Out-shopper Analysis in Retail Management

It is very clear that not all the consumers who are within the trading area shop exclusively from that area. A group of consumers known as “out-­shoppers” frequently and regularly shop outside their local trading area. These consumers spend a considerable amount of time, money and effort making inter-trading area shopping trips. Some out-­shoppers look for economic gains arising from lover prices in larger trading centers where assortments are better and the level of competition is more intense. Some shoppers simply seek the diversity of unfamiliar or more stimulating surroundings. Demographically out-shoppers are younger and are relatively well educated and their relative income is high; psychologically, out-shoppers are active and are on the “go”, urban-oriented who are neither time conscious nor store loyal shoppers. They tend to manifest a distaste for local shopping and, hence, a strong preference for out of town shopping areas.

To obtain an accurate estimate of total expected sales, the retailer has to undertake this out-shopper analysis, subtracting out-shopping sales, normally called as “sales leakage”, from the trading areas gross sales to arrive at a more realistic sales volume for the trading area. To estimate “sales leakage” that results from out-shopping behavior  a retailer can conduct consumer surveys or use standard adjustment. Consumers survey help in getting information on how much the consumers spend locally on a particular class of goods as a percentage of their total expenditure for those goods. Here, retailer can use this percentage to adjust the gross sales figure for the trading area. Another simple and less expensive method is that of standard adjustment. A standard adjustment figure depends on the prevailing trading area conditions. In case the trading area contains large number of consumers who are similar to the demographic and psychographic profile of out-shoppers  the retailer make a standard downward adjustment say of 5 to 8 per cent. The other factors to consider while making such standard adjustments are (a) the existence of major shopping centers outside the trading area that are within the easy driving distance. (b) the presence of major traffic arteries that facilitate out-shopping and (c) the lack of a sufficient number of competing retailers to facilitate consumers comparison shopping. Though estimates of out-shopping are not always accurate, the retailer must consider these factors in making a conservative estimate of trading area net adequacy.

About Abey Francis

Abey Francis is the founder of MBAKnol - A Blog about Management Theories and Practices - and he's always happy to share his passion for innovative management practices. You can found him on Google+ and Facebook. If you’d like to reach him, send him an email to: [email protected]
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