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.