other?
4. What about similar competitors?
5. Who are their customers?  

The extent of this study and the analyses associated with it were kept within San Francisco County, CA and did not include any data outside of the county. Customer address data provided by the store owners may only represent a portion of their entire customer base depending on if customers are willing to provide their addresses.

Conclusions

Answers to questions from the introduction

What is the market like for both stores? Who are their customers?

•  Store 1: Store 1 has a lower population of about 128,000 people with a dense trade area. There are a large number of households within the area where the per capita income is at a higher $63,851. The trade area has a younger population where about 65% of those who are ages 25 and older has a Bachelor's Degree or a Graduate/Professional Degree. The employed population 16 and older (~88,000 people) have mostly White Collar jobs. The population is made up mostly of young, successful, hard-working singles who are open to new experiences and places. The average amount of money spent on food outside of the home is $4,849.73.

• Store 2: Store 2 has a higher population of about 160,000 people with a trade area that is not quite as dense as compared to store 1. There are a lower number of households within the area where the per capita income is at a lower $45,149. The trade area has a slightly older population where about 48% of those who are ages 25 and older has a Bachelor's Degree or a Graduate/Professional Degree. The employed population 16 and older (~94,000 people) have mostly White Collar jobs. The population is made up of many young, successful, hard-working singles who are open to new experiences and places and prosperous married couples who are ambitious, hard-working, and like to shop. The average amount of money spent on food outside of the home is $4,970.79.

Are the stores competing for the same customers? 

Based on figure 3 which shows the trade areas of each store, the stores do not appear to be competing for the same customers since the trade areas do not overlap. However, there are many customers who travel to the store that is farther away from their homes, which may mean that both stores are then competing for these customers.

Is one store in a better position than another?

Looking at the location of competing stores in figure 2, it would appear that store 2 is in a much better position compared to store 1. Store 1 is located in an area where there is a high density of coffee and doughnut shops while store 2 has a much lower density of coffee and doughnut shops within its trade area. 

While the per capita income is much lower in store 2's trade area, the population spends a slightly higher amount of money on food outside of the home. 

What about similar competitors?

There is a highly dense amount of competitors in the northeastern part of San Francisco County, where the density lowers towards the south and western part of the county. Since there seems to be an overabundance of coffee and doughnut shops in the northeastern area, one might benefit from opening a shop towards the southwestern part of the county.

Recommendations

• Attempt to expand the trade areas slightly to the south and west for store 1 and slightly to the north and west for store 2 by perhaps advertising towards those areas since competitors are much fewer in the western area of the county.
• Be sure to market appropriately based on the people that make up each existing trade area

Findings and Discussion

The findings of this report will include presenting the maps and explaining the geographic information they provide. It will also include discussing some of the data provided by the trade area reports.

Maps

Map 1: Customers and Their Mean Centers

Figure 1: Map of each store's customers
and their mean centers

Figure 1 shows where each store's customers are located and the mean center of the locations of each store's customers. The location of the two stores are represented by the red square box with the coffee mug in the middle of the square, and each store is identified as either '1' (the northernmost store) or '2' (the southernmost store). The stores are represented as such in all the maps generated for this report. The customers of store 1 are represented by the small, circular green dots while the customers of store 2 are represent by the small, circular blue dots. While it appears most of the customers go to the store that is closest to their location, there are some outliers where some customers are going to the store that is farther away from their location. Each store's customers are clustered around each store location, and spread out the further away it becomes from the store. The mean center identifies the geographic center for a set of features (in this case, the customer locations). The mean center for store 1 is located just southwest of store 1 and is represented by the larger, green circle with the black dot in the middle; the mean center for store 2 is located just north of store 2 and is represented by the larger, light blue circle with the white dot in the middle. This suggests that, for each store, more customers are coming from areas in the center of the county (represented by the thick black line around the county in this and subsequent maps) as opposed to the outer regions.

Map 2: Competitors

Figure 2: Map of  the competitors of the stores

Figure 2 shows the locations of the competitors of stores 1 and 2. Competitors were defined as a type of business associated with 'Coffee Shop' and 'Doughnut'. Since any of these businesses could potentially be a competitor to either stores 1 or 2 regardless of location, they are lumped into one main category of competitors. The competitors are represented as yellow with black outlined X's. It is plain to see that there is an uneven distribution of competitors within the county where they are highly clustered in the northeast area of the county and are clustered much closer to store 1 than store 2. In fact, it is impossible to count by glancing at it just how many competing locations there are since their symbols overlap each other to a high extent. Around store 2, the density of competing locations is much less compared to store 1. There are very few competitors in the southernmost and westernmost areas of San Francisco County.



Map 3: Customer Derived Trade Areas

Figure 3: Map showing the customer derived
trade areas of each store

Figure 3 illustrates the customer derived trade areas of each store. These trade areas are areas around stores that represent the number of customers that are within each area. For this report, three rings were produced around each store where, starting from the location of the store, the yellow rings represents 40% of the customer base, the red ring represents 60% of the customer base, and the purple ring represents 80% of the customer base. The trade area for store 1 is much smaller compared to that of store 2, showing that the majority of the customer base of store 1 are located much closer to store one compared to the customer base of store 2. The trade areas do not overlap at any point. In fact, the closest they get to each other is about one mile. This indicates that there is room to expand each store's trade area while remaining free from competing against one another.



Map 4: Drive and Walk Distances

Figure 4: Map showing the driving and walking
distances of customers

Figure 4 illustrates the driving and walking distances of the customers for each store. They are represented in a similar fashion to the customer derived trade areas of Figure 3. There are three rings around each store location that increase in distance away from the store. Starting from the location of each store, the yellow rings represent a distance of 0.5 miles, the red rings represent a distance of 1 mile, and the purple rings represent a distance of 1.5 miles. The sizes of the drive/walk areas of each store are similar, but the shapes are different. Store 1's areas are more square shaped while store 2's areas take on more of what could be described as rough, circular shapes. This suggests that the streets and other paths surrounding each store's location are constructed and laid out differently. The drive/walk areas do not come close to crossing each other where the closest point of overlap is about 1.5 miles.





Analysis of the trade area reports

Community Profile: Store 1

Profiles were generated for the 40%, 60%, and 80% population areas. Answers given below will be for the 80% area since this represents the majority of the customer base for store 1. In each category, data was provided for the years 2010, 2016, and 2021. Answers below will be for the year 2016 since that is the most current data.

• Total Population: 128,927
• Households: 68,940
• Per Capita Income: $63,851
• Median Age: 37.3
• Population 25+ by Educational Attainment (111,627 people): 39.4% have a Bachelor's Degree while 26% have a Graduate/Professional Degree
• Civilian Population 16+ in Labor Force: 95.8% employed
• Employed Population 16+ by Occupation: White Collar jobs (professional, sales, etc.) make up 80.7% out of a total population of 87,921 people

The top 3 tapestry segments are:

1. Laptops and Lattes
2. Trendsetters
3. Metro Renters

This includes people that are:

• Young, successful singles in the city
• Intelligent and hard-working
• Urban denizens who are partial to city life
• Internet dependent
• Adventurous and open to new experiences and places

Community Profile: Store 2

Profiles were generated for the 40%, 60%, and 80% population areas. Answers given below will be for the 80% area since this represents the majority of the customer base for store 2. In each category, data was provided for the years 2010, 2016, and 2021. Answers below will be for the year 2016 since that is the most current data. 

• Total Population: 160,365
• Households: 57,087
• Per Capita Income: $45,149
• Median Age: 40.7
• Population 25+ by Educational Attainment (122,384 people): 28% have a Bachelor's Degree while 20.2% have a Graduate/Professional Degree
• Civilian Population 16+ in Labor Force: 94.5% employed
• Employed Population 16+ by Occupation: White Collar jobs make up 66.3% out of a total population of 93,665 people

The top 3 tapestry segments are:

1. Laptops and Lattes (these people are described in the previous section)
2. Pacific Heights
3. Urban Chic

Pacific Heights and Urban Chic include people that are:

• Prosperous married couples living in older suburban enclaves, many with older children
• Ambitious and hard-working
• A more diverse population
• Financially responsible, but still indulge in casino gambling and lotto tickets
• Serious shoppers that appreciate quality and bargains
• Active in fitness pursuits
• Top market for premium movie channels like HBO and Starz

Retail Goods and Services Expenditures: Store 1

Profiles were generated for the 40%, 60%, and 80% population areas. Answers given below will be for the 80% area since this represents the majority of the customer base for store 1. In each category, data was provided for the years 2016 and 2021. Answers below will be for the year 2016 since that is the most current data. 

When it comes to spending money on food away from home, the average amount spent is $4,849.73.

Retail Goods and Services Expenditures: Store 2

Profiles were generated for the 40%, 60%, and 80% population areas. Answers given below will be for the 80% area since this represents the majority of the customer base for store 2. In each category, data was provided for the years 2016 and 2021. Answers below will be for the year 2016 since that is the most current data.

When it comes to spending money on food away from home, the average amount spent is $4,970.79.


Sources

ESRI tapestry segments information: http://doc.arcgis.com/en/esri-demographics/data/tapestry-segmentation.htm