Where Would Shoppers Go?

This page authored by Michelle B. Kunz, Morehead State University
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Summary

This scenario-based problem has students apply two retail gravitation models/formulas to determine where a consumer would choose to shop when making a specific purchase, or on a described shopping trip. The two retail gravity models or formulas are Huff's Gravity Model, and Reilly's Law of Retail Gravitation. This activity can be applied in a Retailing class related to the site and location selection units, in a consumer behavior class related to outlet selection in the consumer decision process, or when examining situational influences. It is also relevant to Real Estate studies, or marketing strategy cases. This exercise can be completed individually, or by small teams. If the university is located in a larger metro area, you might wish to select several shopping centers or malls as possible destinations. If you are in a smaller, less metro area, you might select several small neighboring towns as destinations. The exercise gives students the opportunity to analyze how the retail offerings, product variances, and travel conditions might impact where consumers would decide to shop.


Learning Goals

In this exercise students will
  1. Apply a formula to evaluate the potential for a retail center to draw customers.
  2. Compare the draw of two different retail locations.
  3. Analyze factors that influence the market potential of retail locations.

Context for Use

This exercise could be used in a consumer behavior class to demonstrate factors that influence selection of retail locations, in a retail class related to site and location selection, or in real estate studies related to site selection and market potential evaluation.

I typically introduce the subject at the end of a class lecture, prior to when we will cover this material, depending upon the class I am teaching. If the class is particularly large, it works well to divide the students into teams of two or three, but usually no more. Because undergraduate students tend to have a pattern of specific stores or brands they purchase regularly, I introduce the exercise, by asking them if they needed to purchase.... and I list several items, some of which we can easily purchase in our town of limited retail resources, and then a couple things with very specific needs, such as a job interview suit, or a special gift for a family/friend. This gets them thinking, and they begin to realize several factors might influence where they decide to shop. I ask the class to list on the board several factors that they consider when making these selections to get them thinking about consumer preferences.

I then assign the scenario to the class, with the shopping task and possible locations. Using the two retail gravitation models, students then determine which of the two locations consumers would choose for the shopping task. If the class is large, I design several different shopping tasks, along with multiple locations options. The gravitation models examine travel time/distance as well as the size of the stores/retail offerings and consumer preference factors. If I assign students to small groups, they then have the opportunity to discuss and brainstorm multiple factors that might influence consumer preferences, and must decide what variables they use for the formulas. Student should complete the exercise and be prepared to discuss their results at the next class. If you have multiple scenarios, it can provide a rich in-class discussion of the variability of factors that influence shopping choices, as well as the influence of the shopping task on site selection.

I do not let students get wrapped up in the mathematical components and possible issues with the formula for the exercise, but this side of the activity can also bring a rich discussion to class, if different answers were obtained for the same situation and locations. You can demonstrate what factors resulted in the different answers, and then discuss how complicated accurate predictions of consumer behavior can be.

In a retail class this lets students discuss and analyze how the type of merchandise, retail operation, and surrounding retail offerings might influence consumers' choice of shopping location. In this instance, you might want to use the same shopping mall, with different product / shopping needs in multiple scenarios, being aware of the different products or product assortment offered at the two locations.

Description and Teaching Materials

The activity includes a shopping scenario consisting of the type of product and possible locations to make the purchase. Provide student with the handout explaining the two retail gravity models and the scenario. Ask them to determine which location they would choose for the shopping task assigned, and then analyze what factors determined the results.
Student Handout for Retail Gravitation Model (Microsoft Word 30kB Aug10 10)

Teaching Notes and Tips

This activity can be customized for multiple applications, class topics, and class size.

Assessment

Questions for in-class discussion and analysis should be designed around the course and unit for which you use the activity. For example:
  1. What variables did you use to determine travel time to each location? (this might include traffic congestion, distance, traffic signals/timing, number of entrance/exits to the center, etc.)
  2. What characteristics of each shopping location did you identify? (These might include number of stores, variety of stores/store types; merchandise assortment/offering, specific brands/stores in location, etc.)

References and Resources

There are many articles written on gravitational models. This is a selective list:
Babin, B. J., & Boles, J. S. (1994). The development of spatial theory in retailing and its contribution to marketing thought and. Research in Marketing(6), 103.
Bottum, M. S. (1989a). Retail Gravity Model. The Appraisal Journal, 57(2), 166.
Brown, S. (1994). Reillys law of retail gravitation: What goes round, comes around. Research in Marketing(6), 117.
Carter, C. C. (1993). Assumptions underlying the retail gravity model. The Appraisal Journal, 61(4), 509.
David, R. (2004). A status report on location analysis. DSN Retailing Today, 43(2), 14.
Huff, D. L. (1964). Defining and Estimating a Trading Area. Journal of Marketing (pre-1986), 28(000003), 34.
Huff, D. L. (1984). Measuring the Congruence of Market Areas. Journal of Marketing (pre-1986), 48(000001), 68.
Huff, D. L., & Batsell, R. R. (1977). Delimiting the Areal Extent of A Market Area. JMR, Journal of Marketing Research, 14(4), 581.
Peterson, R. A. (Writer). (1974). Trade Area Analysis Using Trend Surface Mapping [Article], Journal of Marketing Research (JMR): American Marketing Association.
Rogers, D. (1992). A Review of Sales Forecasting Models Most Commonly Applied in Retail Site Evaluation. International Journal of Retail & Distribution Management, 20(4), 3.
Tammy, D., & Zvi, D. (Writers). (2002). Validating the gravity-based competitive location model using inferred attractiveness.
Wagner, W. B. (1974). An Empirical Test of Reillys Law of Retail Gravitation. Growth & Change, 5(3), 30.


There are several websites that discuss these models, and this one is particularly relevant:

Environmental Systems Research Institute, Inc. (Esri), in Redlands, California has an article on the Huff model.