Evaluating store location and department composition based on spatial heterogeneity in sales potential |
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Affiliation: | 1. Department of Marketing, BI Norwegian Business School, 0442 Oslo, UiS Business School, University of Stavanger, Norway;2. Department of Marketing, Faculty of Economics & Business, University of Groningen, PO Box 800, 9700AV, Groningen, the Netherlands;3. Department of Economics, Econometrics, and Finance, Faculty of Economics & Business, University of Groningen, PO Box 800, 9700AV, Groningen, the Netherlands |
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Abstract: | In this paper, we extend a retail location evaluation model with the possibility to include the effect of department size adaptation at the store level. We relate department-level store sales to a store's competitive and demographic environment, thereby providing richer insights into the drivers of department sales than a model of just aggregate sales. Further, we accommodate heterogeneity in consumer characteristics over space by using zip code level data and unobserved spatial effects in department sales by including spatially autocorrelated error terms.Using spatial panel data for 30 clothing stores belonging to one Dutch retail chain, we demonstrate how to use the modeling approach to analyze and predict sales performance of new and existing stores. We show that the predictive performance of our model is superior to that of a benchmark model that does not include spatial autocorrelation. |
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Keywords: | Retailing Store location Assortment composition Store performance Spatial dependence |
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