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Retail Business Environment

Notes anticipate how well the market will respond to changes in the number, type and location of
retail businesses and to provide community leaders with information to guide future business
expansion and recruitment efforts.
Before an analysis of a particular development can be conducted, the economic health of the
local retail community must be assessed. This requires a close look at retail activity, particularly
in the central business district. Key indicators of economic health in the retail sector include
vacancy levels, property values, store turnover, retail mix, employment, tax revenues, new
business incubation, critical mass/concentration of retail, and the availability of goods and
services demanded by the community.

Second, changes in trade area demographics should be estimated. The trade area is generally
defined as the geographic area in which three-fourths of current customers reside. A significant
increase in population could signal new opportunities for retail expansion or development. The
profile of these new or anticipated residents can help you assess future market demand for
various types of products or services.
Third, regional retail competition must be assessed. New retail concepts are threatening
traditional retail stores. These concepts include large non-mall stores offering assortment and
low prices for selected types of goods like electronics, off-price apparel stores, food/drug stores
and neighborhood drug stores that offer convenience, outlet centers, warehouse clubs and the
internet. By recognizing the changes in competition, both locally and regionally, your assessment
of proposed retail developments can offer valuable insight into the changing market and risk
facing the traditional retailers in the community.
Finally, with an understanding of general retail trends, changes in trade area demographics, and
regional competition you can use secondary data to measure market gaps in the community and
assess the impacts of the proposed development. Two techniques can be used: retail mix analysis
and retail space analysis.
Retail Mix Analysis: The retail mix in “comparison” communities can be used to measure how
many and what type of retail stores might be supported in your community. Comparison
communities might include those with similar population, household incomes and distances
from major metropolitan areas. If your community is growing in population, comparison
communities with a larger population can be used.
Once the comparison communities are identified, the retail mix in each community is inventoried
by specific retail category. The average numbers of stores by retail category in the comparison
communities is then compared with the number in your community to identify any significant
differences that might suggest business expansion or development opportunities.
The amount of additional retail space that can be supported by a growing community can be
projected using two types of data: Household Consumer Expenditure Estimates and Sales per
Square Foot of Existing Retailers.
This analysis can be refined by using “household consumer expenditure data” or “median store
sales per square foot” that more accurately reflect the socio-economic conditions of your
community. Data can be purchased through private data firms that describe spending of consumers
or store sales in your particular community or other representative areas. By using more reflective
data, calculations will more accurately determine the additional retail space necessary to serve
the market area.

2.6 Impact of Changes in Retailing

Retailing business in India is undergoing rapid transformation. The kirana store is a major
element in the retail business in India. The emergence of new retail formats in retailing sector

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