Assignment 4: Site Selection

Trader Joe's Site Selection

Presented to

Trader Joe's

Prepared by

Andrew Jeffers

April 26, 2017

Executive Summary 

Purpose and method of this report

Trader Joe's is a company whose goals, among many, include making a profit. They are interested in what is going on in the Minneapolis and St. Paul, Minnesota area, and they believe another store is needed and wish to expand their business and add another store in an advantageous location. The purposes of this report are to:

• Analyze the relationships between the six Trader Joe's location in the MSP area with the surrounding area using customer information provided by Trader Joe's and their store locations
• Determine and recommend three potential site locations for a new store and rank them from most to least favorable 

Using ESRI Business Analyst, a number of analyses were executed as a way of determining the best possible locations for a new store. The analyses were conducted within Hennepin and Ramsey counties. These analyses include:

• Market Penetration: calculates market penetration by dividing customer data by demographics
• Hot Spots: creates a custom-sized grid over an area and calculates demographics
• Optimal Stores: finds an optimal store based on cluster distribution
• Customer Prospecting: finds geographies within a set demographic range
• Optimal Store Locations (Mean Center): determines the optimal location for a site based on the concentration of surrounding customers
• Rank Markets: markets are ranked based on selected attributes

Findings and Conclusions: 

The results of the analyses provided mixed patterns concerning the relationship Trader Joe's has with the surrounding area. It was up to the user to analyze the results to the best of their ability and choose three locations in which they think would be ideal to open a new store based off of these results. 

Recommendations of sites in which a new store could potentially be built

Recommendations for which sites would be ideal for adding a new store include (from most to least favorable):

1. 13625 Technology Dr, Eden Prairie, MN 55344
2. 800 Xenia Ave S, Golden Valley, MN 55416
3. 2365 Wayzata Blvd W, Long Lake, MN 55356

Introduction

Purpose of this analysis

Business Analyst will run a number of analyses that will assist the user in determining where the best location will be to build a new Trader Joe's store based off of customer data, current Trader Joe's store locations in the study area, and demographic and business data provided by BA.

Scope of this analysis

The extent of this study includes the Minneapolis and St. Paul, Minnesota region. More specifically, it is restricted to Hennepin and Ramsey counties. 

Sources and methods

Trader Joe's six store locations and customer data within the extent area were provided by Trader Joe's. Google Maps was used as a way to determine which specific sites would be an ideal location to build a new store on. Demographic data was provided within Business Analyst and it is with Business Analyst that the analyses were conducted. The analyses that were conducted are as follows:

1. Market Penetration: A market analysis was run using the customer data as the input layer and Zip Codes as the base layer used for calculations. The selected data collection was the 2016 Total Population. After running the initial analysis, some of the zip codes were then consolidated to produce a result that was easier to understand and interpret. 
2. Hot Spots: A market analysis was run using 1 mile grid cell sizes and 2016 Total Population for the symbolization field. Also, 2016 Median Household Income was used as an added variable. After the analysis was ran, two hot spot maps with graduated color symbols were produced: one showing population and the other showing income. 
3. Optimal Location (Mean Center): A site analysis was run using the customer data as the input layer where one mean store center was calculated using customer locations. 
4. Customer Prospecting: A market analysis was run using zip codes as the input level of geography and the customer data layer as the input as well. 2016 Total Households and 2016 Population Age 18+ were then used as variables. 2016 Population Age 18+ was used in particular as a way of targeting people who are more likely to go shopping since most people younger than 18 do not have the finances to support extensive shopping habits. 

After these analyses were run, each one was manually compared and contrasted with the other to determine which three areas may be ideal locations to set up a new store. After the three areas were selected, Google Maps was used to find specific sites for a store where considerations included how big the lot was, what the proximity was to other retail and commercial outlets, and well traffic flowed through that particular area. Using the addresses provided by Google Maps of each site, an Excel table was used to normalize the address data so that it could be geocoded in Business Analyst. Two final steps were then completed which included:

1. Appending Data: In order to rank the sites, certain demographic and BA data needed to be added to the Potential Trader Joe's Stores layer. A market analysis was run using the Potential Trader Joe's Stores layer as the layer that inherits the data. The variables that were added included 2016 Total Population, 2016 Median Household Income, Avg spent per week by HH (Household) at food stores: $150+, and Shopped at grocery store/6 mos: Trader Joe's. The analysis was run and these variables were added as fields in the layer's attribute table.
2. Rank Markets: A market analysis was run using Potential Trader Joe's Stores as the layer used to rank the boundaries in the market area. The primary field for ranking was 2016 Total Population and the additional selected fields included the other three variables. The analysis was ran and the three potential store locations were then ranked 1 to 3 from most to least favorable.  

Findings and discussion

Figure 1: Trader Joe's market penetration

Market Penetration

The result of the market penetration (figure 1) is displayed as a 5-class choropleth map with very light brown representing the lowest values to dark brown representing the highest values. The values indicate the percentage of customers within the zip code area compared to the total population within that area. Trader Joe's is penetrating the market well in all of Ramsey County and east Hennepin County. However, sales are somewhat lacking in west Hennepin County where the lowest percentage area are the westernmost sections and the section directly north of Lake Minnetonka. Trader Joe's stores are represented in this and subsequent maps as neon green stars. It's clear to see from this map that Trader Joe's may want to consider adding a location in the mid to western area of Hennepin County which may then allow for better market penetration in that area of the county.

Hot Spots - Income

Figure 2: Trader Joe's hot spots based off median household
income

The result of the hot spot analysis based off of median household income (figure 2) is displayed as a 5-class choropleth map with bright yellow representing areas with the lowest income to bright red representing areas with the highest income. Most of Ramsey and eastern Hennepin counties feature areas with lower incomes while northern Ramsey County and mid to western Hennepin County feature areas with much higher incomes. Trader Joe's may want to consider locating in the higher income areas of Hennepin County, seeing as how there is a location within close proximity to the high income location in northern Ramsey County.

Hot Spots - Population

Figure 3: Trader Joe's hot spots based off total population

The result of the hot spot analysis based off of total population (figure 3) is displayed in the same manner as the previous hot spot map. For this map, however, population is represented where the lowest populations are represented by bright yellow and the highest populations are represented by bright red. Most of western Hennepin County has the lowest populations out the entire study area. The most populated areas are in eastern Hennepin County around Minneapolis and in the lower part of Ramsey County around St. Paul. Based on this map alone, Trader Joe's may want to consider adding a location within the heart of the highly populated region perhaps somewhere between Minneapolis and St. Paul. 

Optimal Location (Mean Center)

Figure 4: Trader Joe's optimal store location 

The result of the optimal location analysis based off of customer data (figure 4) is displayed as a neon pink circle and is located just west of Minneapolis in Hennepin County. Since this is the geographic mean center of all of Trader Joe's customers in this region, Trader Joe's may want to consider adding a store in this location or very close to it.  

Customer Prospecting

Figure 5: Trader Joe's ideal customer areas

The result of the customer prospecting analysis (figure 5) is displayed as a 5-class choropleth map where the best ranking is represented as bright red and the worst ranking is represented as bright yellow. The two best areas fall within the Golden Valley, Edina, Minnetonka, and Eden Prairie circle, the third best area includes St. Paul and west of St. Paul, and the least best area is in northern Ramsey County. There are already two locations within the third and fifth best areas, and the other three locations are located in close proximity to the first and second best areas. Based of this map, Trader Joe's may want to consider looking at an area slightly southwest of the first best area, perhaps in or near Eden Prairie.

The Three Potential Sites

Figure 6: Potential Trader Joe's store locations

Looking at all of the previous results together, three locations were chosen as potential sites for a new store, represent on the map in figure 6 as yellow stars. Site 1 is located in Eden Prairie (figure 7). Site 2 is located in Golden Valley (figure 8). Site 3 is located in Long Lake (figure 9).

Figure 7: Eden Prairie location

   Figure 8: Golden Valley location

Figure 9: Long Lake location

Once the cities were decided upon, choosing a specific site location was based on where an empty lot could be found in an area where other retail is located and is within close proximity to high traffic flow, such as a major highway.





Rank Markets

Figure 10: Ranking table

After the ranking analysis was ran, the results for site locations 1, 2, and 3 were ranked in that same order, respectively (figure 10). Site 1 (Eden Prairie) had the highest numbers in all categories except for median household income where it was ranked second among all sites. Site 2 (Golden Valley) had the second highest numbers in all categories except for median household income where it ranked last among all sites, just behind site 1. Site 3 (Long Lake) by far had the lowest numbers in all categories except for median household income where it ranked first among all sites by a large margin.