Catchment Analysis for Retailers

Different businesses have their respective key “P”s of the marketing mix. For a manufacturing company it is their “Product”, for the beverage giant it is “promotion” and for the commodity business it is the “price”. However, for the retailers the key P is the “Place”. With the amount of growth the world is going through, and the way the lives of individuals is shaping up, it is clearly visible that one is always short of time (even money is not an issue now for the middle class consumer).

Hence it is of the utmost importance for the retailers to be easily accessible, or be so unique that they attract footfall by just their offerings, ambience, and secondary services like F&B and entertainment opportunities (in case of malls and lifestyle centers). So it is really important for the retailers to be really be located in the key city areas, or to have a clear understanding of the areas it is going to serve.

Catchment is defined as the sphere of influence from which the retailer is likely to draw its customers. It is the area from where they expect to gather footfalls and run their business. Most widely used definition of various catchments is Primary, Secondary and Tertiary that attract 75%, 20% and 5% of the total visitors respectively.

The size of the catchment area is determined by the format and size of the store, population density of its catchment, the competitive intensity, and how well its proposition fits the needs of the customer base. The major determining factor for the size of the ring / area is the format – bigger formats have larger trade areas and hence a large catchment to cater as against a small retail player or the local grocery store.

Usually primary catchment spans over a couple of kilometers on all sides of the establishment, but it might not be a good definition for a sparsely populated area. In such a case, a radial distance of up to 5 kilometers might suffice the need. The measure of radial distance and time travel to define the catchments should be decided by the retailers themselves to best suit their needs and expansion plans.

Examples:

The image below illustrates the radial representation of the primary, secondary and tertiary catchments using the red, blue and green lines.

catchment

As you can observe, large areas in the blue and green (marked by orange) do not have any major road, connecting to them and hence it is safe to assume that it is less populated and hence it should not be given the same prominence as the areas marked by green overlay.In a practical case, this problem actually led to over-estimation of the potential population, causing a major drag on the bottom line at a later stage due to the mismatch in the range of facilities provided and the trials achieved.

This is not an accurate representation of the catchment.

Let us now look at the second image.

ideal catchment

The catchment boundaries represented by red, green and orange areas are not just round. They have been drawn according to the roads that run across the areas. It is evident that the map has been drawn after taking into consideration the travel time and distance from the retail center.

This is an ideal catchment representation.

How does one carry out catchment analysis?

Retailers use catchment analysis to get a better understanding of the area that they plan to serve. It requires inputs from both secondary and primary research. Secondary resources like the municipal corporation, or IRS services can be utilized to get an overall understanding of the areas under consideration. Information like total population, number of households, distance from the retailer, etc. is used as well. This is an important step for the next stage of the study as the insights from the secondary research will feed into the design of the primary research initiative.
Primary research involves personal face to face interviews with the residents of the areas identified in the secondary research. A qualitative approach of market immersions and consumer immersions is the key to understand their behavior and perceived category gaps in the areas.
A thorough analysis of all the sub-areas in the catchment is usually advised for the study, however depending on the density and homogeneity of the areas a sporadic and well spread out study can be undertaken.

Key information outputs from Catchment analysis:

It is very important to accurately undertake catchment analysis. This will give the retailers information in the lines of:

Population of the area, Number of households, Family size
Demographics of the residents: Age, Income, Occupation, Marital Status, Number of kids, Number of elders
Understand catchments needs, wants and other lifestyle measures
Assets owned: Electrical appliances, Number of cars, Number of bikes
Media consumption patterns
Current shopping behavior: Who shops? From where? How often? Average Spends? How do they visit? What do they buy?
Understand perception of their competitors
Current F&B experience available; what is missing? What would they look forward to having around?
Category gaps: Any product category the area is missing, Any brands that they want to have in the surrounding

What is in for retailers?

The above mentioned information areas will then help the retailers make many important and strategic decisions.

It helps estimate the number of potential footfalls accurately
Helps plan the dedicated floor plans by categories (if catchment analysis is undertaken in the initial stages of development)
Parking area for cars and bikes can be better managed
Determining category mix of the outlet
Planning for kids play area, area dedicated to elderly etc.
Help target promotional activities / exercises
Help decide on the frequency and types of activities and events to be held at the center
Help differentiate from the competitors

It is ideal that every retailer undertakes Catchment Analysis so as to maximize customer footfalls and spend. Brandscapes Worldwide has undertaken catchment analysis for its clients and has helped them come up with various marketing, category and segmenting strategies in turn helping them gain an easy and focused entry and access for smooth functioning in newer markets.

The article is written by Abhishek Preetam, who has an experience of over 3 years at Brandscapes Worldwide and has worked with numerous clients with a keen focus in the retail sector. In his free time, Abhishek enjoys photography, making videos and listening to music. You can check out some interesting clicks on http://abhishekpreetam.wordpress.com

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About Brandscapes Worldwide

Brandscapes specializes in marketing analytics and insight consulting for consumer goods, services and the retail sectors. We leverage the power of advanced data mining tools and the practical marketing and communication planning expertise to distil actionable marketing insights.
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