Promech Publishing : Trends In Retail Development
By Dr Dirk A Prinsloo
Market research increased the probability of successful centre development, management and marketing. Research findings are essential in planning and developing marketing strategies. Our suburban areas are experiencing major changes mainly because of changes in resident profile. For the first time since the 1994 elections shopping patterns and behaviour are being affected by changes in demographics.
A shopping centre must be stocked with goods and services that fit the needs and desires of the people living in the trade area. In the case of a new centre the market research is the pre-opening study of the trade area. After the centre opens, market research on an ongoing basis is required to manage and promote the centre. The use of market research findings has become critical in shopping centre marketing.
The pre-opening research tends to focus on trade area demarcation, the identification of the socio-economic and demographic profile of the potential customers living within the trade area, to establish driving times to the centre and to establish the current shopping patterns as well as the likelihood of supporting stores in the proposed centre. The ongoing research tends to focus on demographic changes, satisfaction levels, problems associated with the centre and individual stores, the strength of competing stores and the image of the centre in relation to other shopping centres.
2. LEARNING OBJECTIVES
The main learning objectives of this lecture are the following:
- to identify the place of market research in strategic planning and centre marketing;
- to understand the market research process;
- to identify various kinds of research;
- to identify different sources of data;
- to indicate how research is conducted for the development, management, marketing and promoting of a shopping centre;
- to indicate how the research could be used in a strategic planning or strategic marketing exercise (Case Study) and to
- identify future research issues.
3. THE ROLE OF RESEARCH IN CENTRE MARKETING
Diagram 1 illustrates the steps involved in any strategic planning or management process.
The plan, as indicated in Diagram 1, begins with a mission for a specific shopping centre. An analysis of internal strengths and weaknesses and external threats and opportunities is then undertaken to help developers/managers to develop the potential of a shopping centre. The situational analysis is best achieved by the analysis of internal data sources and external market and consumer research. It is only after a clear understanding of the situation in which a shopping centre finds itself that clear OBJECTIVES can be formulated. The objectives could be related to the development of a new shopping centre, the management and marketing of an existing centre. The rest of the strategic planning process deals with the implementation of different strategies to obtain the set objectives.
The thrust of a market research project is to gather information that is not otherwise available to decision-makers.
The role played by consumer and market research in the strategic marketing process is therefore of utmost importance to establish:
the trade area of a specific shopping centre;
the socio-economic and demographic profile of customers patronising a specific shopping centre;
- the customers’ shopping behaviour in terms of:
- the frequency of supporting a specific store or centre,
- the reasons why or why not certain stores are patronised,
- the image of a shopping centre compared to the image of competing stores;
- the positive and negative aspects associated with a specific shopping centre;
- the identifying of specific needs as mentioned by customers;
- to assist in selecting the right media use and
- to determine the market share of a particular centre/store
The rest of the lecture will concentrate on how research is conducted for shopping centre development and centre promotions and marketing. Emphasis will also be placed on how to use the research information to satisfy the needs of the customers.
4. THE MARKET RESEARCH PROCESS
Any market research process consists of a number of different steps. No matter what type of research is conducted, all these steps are usually included
4.1. Identifying the Problem
The problem definition is the first step towards launching a research study. The first sign that a problem exists in a shopping centre is:
- complaints from customers;
- the under-performance of the centre or the anchor tenants;
- vacancies and difficulty in filling empty spaces;
- or the offering of merchandise other than what is required by the target market;
- ineffective communication;
- the tenant mix does not satisfy the needs of the customers
- the centre experiences very strong competition from competing/new centres.
The problems and challenges and the importance thereof will vary from centre to centre. Decreasing sales and increasing expenses or decreasing profits are all broad indications of problems associated with a shopping centre.
The research problem specifies the information required to progress towards the achievement of the research goals. The most critical research questions in most South African centres are the following:
- how is my shopper profile changing and
- how should I position the centre to cater for the changes?
4.2. Research Objectives
The objectives of the research must be identified and formulated with great care to ensure that all those aspects required identifying and solving the set problem will be addressed.
To solve a marketing problem of a shopping centre the main objectives with any research project are to:
- demarcate the existing primary and secondary trade areas of the centre;
- establish the socio-economic and demographic profile of the customers living within these trade area;
- establish the shopping patterns of the customers;
- identify the image of a centre compared to the major competing centres;
- identify the strengths and weaknesses of the centre in comparison to other centres and to
- focus on specific issues like media use and propensity to support specific stores.
4.3. Collecting Data
Collecting data is the most important part of any research process. The information must always be of a very high quality and absolutely reliable. The fieldwork process must therefore be well executed and supervised.
Two broad types of data are available for shopping centre market research (Diagram 3).
4.3.1. Primary Data
Primary research data are observed and recorded directly from respondents. The information collected is directly related to the specific research problem identified. All the questions that one asks the respondents must be totally unbiased and formulated so that it is understood by all the different respondents.
Primary research data can further be divided into observations and surveys. In the case of a competitor analysis where it is difficult to obtain direct information observations can be useful determining the size of the store, the number of employees, range of merchandise, level of activity, advertising and promotions and the appearance of the store.
As far as surveys are concerned mainly two kinds of research surveys could be followed. Qualitative research and Quantitative research.
184.108.40.206 Qualitative Research
The main objectives of qualitative research are to obtain new ideas, or test new concepts or to identify strengths and weaknesses of a centre. In focus groups 6 – 10 people participate in a 1 – 3 hour session where the discussion is led by an experienced moderator. It is important that the group meet the screening and segmentation requirements. Prior to the interview specific segments of the market are selected to participate in the group discussion. Groups are usually selected on the basis of age, sex, income and supporters or non-supporters of a specific centre or shop. (See lecture on market segmentation) The more homogeneous a group the better the results. This, however, means that a number of groups are required to address the different market segments patronising a specific centre.
The discussions are taped and analysed to give a detailed overview of the feelings/views/attitudes of this particular group. Most shopping centres are however not making use of this method of research. This will however become more popular in future.
In-depth interviews are conducted where a face-to-face interview takes place between a moderator and a person specifically targeted for the interview. In-depth interviews are usually conducted with senior management or decision-makers.
220.127.116.11 Quantitative Research
This research is usually conducted where a fieldworker uses a structured questionnaire and the respondent is interviewed either on a face-to-face basis (personal) or telephonically. Postal surveys are the cheapest but very time consuming. Personal interviews can be considered at a shopping centre where shoppers are interviewed as they exit the centre. Depending on the size of the shopping centre, between 100 and 700 shoppers are interviewed on different days of the week. The shopper survey forms the basis for understanding the shoppers patronising a particular centre. This type of interview has a time duration of between 2 and 10 minutes. The sample in the case of a shopper survey is of utmost importance to give a true representation of the profile of the shoppers supporting a particular centre. One of the main uses of a shopper survey is to demarcate the primary and secondary trade areas.
Household surveys are conducted in the home of a respondent to obtain additional information that is difficult to obtain during a shopper survey. A household survey mainly focuses on the shopping behaviour of households in and outside the catchment area of the centre. Shopper and household surveys are the most expensive but if well executed provide the best results.
Telephone interviews are less expensive but the refusal rate is high and the length of the interview is limited to between 5 – 10 minutes. Consumer panels usually operate telephonically where a predefined group of panel members are contacted on a regular basis for information on a specific centre. This type of research is becoming more popular mainly because of cost and security reasons.
It is important in quantitative surveys that the sample size is large enough to be statistically reliable and significant. Probability sampling can be totally random where everyone has an equal chance to be included in the survey or a systematic sample where every 5th (or any other number) person is included in the survey. A stratified proportionate sample is where a specific number of people within, for instance a specific age category, are interviewed on a random basis. Household surveys are usually conducted on a suburb stratified proportionate sampling base where the inhabitants have an equal chance of being included proportionate to the population of a specific suburb in relation to all the suburbs included in the survey. Telephone interviews could be selected on similar criteria.
Table 1 gives a comparison of the three basic survey methods.
Sampling, as a statistic technique will not be discussed in detail but centre managers/developers must make sure that sample sizes are representative of the centre and area profile.
It is also important to conduct these surveys at regular intervals mainly to track changes and to identify problems at a very early stage.
4.3.2. Secondary Data
Secondary data is compiled inside or outside the organisation for some purpose other than the current investigation. Examples of secondary data would include internal sources of sales data by each tenant in the shopping centre.
Sales data – most tenants have to provide centre management with their actual sales figures for the purpose of assessing turnover clause rentals. A simple comparison of sales performance between tenants will highlight those tenants who are prospering and those who are battling. Based on this sales data, the rentals and the floorspace and a number of ratios can be compiled.
Rent/Sales Ratio – This is the ratio of rental to sales experienced by a store. It is simply the rental expressed as a percentage of sales. Stores within the same merchandise category should experience similar rental ratios. Differences do occur as a result of pricing, stock turns, location, quality, and of course the rental rate per square metre paid.
Rent/Sales Index – This is the ratio represented by a store’s share of the centre’s total and divided by the store’s share of the centre’s sales. When a store’s share of sales is more favourable its rent/sales index will be less than 1,00, and when its share of sales is smaller than its share of rent, its rent/sales index will be greater than 1,00.
Trading Density – This is total annual sales divided by the space occupied by the store. One uses annual sales because of seasonal fluctuations with monthly data. Trading density can be calculated on two levels, i.e. using gross store area – the total area for which the tenant pays rent, or nett selling area – the area to which shoppers have access. A comparison of the two is often useful in revealing imbalances in space distribution.
In South Africa trading densities vary widely between store types, and their are also big differences between trading precinct types. This is an extremely important ratio because it reflects the relative efficiency of space utilisation as well as the adequacy or otherwise of a store’s space. External sources of information refer to the 1996 Population Census conducted by Stats SA. Demographic, socio-economic and house information is available for metropolitan areas and cities on suburb basis. Except for income most of this information does not change rapidly. The data, however, gets outdated after a number of years. With the changes taking place in South Africa at the moment, this information will become outdated faster than in the past. The information is however of critical importance to fully understand your market place.
Another external source that is vital for shopping centre development/management is the information available from local authorities. Population numbers, population growth, the possibility of new commercial or industrial developments and road changes might have a direct influence on a specific shopping centre.
A variety of other sources may provide centre mangers with some information about their centres or competing centres or the environment they operate in. AMPS provide information on media usage, Socio-monitor psychographic life style profiles, and Vision some suburban characteristics. All this information can add value to a better understanding of the customers.
4.4. Interpreting and Analysing Research Findings
4.4.1 Statistical Analysis
The first step in drawing conclusions from most surveys is the tabulation of the data. In most cases cross-tabulation may be quite useful. Statistical interpretation focuses on what is typical, outstanding or what deviates from norms or averages. Various other statistical techniques could be used to further analyse the data. The most important are factor, cluster, discriminate and Chad Analysis. It is however important that the decision-makers are able to understand the results of different multivariate statistical techniques. The analysis must be straightforward for everybody to understand.
4.4.2 Demarcation of Primary and Secondary Trade Areas
Since most customers to a specific shopping centre come from the surrounding suburbs, it is necessary to demarcate the trade area of that specific centre to further analyse the target market. In most cases the demarcation of the trade areas is based on findings of a shopper survey. The line is merely an arbitrary boundary to exclude from the area of research those places where the amount of business that might come to the centre fades out to lower and lower support levels.
The following criteria may be used in retail trade area demarcation:
Percentage of potential customers or sales
Percentage of potential customers may be measured in such terms as distance, travel time or density. Industry experience has shown that one can at best outline a trade area in which 80-90% of sales will originate. For example, a trade area demarcation could be based on 85% of the shoppers that live closest to the centre, measured in distance or travel time, or the densest 85% of customers.
Distance as demarcation criteria depends on the density of the surrounding area as well as the accessibility of the site. For South Africa the following radii apply:
- 0,5 km trade radius for a local shopping centre
- 1,5 km radius for a neighbourhood centre
- 3 km for a community centre and
- 5 km and further for a regional shopping centre.
Researchers generally accept that travel time is a better measure than distance. The following guidelines are used:
- 5 minutes to a neighbourhood centre
- 10 minutes to a community centre
- 15-30 minutes to a regional shopping centre.
Market share or Market penetration
This may be measured in terms of the percentage of shoppers among the population, sales per capita, shopping trips and total spending. A trade area demarcation could for example include the area in which a retail facility captures at least 50% of the market for its product range.
Primary, Secondary and Tertiary Trade Areas
The primary trade area of a centre is usually defined as those areas from where 60% of the clients are drawn. In the case of a regional shopping centre the primary trade area falls within the 10 minute isochrone (a line linking all similar time distances from a particular centre).
The secondary trade area of a regional shopping centre includes the area within 15 – 20 minutes driving time, or 5 – 8 km from the site. Fifteen to 20 percent of all sales should originate from this area.
The tertiary trade area is the broadest area from which customers may be drawn. Typical driving time limits are 25-30 minutes. The tertiary area is normally small. However, in areas like Rosebank for instance, where a large number of office workers support the retail facilities, the tertiary trade area is much bigger.
Trade Area Demarcation
The many retail trade area demarcation methods may be grouped into three categories:
Rule of thumb in which practical experience and logic of the analyst are applied to demarcate a trade area. These are estimates and may be used for existing and proposed retail facilities.
Theoretical models (Christaller) are used to demarcate areas that serve as proxies for actual trade areas. They are the least expensive to apply but also the least accurate.
Empirical methods identify actual trade areas but are applicable only to existing retail facilities. They are the most accurate because it is based on the actual origin of shoppers.
Tables 2(a) and (b) give a broad indication of different shopping centre types and the size of their primary catchment areas. Map 1 gives an indication of the primary and secondary catchment areas of Cresta Shopping Centre. It is important to note that these catchment areas change over time and therefore the need to conduct shopper/origin surveys on a regular basis.
4.5. Reporting Research Findings
The penultimate step in the market research process is preparing a report of the research findings. The researcher must take a clear objective look at the findings to see how well the gathered facts answer the fundamental research question posed in the beginning. Market researchers must avoid complex studies and language. The researcher must recognise the needs and expectations of the report user. This does not mean that the researcher must give the user the answer he expected but must be objective and unbiased.
4.6 Use as Strategic Input
Research findings are not ‘nice-to-haves’. They must be used on a regular basis as input into issues like tenant mix, communication, design of PR and marketing events, to attract new tenants and to position the centre correctly for new market segments. 4.7 Long-term Research Programme
The most value from research is obtained once tracking surveys are conducted to highlight changes and trends. Specific benchmarks could be determined to measure the performance of the centre. It is therefore strongly recommended that a 3 – 5 year research programme is followed. This will enable a continuous flow of information from the market place.
Action steps must be taken to implement research findings in the process of better marketing and managing a shopping centre.
5. MARKET RESEARCH NOT A LUXURY ANYMORE BUT A NECESSITY
The next section is a very practical case study to emphasise the use of research. This will clearly indicate the role of research and how it should be incorporated into centre marketing, positioning, development and management.
The competition amongst shopping centres of different sizes is increasing and every centre is trying its best to capture what it perceives to be its fair share of the disposable rands. Because of the plethora of shopping centres, shopping options and more intense competition, consumers appear to be more elusive. The impact of cell phones, Lotto, gambling, fuel prices, security and medical costs all had an impact on the performance of shopping centres. All this together with changes in our residential areas and the social structure has further emphasised the need for shopping centre research.
In the light of what has been spelled out above one is reminded of what Walt Disney once said:
“You can dream, create and build the most wonderful places – BUT – you need people to make them work.”
I would like to add to this:
“And to make the people work better for you, you need to know them better.”
This in fact is the crux of what market research is all about.
In the past, through the 1980s up to 1994/5, most market research was feasibility based so as to determine the ability of the market to support broad retail use. Research of that type is still very important but the emphasis has changed. Unfortunately most research reports are not being used to the fullest potential by shopping centre owners, shopping centre managers and marketers. The main reasons for such a state of affairs are:
- work pressure and a lack of time;
- a lack of understanding;
- complicated reports;
- summaries that are too broad;
- research that does not meet the objectives and
- the fact that research does not form part of the strategic planning of a particular shopping centre.
3. Fast Changing Environment
Consumer research today is generally viewed as much more of a necessity than the luxury it was in the 1980s and early 1990s. This necessity has been brought about by major changes:
- in shopper profiles;
- in shopping behaviour/shopping patterns;
- in the retail structures and options available to the consumers and
- changes in economic conditions, and
- the strength of competition and the fight for the same disposable income.
3.1 Changes in Shopper Profiles
One of the most important changes in shopper profiles has been brought about by the relocation of many black homeowners and residents from the townships to residences in the suburbs. This is one aspect that needs to be monitored carefully to make sure that shopping centres cater for all the needs of the different customer segments within a particular catchment area.
Other demographic changes include the following:
- more working women;
- fewer children;
- more money spent by teenagers and
- a stronger middle class shopper.
3.2 Changes in Shopping Behaviour
In the United States the number of hours spent by customers in a shopping centre has dropped from 12 hours per month in the 1980s to 4 hours in the 1990s. In South Africa the duration of a shopping trip to a regional centre varies on average between 90 minutes and 120 minutes. The number of shops visited during a shopping trip has been stable during the last 5 years but decreases could occur in future.
There is currently a strong tendency towards more convenience shopping and this trend will continue to strengthen in future. Retailers in convenience foods have become more price competitive, more operators are available and centres that are very conveniently located are being built. This rapid expansion of the grocery/convenience shopping market has resulted in an over-saturation of these products in specific areas.
3.3 Changes in Retail Structures and Shopping Facilities
New retail concepts in South Africa such as ‘value centres’, theme centres and entertainment facilities are still in the process of establishing themselves as part of a wider spread of shopping opportunities.
3.4 Looking Ahead
I wish I could prepare you for the future by forecasting the changes that are likely to take place. There will be a lot of turbulence.
There are, however, four critical aspects that shopping centre marketers, managers and owners should focus on when looking ahead.
3.4.1 Understanding How Customers are Changing
You need to know who your customers are today to measure changes in a year or two’s time. Customer tracking becomes an absolute necessity. It is the easiest thing to change your marketing strategy, but changing your tenant mix is very difficult, time consuming and costly. Therefore regular tracking surveys must become part of the regular information from the marketplace in order to build a strategy for long term tenant mix adjustments.
3.4.2 Market Segmentation (See Lecture )
In the next century marketing and retailing will be dominated by segmentation. We need to understand the needs of different groups at each centre much better than we do and to tailor-make campaigns accordingly. We have not done a lot of successful segmentation at our centres up until now. There are major opportunities but also a need for detailed customer research.
3.4.3 Relationship Marketing (See lecture)
Relationship marketing offers one of the keys to successful retailing in the first few years of the coming century. Shopping centre owners and managers will join with retailers and suppliers to become partners in establishing a strong relationship with consumers/customers. In essence there are five requirements for a quality relationship between the different partners namely:
- a very good knowledge and understanding of the customer;
- trust between the partners;
- frequent communication;
- the quality of the communication and
- regular feedback/contact.
3.4.4 New Retail Trends
Various new retail formats as well as international tenants will be on offer creating extra competition. There will also be a rapid growth in home interactive shopping technology.
All the above changes and new future trends put more emphasis on the need for consumer research as part of a regular routine.
3.5 A New Approach to Consumer Research : Cresta Case Study
It was mentioned earlier that research is not a luxury anymore but a necessity. It is however very easy to cut the research budget during difficult economic times. Nevertheless, a new approach should be followed by research users as well as research suppliers.
The following is a short overview of the role and place of market research in a long term relationship with centre management and centre marketers. Cresta shopping centre is used as a case study. This centre is located in the north western sector of the Greater Johannesburg area. The centre is ±72000m² in size and services a very loyal customer base of which 17% are below average income households, 58% above average and 25% very affluent households.
3.5.1 Research Programme
As part of Cresta’s medium term marketing/development plan, a three to four year research programme has been drawn up in conjunction with the centre management. A broad overview of different surveys planned during a 4 year period is shown in Table 2.
This programme ensures that a continuous stream of information is received by centre management. The most important fact about these surveys is that certain features can be tracked on a regular basis. The following is an example of the importance of a shopper-tracking survey conducted at Cresta during 1995 and 1997. (See Table 3)
The main questions are: how many of these changes are significant enough to be addressed specifically or targeted as a specific market segment. Is the young adult group (18 to 24 years) a separate segment and are the Afrikaans-speaking component a specific segment and what about the 21% earning more than R20 000 per month?
3.5.2 Monthly research meeting between centre management and research supplier
- The main objectives of these meetings are to:
- conduct extra in-depth analyses from the research findings;
- to support/supply information for all promotions and marketing campaigns;
- to focus on changes taking place in the catchment area that might impact on centre performance and
- interact with tenants when necessary.
3.5.3 PR/Event Evaluation
Part of the researchers’ involvement with the centre is to evaluate the success or otherwise of a PR/Marketing campaign. Sometimes hundreds of thousands of rands are spent on these campaigns without any feedback of the success of these campaigns These evaluations can happen during or after the event. Included in such surveys are interviews with shoppers as well as tenants. Results are available within 2 to 4 days and the quick response is very valuable in correcting mistakes and providing guidelines regarding future events. During March 1998 a Vanity Fair was held at Cresta. The following results were made available with regards to the experience of the event by the shoppers: awareness of Vanity Fair – 60% Yes. Awareness levels were the lowest amongst the 25 to 34 year old category. This should be addressed in further campaigns
awareness of the campaign was mainly created by:
- street posters (41%)
- in centre material (28%)
- Highveld Stereo (10%)
- Radio 702 (7%)
In total 82% of the respondents were positive to very positive about the event.
Now certain benchmarks have been set and similar or other events can be measured as they take place.
The reactions from the tenants were also measured indicating a:
- positive attitude towards the campaign because it brought more people to the centre, the awareness increased and business improved;
- negative complaints focused on the fact that not all parts of the centre benefited from the campaign and
- the recommendations from the tenants were very constructive and can be used in future campaigns.
This case study indicates how important it is for centre management to receive continuous information from the market place and from tenants.
The shopping centre industry is becoming more information driven and slowly but surely additional information is becoming available. More and more related information will become available on the Internet. The number of special reports being published will ensure an increase in centre related information. Geographic Information Systems and mapping are helpful tools in moving closer to relationship marketing and eventually micro marketing where specific customers can be targeted at a specific address.
All this information should be supplemented by consumer research on a regular and on-going basis. “The key is to stay on top of the changes, developments and needs and be as knowledgeable as possible”. “Market research companies now have a greater role to play world-wide. They are no longer merely gatherers of information but sources of market intelligence.”
Throughout the course reference will be made to how important research has become for shopping centre marketing. The abovementioned is a broad overview of the different components included in the whole research process. The key however is the fact that it must be reliable and actionable.
Davies, R.L. & Rogers, D.S. et al,
Store Location and Store Assessment Research
John Wiley & Sons, New York
Ghyoot, V.G., 1992
Feasibility Analysis for Proposed Shopping Centres with
Special Emphasis on Trade and Demarcation
D.Com., University of South Africa, Pretoria
Ghosh, A. & Mclafferty, S.L. 1987
Location Strategies for Retail and Service Firms
Lexington Books, Toronto
Hines, M.A., 1987
Shopping Centre Development and Investment
John Wiley & Sons, New York
Jones, K.G. & Simmons, J.W., 1990
The Retail Environment
Routledge, New York
McGoldrick, P.J., 1990
McGraw Hill, London
Prinsloo, D.A., 1992
Getting Answers to Questions, Shopping Centre Profile
March 1992 (20-26)
Prinsloo, D.A., 1993
Putting Best Foot Forward, Shopping Centre Profile
February 1993 (28-30)
Van Graan, J.M., 1992
Tapping the Huge Black Market, Shopping Centre Profile
July 1992 (28-29)
Shopping Centre Development Handbook (2nd Edition), 1985
Urban Land Institute, Washington
YOUR PARTNER IN MARKET RESEARCH