Assignment 4: Retail Site Selection for Trader Joe's

Project Overview

Trader Joe's is a nationally recognized grocery store with six locations in the Minneapolis/St. Paul, Minnesota area and is looking to expand. Through the use of ArcMap, Business Analyst, and customer data, the best location for a new Trader Joe's store will be determined. 

Site Selection

The first steps in the site selection process is establishing the geographic extent of the area being studied, (this is known as the "study area"). For this assignment, the study area was set to Ramsey and Hennepin counties. Also determining the locations of current customers and store locations are an important aspect of site selection. Figure 1 shows a map of the study area in red, locations of Trader Joe's stores in the greater Minneapolis/Saint Paul area as gold stars, and locations of customers as white dots.

Figure 1: Study area and, locations of Trader Joe's stores, and customers.

Now that the study area, locations of stores, and locations of customers have been established, the next step is to determine market penetration of Trader Joe's stores within the study area. To determine how well Trader Joe's stores are doing compared to their competitors, market penetration looks at the number of Trader Joe's customers compared to the number of people within a geographic area. In figure 2, darker green areas show where Trader Joe's penetrates the grocery store market at higher levels than in lighter green areas. The red point on the map with the black dot in the middle shows the geographic center of all Trader Joe's customers in the study area. Again, Trader Joe's store locations are shown as stars on the map and green dots represent the locations of customers.

Figure 2: Trader Joe's market penetration.

 In addition to market penetration, it is helpful to know where ideal customers are located to determine site selection. Ideal customers can mean many things, but for the purpose of this assignment, ideal customers are ones who have families to feed and money to spend. These criteria can be analyzed through using the median household income and total families datasets. Ideal customer areas, shown as green areas in figure 3, are ones with a median household income of greater than $80,000 and have families.

Figure 3: Ideal potential customer areas.

Lastly, three locations were determined (shown in figure 4) as being the best potential sites to put a new Trader Joe's location. These locations were selected based on their proximity to ideal potential customers, market penetrations, and customer access. The three best locations are represented as red stars in figure 4 and the circles behind them indicate a ranking based on total population, median annual income, over $150 spent at a grocery store on average per week, and shopped at a Trader Joe's within the last six months. Red is the best choice of the three, orange is the second best, and yellow is the third best.

Figure 4: Potential locations for a new Trader Joe's 

Conclusions

What can be taken away from this analysis is that the best location to put a new Trader Joe's store would be in north west Eden Prairie (see figure 4). With close proximity to an ideal potential customer market in Chaska and minimal market penetration for room to grow in Chanhassen, Excelsior, and Shakopee, 16545 Luther Way, Eden Prairie, MN is a prime location for a new Trader Joe's location.

It is clear that business analyst is an extremely powerful tool in determining markets, site selection, and many other analyses pertaining to the growth of a business. Through examining where Trader Joe's customers and store locations were in a study area, many tools in the business analyst extension of ArcMap were used to research markets, potential customers, and best store locations. Ultimately, much more analysis would need to be done in order to truly determine if the potential sites chosen were for sale, affordable, and return on investment would put Trader Joe's in the green with the new location. Nevertheless, this exercise provided some good insight as to what it would be like to select a new site for a company such as Trader Joe's.   

Assignment 3: Real Estate Analysis

Background: The United States has a wide range of home values depending on numerous statistics and characteristics, and Eau Claire is no exception. 415 Congress street is a two-bedroom home within Eau Claire's 3rd ward district, and studying this home will yield insights into the Eau Claire housing market and it's geographic tendencies. The information that will follow will be in the interest of selling this home, so as to also discuss demographic tendencies of home buyers.

Procedure:

1. Analysis of the home itself, as in bedrooms, amenities, land, and other aspects specific to 415 Congress Street.

2. Analysis of the 3rd ward area and its similarities as well as differences compared to other neighborhoods around Eau Claire.

3. Demographic analysis of people that live in the 3rd ward area as well as prospective buyers of the home.

4. A comprehensive monetary analysis of the particulars discussed in sections 1,2 and 3 in reference to a final listing price for the home.   

Analysis:

Location: 415 Jefferson Street

The house at 415 Jefferson street is a single family home with two bedroom and two bathrooms.The house is roughly 2,000 square feet and includes a two car detached garage. Most homes in this area do not have garages, which is one reason why 415 Jefferson is unique. This house was built in 1871 but has since been updated most recently with new appliances. As well as well as a new roof in 2012. Throughout the home you will find hardwood floors and oak woodwork. Other houses in the area are about the same size with two or three bedrooms. However, not all of those homes have been recently updated. Given this home's size and location we would most likely be selling to a single family possibly with one child and a parent that would work at the university. Because this home is for sale and not for rent we would not market this to college students but rather full time residence.

The Bureau of Labor has numerous markers available that have been synthesized with market research to better understand the value of a home and it's surroundings. For example, the average price of a home will increase roughly 17-19% if there is a park within 100 feet. Having a school nearby affords a heavier police presence, and overall makes a community safer, which therefore can potentially raise values of a home by 10-15%, depending on the quality of the school. 

Figure 1: Amenities near 415 Jefferson St.

On top of the local park and school, 415 Jefferson is located less than a block away from a community garden. Unique features such as this produce heightened interest in housing markets depending on the target buyer, which includes families, as per a 2005 Texas A&M study, where other items such as landmarks and tourist attractions raised home value. 

Neighborhood Analysis

415 Jefferson Street sits within Eau Claire's 3rd ward neighborhood, which is a few blocks away from downtown and the UW-Eau Claire campus. Compared to other neighborhoods nearby, the average home price in the 3rd ward is high, and well above the city average, which is $157,000 (Zillow).

Figure 2: Average listing prices

Figure 2 displays the prominent uptick in Home value and final sale price the Third ward holds over nearby neighborhoods. A decent portion of the value rests on individual characteristics as mentioned previously, however a great portion rests on location of a home in Eau Claire. It's central location within the greater city, its locality to major shopping centers south of Eau Claire, and it's proximity to UW-Eau Claire, which supports roughly 3,000 jobs at any one time, are key factors.

Demographic Analysis

Home buyers are often concerned with the people they will call neighbors when searching for a home, and usually prefer to belong to a neighborhood that they themselves can identify with. Age, education, children, socioeconomic status, buy or own  are all key factors. The U.S. Census is usually the best place to consult initially for this kind of data, which is often a key point in real estate.

College Town Distribution

With 415 Jefferson in the 7th census tract of Eau Claire, the age distribution is slightly skewed, and predominately reminiscent of an Old and Newcomer population pyramid, shown below.

The nearby 17th census tract, with a greater majority of the third ward, comprises demographic characteristics of a college town age distribution, shown above. The characteristics of this segment are similar to an old and Newcomer distribution with regards to the mix of renters, homeowners, and single families, but it has a lower proportion of homeowners. The Old and Newcomer segment is characterized by people in transition of college to full-time employment and recent retirees. Further data collected supported this conclusion, including income data, which expands on the renter to ownership ratio based on median household income. Census block 7, as of 2016, had 526 homes with a household income greater than $50,000, compared to just 137 for census block 17. Even more telling, block 7 had 1175 declared family households, compared to 366 in block 17, mostly due to many of the houses in block 17 being rented by students, which then also drives down real estate prices.



Final Pricing Assessment


With all these geographies playing into consideration, including the visuals above, a final listing price of $180,000, or around said price, would be satisfactory of 415 Jefferson Street. With the home being modern, as well as being close to many commodities, this price would accurately reflect the homes value considering current market trends. The last time the house was sold, in 2007, it sold for $156,500, and Zillow currently lists the house at $174,900, however, given the characteristics of the house, the local area, and local demographics, $180,000 would be a fair assessment. 

Resources:
Bureau of Labor Statistics.
“Eau Claire Comprehensive Plan 2015: Neighborhoods and Districts Assessment”. City of Eau Claire Wisconsin. http://www.ci.eau-claire.wi.us/home/showdocument?id=9331.
Esri Business Analyst
“Tapestry Segmentation.” Esri.
http://doc.arcgis.com/en/esri-demographics/data/tapestry-segmentation.htm#ESRI_SECTION1_87F5D845F8E04723AE1F4F502FF3B636.
“College Towns.” Esri. http://downloads.esri.com/esri_content_doc/dbl/us/tapestry/segment66.pdf.
“Old and Newcomers.” Esri. http://downloads.esri.com/esri_content_doc/dbl/us/tapestry/segment38.pdf.
Google Earth
Google Maps

Zillow.com