Caribou Coffee Site Selection

Final Assignment: Retail Store Site Selection

Introduction:

                The main goal for this assignment is for us to select a retail store of our choice and attempt to find a location for a new store to be placed. In order to do this we are using ArcMap and Business Analyst to help us map out all of the existing locations and analyze the data regarding average income, total population, and many other data sets within our study area. Throughout the entire course we have learned many different tools on business analyst that will help us make educational conclusions to where we believe the new retail store should be located. I have decided to do research on Caribou Coffee and try to research a location within Eau Claire County for the new site to be placed. The reason why I decided to choose this particular store as my topic is because I used to work at a Caribou Coffee, and expanding a company is one of the most important aspects for continuing a successful business. Eau Claire County seemed like a good area to do research within because it is still a developing town, it contains a college campus which is good for business since research has proven that college students drink the most coffee.

Summary & Findings:

                In order to be able to successfully determine where I was going to place the next Caribou Coffee in Eau Claire County, I needed to use a couple business analysis tools in order to scan the market and decide where the next store would be the most profitable. My first step was to find out where the hot spots in the county were in accordance to two main variables that I am going to focus on during this project, these variables are the “2015 Total Population” and the “2015 Median Household Income.” These variables will help me determine where the most populated areas are in the county which is the most important aspect for a retail store like this, and which area has the largest household incomes within the Eau Claire County. In order to be able to run a Hot Spot analysis we need to have the Business analyst program running so than we can use all of the information on current population and current median household income for the study area. After this we need to go to the analyst section of the program and choose analysis, we need to specify that we are doing a market analysis and not a site analysis, I decided to extend the grid cell size to each one representing one mile so than it would be more generalized and not as hard to read. Once I got past the first couple of steps in order to create a hot spot analysis, I then needed to specify what I wanted it to represent, in this case I want it to represent the total population of the county, and the total median household income. The reason why the hotpot analysis was the first step into finding the next location for the new Caribou Coffee is because it helps us look at the entire area relating to the variable we are showing and decide which areas have the largest amount of that variable. Below are two maps one representing the hotspot analysis of the 2015 Total Population for Eau Claire County and the other map representing the hotspot analysis of the 2015 Median Household Income.

 

                As you can see from the maps above the site location that I have chosen is located in an area that has a very high population which will be key to the success of this new Caribou Coffee, and the area in regards to the median household income is somewhat average since it is a college town and coffee isn’t that expensive of a product the overall income isn’t the most important aspect but it still has a major role in deciding whether or not this new site is going to be a profitable location or it.

The next tool that I decided to use in business analyst was the ‘Customer Prospecting’ tool, this helps me decide where the ideal customers are in my study area based on the two variables that I have been using, the data of the 2015 Total Population and the 2015 Median Household Income. In order to run this tool I need to use the original study area that I had already collected and choose the analyst area of the program once again, still using the market analysis option so than we can determine where the best place to build a new Caribou Coffee is depending on where the largest amount of ideal customers are located. After we chose what kind of test we were going to use we would then specify which filter we would like the program to base the map off of, in this case we made a separate map for each of the variables we are trying to use during this project. Below are two different maps, both are representing ideal customers based on the two variables that were mentioned earlier in the lab.

                Both of these maps are showing potential customers for the new Caribou Coffee that we are trying to build in Eau Claire County, both are providing us with information that will be very useful in deciding where the best locations are located. For a Caribou Coffee having an overly large income isn’t the most important thing since the products sold at this retail location aren’t overly expensive. But the aspect of putting the new location in an area with a high population rises the opportunity of gaining many more customers, which is why when looking at the maps above the new site selection isn’t in an area with the highest median household income but is in an somewhat high area in relation to the population of Eau Claire County.

Once we were completed with that tool we moved on to making a trading area for the already existing locations so than we can tell where the better locations would be to build the new site. The way that this tool works in instead of choosing analysis, we would choose trade area, then we would decide what kind of trade area we would like to create whether it would be a simple trade area, or a drive time trade area. In this case I decided to create a simple trade area which shows us three rings each representing a different distance away from the already existing locations of Caribou Coffee. The way we can use this advantage is if we were to build the new site outside of the trade area than that will help us locate new customers to the retail store chain, which will help the new site be profitable. In order to find everything that we want to know about the trade area for this company we need to calculate the ‘Point of Indifference’ between my city and three other cities. In this case I am going to do my calculations which Barron, Menomonie, and Osseo, the reason for these three cities in particular is because they are all in a different direction away from our center point which is Eau Claire, WI. To calculate the point of indifference we need to find the exact distance from each city to Eau Claire and the total population of each city. Then the equation to calculate that is (A/1+sqrt (B/C)) this is where A = the distance from Eau Claire, B = the other cities population, and C = Eau Claire’s population. Below are the equations for each of the cities that I was comparing to Eau Claire;

Barron, WI: (53.7/1+sqrt (3,000/101,000)) = 45.8 = 53.7-45.8 = 7.9
Menomonie, WI: (23.6/1+sqrt (16,000/101,000)) = 16.9 = 23.6-1639 = 6.7

Osseo, WI: (24.9/1+sqrt (2,000/101,000)) = 21.8 = 24.9 – 21.8 = 3.1

This test will help me analyze the trade area of Caribou Coffee as a whole and determine whether or not a smaller city would be influenced to come to a larger city or in this case Eau Claire and shop in Eau Claire because of how it’s a larger city than their hometown. Below is a map representing the simple trade area that I have created so than we can compare where the new location would be best suited to be most profitable. 

            As you can see in comparison to the other already existing locations for Caribou Coffee are about two miles apart that is why I thought it would be a good idea to try and extend the newest site to be two miles away from an already existing location. This study area that has been chosen is also a great way to look at what is near by the store. 

           The next step that I needed to complete so than I will have enough information to decide where to put my new site is to rank three of the already existing sites for the competitors. In order to do this we need to use site analysis instead of market analysis so than we can rank the similar sites in the study area. We then decided to use a buffer distance of half a mile since all of the coffee shops are placed so closely together in the study area and this will allow us to get a more precise ranking for each already existing sites. The reason why I needed to rank the top three sites in my study area is so than I could get a good idea of where my new site should be placed in accordance to the location of the three top sites in my study area. My final step was to run the tool called ‘Find Optimal Stores’ this tool will help me find different locations that would best suite my new site, the tool bases all of its tests off of cluster distribution. I decided to base this test off of the data that I have on all of the competitor’s site locations, and off of the two variables that I had stated earlier in the report. , since we don’t have any customer data this will be the next best thing. Below is a map that represents the top 3 ranked locations for coffee shops in Eau Claire County and the new site selection that I have chosen.

 

            As you can see the three top ranked locations are very closely located to one another meaning that the area that they are located in must be a very profitable area. The green star represents the location that I would like to place the new site, it is near the top three ranked locations but not too close to where it would affect their profits by a crucial margin. 

Conclusion:

            Once again my goal of this project was for me to select a retail store and try to use business analyst to find a location for a new site to be built. The retail store that I have chosen to do my research on is Caribou Coffee, my study area is Eau Claire County. After doing all of the research and using all of the different tools that would help me locate a new site for Caribou Coffee, I have concluded that the best location for the new site is 320 E Madison St. Eau Claire, WI 54703. The reason for this is because since most of the coffee shops in Eau Claire County are located within the college campus and have generally a younger demographic, this means that the average income for these coffee shops to expect are that of a college student. This is why I took into account that the total population of the areas in Eau Claire County are overall more important since that will lead to the new location to being more profitable and prospering in the area that I have chosen. Even though the new site that I have selected is close to other coffee shops, the other coffee shops are small companies locally grown, while Caribou Coffee is one of the most popular coffee stores in the world and has a name that is well known everywhere which is why this store will proper above the others that are around it.

Trader Joe's New Site Location

Assignment 4

Goal:

                The goal of this assignment was to get a better understanding of how site selection works on Business Analyst and how one can use these tools for a vaster amount of knowledge on how the business world works. The job at question was to find a new site location for a convenient store company found in Minnesota. There are currently 6 Trader Joe’s in both Hennepin and Ramsey County, the end goal is for us to have found a new location for a seventh Trader Joe’s in these counties based on five different reports that need to be created. These reports include the Market Penetration Report, Hot Spot Analysis, the Optimal Store Location (Mean Center of all Customers), Location of Ideal Customers, and the final step is to rank sites of three already existing store locations. 

Summary & Findings:

                The first report that I decided to create was the Market Penetration report, this report is a method that examines how well a company is at reaching their market area, in this case I am talking about Trader Joe’s and how well they reach their market in that area. Throughout the entire assignment I had to create multiple study areas for each procedure and then would analyze the study area by either analyzing the site location aspect or the market analysis. Below is a map of the market penetration based on the 2015 Median Income of the area.

                As you can see by looking at the figure above the areas that have been most penetrated by the Trader Joe’s market are the areas that are darkest green. Which are the areas that contain the most customers out of the rest of the counties. The areas that have little to no market penetration are the areas that are lightest green, and if you look at where the customers are is the area with the least amount of customers for the Trader Joe stores. This tells us that the best area to put a new store if Trader Joe’s is looking to make a profit is right where the red star is which is the Optimal Store Location.

                The next procedure that I started is called a Hot Spot Analysis, this procedure is used to help identify areas with high values at different geographic scales. This helped us explain if the areas in Hennepin and Ramsey County with a high population are the same as the areas with a high income. This analysis will help us decide which areas within the counties have the most population and the highest income so than Trader Joe’s can put their next store in a location where it would make the most profit. Below is figure 2 and 3, the first figure is showing the hotspots in the counties based on the total population, while figure 3 is showing the hotspots in the counties based on the median household income.

                As you can see by looking at the two figures above there aren’t too many areas in the counties where there are areas with both high population and a high income. This can pose some problems for Trader Joe’s due to the fact that they will want to ideally put there store in a location with both a high population and a high median income. But there are still areas on the map that have high population and a reasonably high median income which would be the best location for Trader Joe’s to build their next store.

                The next procedure that needed to be completed was to locate the ideal customers of Trader Joe’s within these two counties. The Ideal Customers method allows us to identify a threshold of some variable at a certain geographic area or in this assignments case, find the threshold for zip codes with at least 20,000 people. This will be helpful because it will allow Trader Joe’s to find future customers for their company and this test will show which areas will have the most customers that are most likely to go to their store if one was to be built close by. Below are figures 4 and 5, the first figure is showing us the Ideal customers of the area based on total population, and the next figure is showing us the Ideal customers for the two counties based on median household income. 

                By looking at the figures above you can tell which areas have the most ideal customers based on population and income. Most areas in these two counties would all be ideal customers for Trader Joe’s but by looking at these figures one can tell the specific areas that would allow the next Trader Joe’s store to not only survive but prosper by having the largest profit it could possibly have. The red star on the map represents the optimal store location based on all of the data that has already been collected.

                The final procedure for this assignment was to rank already existing sites to see which are thriving the most and which aren’t doing as well. By ranking these stores this allows us to see which sites are in the best areas since they are outperforming other stores around them. This procedure in the end will give us the information needed to decide where to put the next store while considering where the three best store locations are. One of the things that Trader Joe’s doesn’t want to do is put the new store within a close distance of the stores that are already outperforming others, because this is problematic where the new store might take business from one the top stores making both stores not being able to perform at their highest. Instead both stores will have to share customers and not make as much of a profit as originally intended. Below is the figure of the future location that I have chosen and the top 3 already existing store locations, giving the readers a good idea of where I would like to put the next site in relation to the top stores in the area.

Conclusion:

                After looking at all of the data that was collected over the assignment I have decided that the best location for Trader Joe’s to place their new store is at the corner of Olsen Memorial Highway (55) and Van White Memorial Blvd in Minneapolis, MN. There is a large open area where the store can be placed and has room for a large parking lot which will allow more customers to be at this location at once which will maximize the profit of the location. While looking at the population and median household income for the area this would be best because it is close by to already existing customers and contains a large amount of ideal customers which will help this Trader Joe’s be profitable.  Same goes for the hotspot figures, the area that was chosen is in the best location where there is a large population and a considerably high median household income. While looking at the market penetration figure I wanted to find an area where the market has already been penetrated by Trader Joe’s, this means that the area that I have chosen already knows of the Trader Joe’s corporation and will be more likely to shop there. The location that I have chosen for Trader Joe’s to build there next site is the best location, because it is right by a major highway, a neighborhood, contains a large population, a high median income and in the end will make the new Trader Joe’s succeed and be very profitable.