Select a business site with competitive analysis

Janice and Steven want to open a new retail home improvement center in the Minneapolis-St. Paul area. The store, named Living in the Green Lane (LITGL), will provide environmentally friendly products and service lines. As a location analytics manager, you'll use ArcGIS Business Analyst Web App to help them compare the competitive environment of two potential store locations by analyzing retail competitors and market attractors. Your analysis will determine which site has the most favorable competitive environment.

This lesson was last tested on August 18, 2022.

Requirements

• ArcGIS organizational account with a Publisher, Facilitator, or Administrator role in an ArcGIS organization (see options for software access)
• ArcGIS Business Analyst Web App Standard or Advanced
• 61 credits

Map potential store locations

Janice and Steven have already narrowed their preferred store location to two options, both of which have suitable facilities. They have now asked you, a location analytics manager for the Minneapolis-St. Paul metropolitan area, to help them decide which site would be best.

In this lesson, you'll navigate to the area of interest, add the potential store locations to the map, and calculate drive-time areas to display each location's market area.

Navigate to the area of interest

First, you'll create a Business Analyst project and navigate to the area of interest: Minneapolis, Minnesota.

1. Sign in to Business Analyst.
2. If you see a Welcome window and are asked to add a profile image, click Skip This Step and click Create Project.
3. If you do not see a Welcome window, click Create New Project on the Projects tab.

   

   The Create Project window opens.

4. For Project name, type LITGL Project. Click Create.

   

   A window appears, explaining that a new project is being created. The process might take a few minutes. Once the project is complete, another window appears for confirmation.

5. In the confirmation window, click OK.

   The project is created and added to your list of projects.

   Note:

   If you checked Open new projects as soon as they are created in the confirmation window, the project will open automatically and you can skip the next step.

6. Point to LITGL Project and click Open.

   

   The project opens. It contains a map and a table of contents (the pane to the left of the map). To the right of the map is a toolbar with options for navigating and changing the map.

   

   Note:

   If this is your first project, the step-by-step Guided Tours window may open. This window explains several workflows that you can complete using Business Analyst. Close this window while you complete this lesson. To reopen it, click your username and choose Guided Tours.

7. At the bottom of the table of contents, click Close.

   Only the map and the toolbar are displayed. Before you navigate to Minneapolis, you'll change the basemap. The basemap is the background map that displays information such as national boundaries, rivers, streets, or cities. The default basemap is Streets, which may have more information than you need. To ensure the new elements that you'll add to the map are clearly visible, you'll change the basemap to Topographic.

8. At the top of the project page, click the Preferences button.

   

   The Preferences window appears.

9. Under Basemap, click the basemap thumbnail and choose Topographic.

   

10. Click the Save and Close button.

    The basemap is updated. Next, you'll navigate to the Minneapolis area.

11. Next to the search box, click the pin button and choose Zoom to an area.

    

    The search box changes. Now, when you type a location in the box, you'll zoom to the location.

12. In the search box, type Minneapolis and press Enter.

    The map zooms to Minneapolis.

    

Create market areas for each site

Next, you'll add the two store locations that Janice and Steven are considering. To determine each site's market area (the area that the site will primarily service), you'll calculate a 10-minute drive-time area. A drive-time area shows everywhere that is within a specified driving time of a location. When choosing between competing stores, most consumers will go to the one closest to them.

Note:

LITGL will use a 6-minute drive-time threshold for its market area, but you'll use the larger region to include competitors whose trade areas might significantly overlap the smaller 6-minute boundaries.

1. Next to the search box, click the pin button and choose Add a pin.

   

2. In the search box, clear the existing text and type or copy and paste 14525 Highway 7, Minnetonka, MN 55345. Press Enter.

   The map navigates to and adds a pin at the location. The pin has a contextual menu with information and options.

   

   This site is known as the Carter site. You'll rename the pin appropriately.

3. In the pin's contextual menu, click Add site name. Type Carter Site and press Enter.

   Next, you'll create the drive-time area.

4. In the contextual menu, click Create site.

   

   With this option, you can create drive-time areas, walk-time areas, or overlapping rings around the pin. You can create areas or rings for three times or distances at once, but you only want to create a 10-minute drive-time area.

5. Click the Drive time tab. For Time, delete the values 5 and 15, leaving only the value 10 minutes.

   

6. Click Apply.

   After a few moments, the 10-minute drive-time area for the Carter site is drawn on the map.

   

7. Close the contextual menu.

   Next, you'll create a pin and drive-time area for the second site, the Steiers site.

8. Next to the search box, click the pin button and choose Add a pin. Search for and navigate to 13740 Grove Drive, Maple Grove, Minnesota, 55311.

   The map navigates to and adds a pin at the location.

9. In the pin's contextual menu, click Add site name. Type Steiers Site and press Enter.
10. In the contextual menu, click Create site and choose Drive time. For Time, delete the values 5 and 15, leaving only the value 10 minutes.
11. Click Apply. When the drive-time area is created, close the contextual menu.

    

    With this map, you can assess the general convenience of the two sites relative to the Minneapolis transportation network. Both locations have extensive 10-minute drive time areas, reflecting their proximity to the intersections of major highways in the area. Both sites are suitable relative to this selection criterion. The sites overlap a little, but not much.

In this lesson, you mapped the potential store locations and created drive-time areas to represent each site's market area. In the next lesson, you'll perform competitive analysis to determine which site would be best for the new store.

Perform competitive analysis

Now that you've mapped the market areas for the potential sites for a new retail store, you'll perform competitive analysis to choose the best site. You intend to answer the following questions:

• How is each site positioned relative to the retail competitors (other home improvement stores)?
• How is each site positioned relative to the market attractors (large shopping centers that bring consumers to the area)?
• Which location has the most favorable competitive environment overall?

Add competitors to the map

First, you'll locate and symbolize competing home improvement centers (even if they don't have the same environmental emphasis as LITGL).

1. If necessary, open your project in Business Analyst.
2. On the ribbon, click Create Maps and choose Points of Interest Search.

   The Points of Interest Search pane appears.

3. For Choose a category or enter a business name, type home improvement. Click Go.

   

   Businesses that match your search are added to the map as orange circles. A Legend window also appears. The Points of Interest Search pane updates with options to refine your results.

   Note:

   If the Legend window takes too much space on the map, you can move it or close it.

   

   Note:

   Data on businesses and demographics is updated periodically. Your images may not match the example images exactly.

   When several businesses are close together on the map, they are shown as a cluster (a single circle with a number above it for the number of stores in that area). Changing your zoom extent will change how stores are clustered.

   You want to focus on larger competitors, so you'll filter the results to include only stores with a sales volume of $4,000,000 or more.

4. Scroll to the bottom of the Points of Interest Search pane. For Sales volume, type $4,000,000 as the minimum value and press Enter.

   

   The filter is applied. The number of competitors on the map is reduced considerably.

   

   Currently, the business competitors are represented by orange circles. You'll change the color so the circles are easier to see against the drive-time areas.

5. At the bottom of the Points of Interest Search pane, click Next.
6. Click the orange circle under Symbol.

   

7. A window appears with symbol options. At the bottom, click the Color button. Choose a blue color.

   

   The symbols change on the map.

8. Click Done.

   Next, you'll give the layer of competitor stores a name and save it.

9. Click Next and click Save Layer.
10. In the Save Layer window, type Home Improvement Centers over $4M, and click Save.
11. Click Export to Excel.

    

    A spreadsheet is downloaded. You can open it to view information about the competitors in table format.

    On the map, the Home Improvement Centers over $4M layer displays the locations of LITGL's potential competitors near the two candidate locations. You can click its pin and expand the Attributes option to learn more about a competitor store, including the number of employees and sales volume.

    

12. When you are finished reviewing the layer, close the table and pop-up. In the Points of Interest Search pane, click I'm Done.

    Based on the map, how many large competitors does each site have? Where are they located relative to each site?

    The Steiers market area contains four competing home centers. All four are near the same major highway as the Steiers site. The Carter market area encompasses two competing home centers: one on the northern periphery of the market area and one on the southern periphery. There is also one more large competitor between the two market areas. Both sites face major competitors, although in the Steiers market area, they are closer to the available site and higher in number than in the Carter area.

Run market reports for the sites

Your map provides an overview of the competitive situation of the two potential locations. You can find more detailed demographic information by running a Business Analyst report. You'll run three reports for each site and compare their competitive characteristics.

1. On the ribbon, click the Reports tab.

   

2. Click Run Classic Reports.

   A list of available standard reports appears. First, you'll choose the sites on which to report.

3. Click Add Sites.
4. In the Add Sites window, confirm that Carter Site and Steiers Site are checked and click Apply.

   

   Next, you'll choose which reports to run. The Select reports to run section lists the available reports. Each report has a Click to view the sample report button, which opens the report as a PDF file in a new browser tab. Each report also has an information button. Pointing to the information button displays a brief summary of the report's contents.

   

   Some of the reports provide general summaries of the market area (such as Executive Summary, Market Profile, and Community Profile) while others focus on specific demographic factors (such as age, housing, and income). Others focus on distinct products (such as automobiles, electronics, and health and beauty).

   You'll run three of the most relevant reports for competitive analysis on each site.

5. For Select reports to run, check Market Profile and Retail Market Potential (the reports are organized alphabetically).

   

   When the reports are checked, they are added to a list of selected reports. The reports are selected for both sites and you can edit or delete each selection before running the reports.

   

6. At the bottom of the page, click Run All.

   The system runs the reports you ordered. The Run reports section indicates when they are ready to view.

7. Open the Market Potential report for each site.

   These reports display the levels of supply and demand for several retail categories in the site's competitive region, as well as the total number of retailers in each category. They also report a Retail Gap and Leakage/Surplus Factor value for each retail category.

   

   The Bldg Materials, Garden Equip. & Supply Stores category is the industry group in which LITGL will compete. The Demand column represents the total expenditures in this category for all households in the site's competitive area. The Supply column displays the total retail sales by the retailers in the site's competitive area. If demand exceeds supply, the Retail Gap and Leakage/Surplus Factor values are displayed in green, indicating unmet demand in the area. If supply exceeds demand, the Retail Gap and Leakage/Surplus Factors values are displayed in red, indicating that sales exceed purchases in this category for the area.

   While supply exceeding demand may seem to be a negative factor, excess supply may also indicate that consumers are willing to travel farther to shop in this area. The report should be considered in the context of the retail attractors you identified in the Major Shopping Centers report.

   In the Steiers market area, supply is reported at about $222 million in the Bldg Materials, Garden Equip. & Supply Stores category. Demand is reported at $126 million, resulting in a retail gap of $96 million and a surplus factor of 27.7 for 57 stores. In the Carter market area, supply is reported at about $185 million and demand is reported at $165 million, resulting in a retail gap of $20 million and a surplus factor of 5.8 for 71 stores. The better ratio and higher demand are in the Carter area, which has a lower supply level but $39 million more in demand.

   While both areas display a retail gap, the consistency of this pattern across most of the industry groups in the report and the overall high levels of retail sales in both market areas suggest that both have strong retail attractiveness rather than saturated markets. This appears to be especially true in the Carter area, where the major retail attractors have produced an overall level of retail sales above $2 billion higher than the Steiers market area.

8. Close the Market Profile reports. Open the Retail Market Potential report for each site.

   Each report displays the number of households, population, and household income of its site, as well as a summary of consumer responses to questions in the GfK MRI Market Potential Index (MPI) survey.

   

   In the Home category, the report displays the number of households in the area that reported the specific behavior or purchase, the percentage of overall households in the area that this figure represents, and the MPI value for the area. The MPI value compares the behavior of households in this area to the national average. A percentage of 22 and an MPI value of 110 means that households in this area are 10 percent more likely than all households in the nation to report this behavior. (The national percentage can be computed as 20 percent.)

   The Psychographics category indicates the willingness of households in the area to consider product quality, environmental impact, and charitable associations in product purchases. These factors can help you assess the potential impact of LITGL's environment-friendly messaging in this market area.

   The two market areas are similar in all of the measures in the Home category. The number of households reporting purchases is higher in the Carter area, while the percentage of households reporting purchases is higher in the Steiers area. The Carter area has a slight advantage based on the higher numbers of households for each measure.

   In the Psychographic measures, the Carter area has the higher number of households, the higher percentage of households, and the higher index values.

9. Close the Retail Market Potential reports.

Based on your reports, you must now decide which site has the better competitive environment and make a recommendation to your clients, Janice and Steven.

On average, the Carter market area offers the more favorable competitive environment. Although supply for home improvement products is higher than demand for both market areas, the difference is lower for Carter than for Steiers. Carter also has a higher level of demand. In addition, the Carter area appears to be a much more active retail market, with higher levels of overall sales and several large shopping centers nearby.

The MPI values reveal that households in the two market areas report similar purchasing behavior in the Home category, while households in the Carter market area report higher levels of consideration for environmental factors in purchase decisions.

Taken together, this data supports the conclusion that the Carter market area offers the more favorable competitive environment.

You can find more tutorials in the tutorial gallery.