As entrepreneurs and the U.S. government focus more resources on developing “green” businesses, it is becoming more important to systematically select locations that are situated in trade areas with strong demand for green products. Doing so helps to ensure the success of green retailers. While location is clearly a critical element of creating a successful retail business, many small business owners do not have the data needed to identify optimal locations or they are not sure how to analyze such data and apply it to choose such locations. This post is designed to help those businesses.

Greener Country— a new retail operation that sells eco-friendly products online and at a brick and mortar location in Long Island, NY— worked with Jerry Savage of ResearchSight to profile specific areas in Long Island that were being considered for the first Long Island retailer specializing in non-food eco-friendly products. The project is a good example of how market research can be used to help green retailers succeed.

Six zip codes and zip code clusters in Long Island were first identified based on availability of property and the Proprietor’s experience living and shopping in Long Island.  Trade area data were then purchased and those data were synthesized with past consumer insight research to help Robert Meinke achieve two primary objectives: [1] identify trade areas with strong demand for green products and [2] determine what categories should be carried by the new store.

Jerry and Robert analyzed the six trade areas based a broad range of variables including the following:

• Lifestyles of trade area residents: The PRIZM lifestyle segmentation system was used to identify lifestyle segments that are concentrated with the trade areas being profiled. This helped us better understand the trade areas and provided insight that was useful to shaping the new store concept.
• Proportion willing to pay a price premium for green products: After identifying the PRIZM segments that account for the majority of residents in each trade area, we identified which segments have the highest proportion of people stating that they are willing to “pay more for a product that is environmentally safe.” This helped us determine which trade areas held the greatest sales potential for a new green store in the area.
• Retail leakage by category: Estimates of retail sales and consumer expenditures, by category, were then examined to identify trade areas with significant leakage (i.e., areas in which consumer expenditures exceed retail sales). When expenditures exceed retail sales in several categories, it can generally be concluded that the trade area under study can support additional retail development. Clearly, most consumers shop at stores near their home and/or place of employment. The detailed category analysis helped Greener Country identify products that are in at least relatively high demand within the trade areas.
• Population density and growth estimates: Each trade area was compared to determine how many people live within the area and the degree to which the population is likely to grow in the future. Areas with high leakage and strong projected population growth are generally preferable.
• Demographics: A detailed demographic analysis was conducted to help pinpoint various areas of demand and refine the retail offering being considered.
• Competitive analysis and presence of retailers specializing in organic food: Consumer insight research on the market for eco-friendly goods and services has consistently shown that most consumers are motivated to purchase green products in large part because they believe the products will help make them and their families healthier. Therefore, we reasoned that trade areas where organics are selling well are those which can likely support a retailer specializing in green non-food products. Not surprisingly, the first location for Greener Country is located near a Whole Foods Market. We were also able to determine that there are no other stores in Long Island that directly compete with Greener Country’s unique offering of eco-friendly products.

While trade area profiles can be challenging for those who have never conducted one, the time and money spent working with a consultant can be a good investment. The work described above was done for less than $3,000 and the project was completed within a few weeks of the date it was commissioned.

We hope that this brief explanation of how green retailers can use trade area profiles will help more succeed in the future. Feel free to contact the Analyst, Jerry Savage(jerry@researchsight.com) , or Proprietor, Robert Meinke (Robert@greenercountry.com), if you have any questions. We’ll be happy to help if we can.