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.