WelcomeRetail Analysis:

Identifying Investment Opportunities Through Spending Analysis

AgendaDashboard

Q&A

Follow-Up

Speakers

Christopher Doll

Strategic Business Consultant Nuguru ConsultingSpecializes in facilitation, strategic planning, feasibility studies, business planning, and corporate finance.

Retail Analysis

August 2012

Venturus

Agenda► Introductions► Purpose of Retail Studies - Benefits►Retail Analysis Methodology►Retail Analysis for Investment►Retail Analysis and Customer Profiling►Community Impacts – Retail Spending►Questions

Venturus Ltd.

►Founded as Nuguru in 2007►Name change in 2012►Staff-Christopher Doll, Eunice Washkowsky,

and Thai Hoang►What we do - Facilitation, Strategic

Planning, Investment Attraction, Corporate Finance, Feasibility Studies, Economic Studies, Marketing and Branding, Major Projects Planning, and Public Speaking

Clients

►Clients – Cameco, PCS, University of Saskatchewan and Winnipeg, Municipalities including Saskatoon, North Battleford, Warman, and Dalmeny, Economic Development Agencies, WestcapManagement/Golden Opportunities, Private Companies, First Nations, National Hotel Developers, and Value Added Processors

Retail Study Purpose

►Three target markets: Entrepreneurs looking to identify new

opportunities Existing business considering expansion Potential outside investors/companies through

targeted investment attraction

Retail Analysis Methodology

►Retail Analysis uses statistics, surveys, comparative spending analysis, gravitational models, and population models (local, regional and tourism behaviour) to provide information on how consumers behave in a particular area.

Retail Analysis Methodology

►Statistics and Surveys►Acquisition of good statistical information is

difficult as data availability for smaller populations is challenging due to privacy issues and rapid evolution of the retail market

►Surveys are time consuming, expensive, and often incomplete. Usually based on retail sales dollars or square footage.

Retail Analysis Methodology

►Statistics are most accurate at regional or city levels

►Retail behaves on a regional basis in most markets anyway

►Data for spending can be acquired on a household or per capita basis, but what information does that provide?

Retail Analysis Methodology

►The existing data examines spending overall in a retail category, but we don’t at this point understand where the spending occurs or if it provides retail opportunities.

►In order to better understand spending we use gravitational models like Reilly’s Law of Retail Gravitation

Reilly’s Law

Reilly’s Law

►Ok so what does it mean?►Basically a larger population has more retail

“pull” than a smaller one so it determines the point at which a consumer will go to destination A or B based on the size of the market or population base

►Can also be used (inverse equation) to determine where retail leakage in spending and percentage is most likely to occur

Reilly’s Example

Regional Impact - North Battleford Population Spending by Retail Centre

Retail Centre Retail $MM Effort Formula % of sales Total MMNorth Battleford 408.8 1 408.8 83.36 $408.80Lloydminster 928.2 9 11.45926 2.34 $9.55Saskatoon 4471 10 44.71 9.12 $37.27Edmonton 20452 35 16.69551 3.40 $13.92Calgary 21,776 70 4.444082 0.91 $3.70Regina 3,665 40 2.290471 0.47 $1.91Prince Albert 801 20 2.00125 0.41 $1.67

Total 490.4006 476.8226

Comparative Analysis

►Data in each retail sector can be acquired for a given population and compared to other areas. Reduced to a per capita basis spending levels can be compared.

►Spending can then be normalized based on income

►Opportunities can be determined by under spending in a specific retail category and the market size

Comparative Analysis

►So once the data has been filtered by Reilly’s Law, and comparative analysis and normalized spending specific opportunities in a market can be identified

►The key is to ensure the market size is large enough to support the opportunity

Example

Region/Area Yorkton Income North Battleford Geography Level CA Adjusted Per Cap Adj CA Per Capita 17608 0.99029167 17669 Total $ Total Sales $m 486.9 491.6733268 $27,923.29 408.8 $23,136.57 ($84,576,648) (%) Total Sales $m 0.12 0.121176421 0.1 New Car, Used, Recreational Motor Vehicle & Parts Dealers $m 168.9 170.5558121 $9,686.27 88.2 $4,991.79 ($82,946,674) (%) New Car, Used, Recreational Motor Vehicle & Parts Dealers $m 0.17 0.171666596 0.09 Gasoline Stations $m 44.7 45.1382167 $2,563.51 61.9 $3,503.31 $16,605,409 (%) Gasoline Stations $m 0.1 0.100980351 0.13 Furniture Stores $m 6.7 6.765683487 $384.24 4.2 $237.70 ($2,589,122) (%) Furniture Stores $m 0.06 0.06058821 0.04 Home Furnishings Stores $m 5.5 5.55391928 $315.42 2.7 $152.81 ($2,873,160) (%) Home Furnishings Stores $m 0.09 0.090882315 0.04 Computer & Software Stores $m 0.5 0.504901753 $28.67 0.2 $11.32 ($306,651) (%) Computer & Software Stores $m 0.03 0.030294105 0.01 Home Electronics & Appliance Stores $m 9.7 9.795094003 $556.29 7 $396.17 ($2,829,027) (%) Home Electronics & Appliance Stores $m 0.07 0.070686245 0.05 Home Centres, Hardware, Specialized Building Materials & Garden Stores $m 26.3 26.55783219 $1,508.28 30.8 $1,743.17 $4,150,163 (%) Home Centres, Hardware, Specialized Building Materials & Garden Stores $m 0.1 0.100980351 0.11 Supermarkets $m 35.4 35.74704409 $2,030.16 50.7 $2,869.43 $14,829,116 (%) Supermarkets $m 0.05 0.050490175 0.08 Convenience & Specialty Food Stores $m 2.3 2.322548063 $131.90 2.5 $141.49 $169,406 (%) Convenience & Specialty Food Stores $m 0.02 0.02019607 0.03 Beer, Wine & Liquor Stores $m 7.4 7.472545941 $424.38 8.4 $475.41 $901,567 (%) Beer, Wine & Liquor Stores $m 0.05 0.050490175 0.05 Pharmacies & Personal Care Stores $m 23.5 23.73038238 $1,347.70 21.7 $1,228.14 ($2,112,592) (%) Pharmacies & Personal Care Stores $m 0.08 0.08078428 0.07 Clothing Stores $m 14 14.13724908 $802.89 6.2 $350.90 ($7,986,225) (%) Clothing Stores $m 0.08 0.08078428 0.03 Shoe, Clothing Accessories & Jewellery Stores $m 5.4 5.45293893 $309.69 3.8 $215.07 ($1,671,830) (%) Shoe, Clothing Accessories & Jewellery Stores $m 0.1 0.100980351 0.07 Department & Other General Merchandise Stores $m 124 125.2156347 $7,111.29 110.9 $6,276.53 ($14,749,424) (%) Department & Other General Merchandise Stores $m 0.25 0.252450876 0.23 Sporting Goods, Hobby, Music & Book Stores $m 5.4 5.45293893 $309.69 3.7 $209.41 ($1,771,830) (%) Sporting Goods, Hobby, Music & Book Stores $m 0.05 0.050490175 0.03 Miscellaneous Store Retail $m 7.3 7.37156559 $418.65 5.8 $328.26 ($1,597,103) (%) Miscellaneous Store Retail $m 0.07 0.070686245 0.05

($84,777,978)

Population Models

►In some markets population models become more important and spending cannot be explained by Reilly’s alone

►Markets with substantial regional and tourism populations may not behave typically

►Las Vegas has a significantly outsized retail sector given its population base

►Outlet malls are single largest tourism driver

Retail Analysis for Investment

►Large retailers are interested in Saskatchewan but the market is difficult for them to assess.

►Markets typically based on population blocks – one store per 500,000 etc.

►Retailers need compelling proof of market size to enter Saskatchewan markets

Drivers of Success

►There are two keys to investment attraction:

►Potential investors are looking for a tailored package that addresses an opportunity specific to their industry.

►Effective investment attraction requires identification of targets and direct contact w ith decision makers.

Why Strategic Business Attraction

►Past approaches: Incentive Competition Website - Passive Marketing Devine Intervention Government Handout

Not Just Retail

►Targeted investment attraction works based on competitive and comparative advantages that can be determined through comparative analysis and direct contact with potential investors

Retail Analysis and Customer Profiling

►Retail Analysis determines where consumers are spending their money and what they are buying

►It determines how a market may behave differently from the norm

►Kindersley for example has far too many hotels on a per capita basis but the market and consumers are behaving differently

Retail Analysis and Customer Profiling

►Provides more ammunition for opportunity identification

►Where would you expect to find this car?

Community Impacts

►Retail Spending Analysis is used to determine the flow of spending

►Leakage to other markets and online can be determined

►Can show how many dollars are leaving a community and what percentage of spending occurs inside and outside the region

The Process - Summary

►Process>Data Collection>Comparative Analysis>Spending Normalization>Reilly’s Law>Aggregation of total spending to determine opportunities

►Other information Dollars spent or percentage spent in other

communities Behaviour of spending in your region or

community and how it differs from others

Q&APlease send your questions via the Chat or Question widget on your dashboard.

Thank You

Verona ThibaultPresident, SEDA@saskecdevassoc@growourregionverona.thibault@seda.sk.ca306-384-5817

Christopher DollConsultant, Nuguru Consulting Services306-270-9301crifter@hotmail.com