Data Insights: Understanding Traffic, Trade Area and Site Selection

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The Hypothesis

Retailers have multiple tools and datasets at their disposal to learn about their customers. They have beacons, in-store monitoring, and transaction history. While the data collected from these traditional methods is powerful, GPS location data can help retailers better understand their trade areas in ways not accessible via conventional methods. This richer understanding would enable retailers to make more informed business decisions.

For example, many malls provide other services and amenities aside from retail. This is under the assumption that having venues such as a movie theatre will encourage additional traffic, longer duration, and more frequent visits. However, should all malls have movie theaters? If not, which ones should a mall developer choose?

By using GPS location data to study the trade areas, not only can we explore this assumption, we can also provide insights into whether a mall should expand to include a movie theatre.

But Wait ... What is a “Trade Area”?

A trade area is defined as the geographic distance where retail customers come from.

Trade Areas are defined as follows:

  • Primary: 10% of your customers are within this radius
  • Secondary: 30% of your customers are within this radius
  • Tertiary: 60% of your customers are within this radius

Understanding Typical Mall Trade Areas

Using our data, we were able to to calculate the trade areas of over 800 malls across the United States. By connecting Open Street Map (OSM) mall polygons, and connecting them with our Visits and Home and Work Product, within a few hours we had found all the trade areas. So, what do these Trade Areas look like as Averages? Below is a study summarizing the averages for ~800 malls / ~1.7MM visitors throughout August 2018.

Average Time Spent in Mall

The Observation

From the above, it appears that that the closer one lives to a mall, the more time in total is spent at the mall. Additionally, we see that the malls are likely to have repeat visits. One possible explanation is the relative convenience of traveling shorter distances.

Amenities in Malls: Does having a movie theatre make difference?

As previously stated, mall developers  assume that having additional amenities will result in:

  1. Additional traffic and / or
  2. Longer duration

We want to test this theory specifically for movie theaters. In this exercise, we studied visits to malls during the month of August. To reduce potential skews in the results, we removed malls with low number of visitors ( < 200 visitors over the course of the month) and malls suspected to be strip malls. We then split this selection of malls into two groups:

  1. Malls with movie theaters (605 malls) (Seen in Blue Below)
  2. Malls without movie theaters (170 malls) (Seen in Red Below)

For this comparison, we narrowed it to the visits from the primary trade area of a mall.The below charts are represented on a log scale to highlight the difference.

At a top line, we notice that visitors within a primary trade area of a mall with a movie theater spend about 6% longer while visiting, and have about 41.7% more visitations to malls.

Movie Theatres: Where are they worth it?

We see that the presence of a movie theater results in incremental visits and longer duration. However, this does not mean that every mall should include a movie theatre. For example, if there is a preexisting movie theatre nearby, would the cost incurred be worth it?

For this part, we used the above 775  malls and visitations to these malls over the month of August. Our three points of analysis were:

  1. The distance people are willing to travel to the movie theatres
  2. The distance that they travel to their nearest mall and;
  3. Whether the delta in these two distances is sizeable enough to warrant an installation

It turns out, for the 605 malls with movie theaters, the distance to the nearest movie outside of the mall’s primary trade area compared to the distance a person travels to the mall results in a ratio of 1.007. That’s a mouthful, but in short it means that most malls with movie theaters are already set up in a manner where most of the people in their primary trade area are closer to the mall than to the next closest movie theater.

Compare that to the 170 malls without movie theaters, where the ratio was 1.23. This indicates that a significant portion of those within the primary trade areas are willing to travel a longer distance than it would take them to get to the mall. Assuming that people are most likely to go to the theater closest to them, then this single ratio shows that many malls might be ripe for a movie theater.

The Takeaway

Not only would the installation of a theater have a positive effect on the amount of traffic and the duration of mall visits, it could increase the number of people who would be willing to travel longer distances to the mall, thus potentially widening the primary trade area even further.

While there are many factors and data sets to use when considering how to understand mall traffic and how to improve mall traffic by constructing new stores, location data is still a largely underutilized and enormously powerful tool. In isolation, location data might not be able to provide clear-cut answers but it can be used to enhance other tools / datasets or even help supplant assumptions with facts. When used in conjunction with all the other tools at your disposal, location data will help remove uncertainties, resulting in a richer and more comprehensive understanding of the world.

Ready to find out how location data insights can deliver for your industry? Let's talk.


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