Site Selection - SCHEELS

Scheels All Sports is an employee-owned outdoors and sporting goods retailer spanning twelve states with 20+ stores located all within United States. Scheels focuses on providing expert customer service while providing a unique customer shopping experience with attractions in some of their stores such as large aquariums, sport simulators, and even ferris wheels at some of the larger locations. Although growth is steady, the site selection team is very diligent about evaluating future sites to house the next Scheels store.

Scheels is very unique in their variety of goods offered. There are no off brand items; selection is based on a good, better, best product scale. Products are tested and used by employees or “experts” at Scheels and then recommended to customers based on their individual needs and desires. Items offered at each location include: clothing, shoes, sport team merchandise, hunting/fishing/action sport gear, etc. The company has the motto “Gear. Passion. Sports.” and the stores truly represent that with the items available.

There are plans to build an approximately 250,000 square foot store somewhere in the “Scheels trade area.” Currently there are locations in Montana, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, Iowa, Nebraska, Kansas, Colorado, Utah and Nevada. Currently, a flagship store is being built in Colorado which will make the total state count up to 13. The site selection team is examining these thirteen states and also the possibility of branching into states such as Idaho and Missouri if certain criteria is met.  

The idea for this location is a free-standing retail building, meaning this Scheels will not be connected to a mall although smaller retailers may flock to this area and continue development surrounding the new location. Many methods are used and come into play when selecting a new site. These decisions are not made on a whim and have to be what is right for not only the surrounding potential customers but also for the company and its owners, in this case, current employees.

When it comes to site selection there are three major steps, the first being finding the most attractive market in which to operate. The second step is evaluating the density demand and looking at potential customers in the area and seeing if they fit the proven business model. The last step is selecting potential sites and from there narrowing down to which will be the best for the company moving forward. The world of retail is unforgiving and one must be able to provide a unique experience for customers or they will go to other options such as other stores or online.

As a company, Scheels is based out of Fargo, North Dakota, and tends to expand in the general area surrounding it. (Figure 1)

Figure 1 - Current Scheels Locations in the Study Area

• These are states that for the most part are very similar seasonally besides Nevada and all contain a wide variety of outdoor sports and activities. The types of consumers found in all these states also have very similar buying habits which makes it easier to predict how successful a store will be. That is not to say that Scheels will always only stick to these states but as a company has decided this is the area of the country that works best.

Competition is always a factor especially in the world of retail. In the U.S., the main competitors in terms of store size and items offered are Cabela’s and Bass Pro Shops. Their locations can be found in (Figure 2). 

Figure 2 - Competitors within Study Area

Cabela’s is Competitor 1 and Bass Pro Shops is Competitor 2. There are two different approaches in regards to competition. A company either has the option of picking a location far away from competition in hopes of capturing the market share and creating loyal customers or taking competition head on and betting on itself and store loyalists to beat out the opposition. Looking at the map comparing Scheels stores and the competition, it appears as though most often the retailers avoid taking Scheels head on and focus on other areas. Cabela’s has stores spanning across the United States but tends to focus on hunting/fishing more so than the widespread variety Scheels has. Bass Pro Shops are generally found more so in the southern half of the United States and, like Cabela’s, focus on hunting/fishing. When selecting potential locations it is important to be mindful of potential competition locations.

Knowing the potential customers in a specific area and using census data and programs, such as ArcMap Business Analyst, can make finding ideal customers much easier. Every company has “ideal customers” or customers that fit their business model. For Scheels this is no different. Scheels focuses on families that hit a certain level of income yearly, that spend a certain amount of money on various sports, are within certain distances of things such as ski hills and are in areas that are hunting/fishing friendly. Using Business Analyst and running an analysis on the study area ideal customers can be narrowed down to the county level. (Figure 3)

Figure 3 - Ideal Customers

The variables used in this filtering process were:

• Populations between 150,000 and 1,000,000+,
• Median Household Income between $45,000 and $500,000,
• Bought clothing in dept. store in last 6 mos, population between 20,000 and 500,000,
• Participated in skiing (last 12) months, population 5,000+,
• Participated in hunting with rifle in last 12 mo, population 5,000+,
• Participated in fishing in last 12 months, population 5,000, and
• Bought shoes from department store in last 12 months, population 5,000+.

This narrows down the counties and really hones in customers that may be interested in shopping at Scheels.

Another indicator used in site selection is hot spot analyses. This is a tool that shows a specific variable down to the mile level. To get an overall view of median household incomes across the Scheels Study Area, a hot spot analysis was done for every 5 miles. (Figure 4)

Figure 4 - Hot Spot Analysis

The darker the area (red) the higher the median household income is for that 5 miles worth of distance. Areas that are darker should be paid special attention to as areas with more money are more likely to spend it on fun items, Scheels is full of fun items that are not necessarily considered “needs.”

Using the above information three potential locations were selected. (Figure 5) These sites are all undeveloped plots with enough area for the stand alone store and potential smaller retailers to come in around it. The Casper, WY location was selected because  it fit the ideal customer area, was in a relatively high median income area but mostly because the lack of competition in the area. Casper is the 2nd largest city in Wyoming, having a population of 55,000; this is similar to many of the other cities where Scheels is located. Casper is highly regarded as a family city, a key emphasis Scheels has as a company. The second selected location was Twin Falls, ID. This was chosen for many of the same reasons as Casper. Idaho is currently an untapped market by Scheels and perhaps expansion towards the west would be beneficial. Idaho is highly regarded as a destination for people who enjoy outdoor activities, would get a lot of tourist traffic and provide Idaho residents with equipment they desire to do the previously mentioned activities. Twin Falls is known as the regional commercial center for south – central Idaho and also northeastern Nevada. The only Scheels in Nevada is in Reno, this Scheels happens to be to be the largest sporting goods store in the world and Nevada has proven as a profitable state for Scheels. The last location is located in Quincy, IL. Quincy, IL is located near the Iowa and Missouri border and there is currently only one other Scheels location found over 100 miles away from the proposed location. There are a few Bass Pro Shops located in Missouri but none are close enough to be considered serious competition.

Figure 5 - Proposed Locations

The process for deciding which of these three location is the best fit is not as simple as picking one out of a hat. Fortunately, Business Analyst makes it almost as easy. Using the Rank Sites feature, Business Analyst ranks the sites based on selected variables, in this case, population, median household income, etc. This then ranks the sites, presenting which site best fits the criteria and fits the model. (Figure 6)

Figure 6 - Ranked Sites

Based on the variables selected and Business Analyst algorithms, the IL location was selected as the best site for a new Scheels. The second best site was the ID location and the third site was the WY site.

The Illinois location is found on the outskirts of Quincy and in an area that is beginning to be developed. (Figure 7) A new Scheels location would complement the area well and only encourage growth and development further. Although close to a mall, the location is stand alone and big enough to house major attractions such as a large aquarium, ferris wheel, rollerball, etc. These attractions will not only bring people in but will also differentiate Scheels from other competitors just because as a retail space it is completely unique and offers a different level of customer service.


Figure 7 - Proposed Location

Lab 4: New Prospective Site for Trader Joe's

Introduction:
When wanting to expand one's business presence in a particular area site selection is key. Trader Joe's is a grocery store out of California with roughly 500 stores with that number steadily growing every year. BusinessWeek credits Trader Joe's with having the highest sales per sq. ft. of any grocery store. Being so popular, the chain has decided to grow it's outreach in Minnesota, mainly in Hennepin and Ramsey county. In Hennepin and Ramsey county there are currently 6 Trader Joe's and the company is looking to add another. Through the use of ESRI Business Analysts and the tools it offers along with Trader Joe's customer data, a new site can be selected in order to most efficiently expand their grocery store presence in study area.

Methods:
Business Analyst possesses a number of tools specifically for the purpose of business expansion based on customer data and also demographics of an area.

The first step is establishing an area of study. Trader Joe's has specifically requested a focus on Hennepin and Ramsey county, the major counties in the Minneapolis/St. Paul area. This can be done by simply selecting zip codes under the study area menu. Once done the map and demographic data was specifically focused on these two counties (Figure 1).



Figure 1 - Area of Study

The next step was taking data of the current locations provided by Trader Joe's and adding it to the study area (Figure 2). When evaluating an area already containing your own business it is important to not select a location too close to an already established business because you want to avoid stealing customers and over saturating a market area.

Figure 2 - Current Locations

Having current customer data (Figure 3) is very important because it gives you an idea where your most popular areas are customer wise and also shows how far people are willing to commute to visit your business, a major factor when it comes to shopping, especially grocery stores is convenience and although Trader Joe's offers a variety of products, some grocery stores may steal business away if they are more convenient to reach.

Figure 3 - Current Customers

Using the Optimal Location tool is essentially taking all the customer data you have for a business and presenting you with a mean center (Figure 4 ). The mean center gives the average location of all your customers. In this case, the mean center for the customers in our study area is the heart of Minneapolis which makes sense given the fact a high amount of customers is located near this same area. Looking at the current locations, Trader Joe's does not currently have a location specifically near the mean center but has done a decent job "surrounding" the area with it's stores. This could potentially be a possible site to consider as there is a large customer base near.

Figure 4 - Mean Center of Customers

The next tool Business Analyst has is known as Market Penetration. Market Penetration is essentially a method that shows how well your business is doing penetrating a study area. It is based on the number of customers over the total population area. The higher the percent, the more you are penetrating the area. The higher penetrated areas are ones you already have a decent grasp on and not necessarily the area to focus on putting a new location. The idea of putting a new location is tapping in to a less popular consumer base, expanding your penetration of an area as a whole. In the case of Trader Joe's in Hennepin and Ramsey county (Figure 5), they have a higher amount of penetration in the middle and east side of the counties. This includes the area where the mean center of the customers is. Perhaps looking more towards the west is a better idea.

Figure 5 - Market Penetration

Another very telling tool is Ideal Customers. Ideal Customers takes demographic data you select at a specific variable level and narrows down areas that fit what the user deems an "ideal customer" in the case of this study area. The data was broken down at the zip code level and the variables were populations between 15,000 and 55,000 along with median house hold incomes between $35,000 and $150,000. This is relatively broad but specific enough to give an indication of areas that are well populated and not at the lowest income tier. Trader Joe's is generally considered a "trendy" grocery store with a wide variety of goods at varying prices. The results of the Ideal Customer analysis can be seen in (Figure 6).

Figure 6 - Ideal/Prospective Customer Areas

With all the above tools being used and the data considered it is time to pick a few possible locations. The Market Penetration and Ideal Customer tool are strong indicators because one tells you where you are already doing a good job at reaching customers while the other focuses on showing areas that contain people that may visit your stores. Three locations were selected based on all the variables above. These three locations all happened to be near the border of the study area (Figure 7). All thee locations were geocoded using information extracted from an Excel File and turned in to geocoded points. One being in St. Paul, an area considered well penetrated but far enough away from other Trader Joe's to further bring in customers outside of the study area without stealing customers from the current locations. The next location in Eden Prairie was selected because it was in a lesser penetrated area that fell in the "ideal customer" range. The last location is Champlin was selected for similar reasons but also in attempts to attract commuters leaving work in the cities along Highway 47.

Figure 7 - Possible Site Locations

With these sites in mind, Business Analyst has the ability to rank sites based on variables inputted to pick which site is most suitable. For Trader Joe's the variables selected were based on Total Population of the area, the Median Household Income for the area along with Avg $ spent per week ($150+) and those who have shopped at a Trader Joe's in the last 6 months. The results of the site ranking can be found below (Figure 8).

Figure 8 - Ranked Possible Site Locations

Results:
Using all the tools above to select three sites and then having those three sites, Business Analyst listed the Eden Prairie Site as the best place of those chosen to open a new Trader Joe's location (Figure 9) This location taps in to a mildly penetrated area while the area it would be located in falls under "ideal customers". This location will pull in customers from within the study area, especially customers west of the location as there is no representation for Trader Joe's in the far west. The location is also located near the county border so there are many potential customers outside of the study area who would inevitably take advantage of a new Trader Joe's location. The Rank 2 location would have also been a good spot but after Business Analyst analyzing the variables submitted for ranking the Eden Prairie Location reigned supreme. The St. Paul location was a far cry due to the fact the market was on the higher side of penetration so it makes sense it got last for ranking.




Figure 9 - Proposed Location