Trader Joe’s Retail Site Analysis
1 Expansion of a Franchise
Trader Joe’s is one of
the most sought after grocery store franchises in the Midwest. This image has
been carefully crafted by a selective process in how the chain selects its new
store locations. Having a large presence in the suburbs surrounding the Twin
Cities of Minnesota has blessed Trader Joe’s with a relatively wealthy customer
base. Suburbs are considerably more attractive options for grocery stores
compared to large urban cities as many people buy their groceries after work or
after picking kids up at school. The large city is a place to work, not a place
to eat at home with a family.
Six Trader Joe’s stores
currently call Hennepin and Ramsey counties home. While this may seem like a
significant presence, there are some gaps that remain. A host of factors can
help determine where the next Trader Joe’s will be placed to fill in these gaps.
It is essential to remember that one cannot possibly make an educated decision
by only looking at one factor. One must gather all the data together and make a
decision taking every factor into account.
2 Market Penetration
Market penetration is one
of the greatest tools a business can use to see if its stores are reaching its
full potential. Market penetration is a method that examines how well you are
reaching your market area. It is performed by taking the total number of
customers and dividing that number by the total number of people in each area
to give a percentage of how well that store is penetrating its market.
For Trader Joe’s to be
able to accurately see how they are reaching their market, a study area had to
be established around Hennepin and Ramsey counties. This study area would be
used in the subsequent types of analysis performed. Regions of the map were
separated by their zip codes and then a dissolve tool was used to group zip
codes touching one another with similar values.
The map clearly shows
that the center of the counties is well served by Trader Joe’s. When it comes
to the periphery around the Twin Cities, there are some areas that are under served. Focusing on the western end of the counties, it is clear there are
some market penetration values that are lacking. By strictly looking at this
date, one would want to place a store in the vicinity of under served Wayzata to
also access places like Long Lake and parts of Minnetonka.
The following map shows the Market Penetration values for the counties of Hennepin and Ramsey.
The next tool used to
help determine the best location for a new store was a hot spot analysis. A hot
spot analysis makes it possible to find areas with high values at certain
geographic scale. These values can be anything from population to income
levels.
For the Hennepin and
Ramsey counties, median household income was used. The grid on the map uses
cells that are 0.5 miles in size.
Looking at the map, one
can see that the distribution of wealth is greatest around the suburbs,
especially in the west-central and southwest of the two counties. A noticeable
area of high income levels can be found far in the southwest near Eden Prairie
and Minnetonka. A lack of stores around this area makes it an attractive
option.
The following map shows the Hot Spot analysis for Hennepin and Ramsey counties.
4 Mean Center of all Consumers
This type of analysis is
more straightforward than the previous two. The mean center shows the exact
middle of all consumers. As expected, the middle of all consumers is near the
heavily populated city of Minneapolis. This large population base shifts the
mean center to the east central area of the two counties.
On paper, this looks like
a good place to open a new Trader Joe’s. However, using the analysis that has
already been performed, the area near Minneapolis is not as viable as it seems
on the map. These areas are already well served by surrounding Trader Joe’s and
besides one small pocket, a lower income level compared to the suburbs.
However, moving too far
away from this customer base could lead to a store that is not surrounded by
enough people. Knowing where the mean center of customers is useful to know how
a certain area is divided up demographically.
This map shows the location of the hypothetical optimal store location based on location for Hennepin and Ramsey counties.
5 Locate Ideal Customers
Locating ideal customers
is a powerful tool within Business Analyst that allows a user to set his or
her own variables to identify potential revenue streams within a certain
geographic area. Using only two variable for this part of analysis, allowed the
data that was to be presented was succinct.
The first variable was
searching for areas at the zip code level where the median household income was
above 100,000 dollars. This would allow the user to which areas had families
with larger disposable income levels. The second variable would be the amount
of people who have shopped at a Trader Joe’s in the last six months, but with a
twist. The average amount of consumers who shopped at Trader Joe’s from each
zip code was approximately 2,222 people. The second variable’s floor was set at
2,500 people to find an even greater amount of people shopping at Trader Joe’s
This analysis showed that
the suburbs, with an exception to suburbs in the north, had the most amount of
money and shopped the most at Trader Joe’s. These areas were unsurprisingly where
the current Trader Joe’s stores for the most part resided. These areas would be
the focus on where to place the next set of stores.
The map below depicts which zip codes best match the given criteria above.
6 Site Selection
Using information from
all of the analysis that had been performed prior, three sites were selected
for a potential Trader Joe’s site. Sites were carefully selected by taking into
account where commercial and residential zones were, as well as where major
roads or highways were located. Finding the addresses off Google Earth required
them to be geocoding within ArcMap so further analysis could be performed.
Site One:
(8015 Den Rd, Eden Prairie, MN 55344) The first site was selected in Eden
Prairie in an area where there is a large shopping center. The site was also
selected due to its proximity to an intersection of two major roads. This site
is close to large population with a very high household income. The town of
Eden Prairie is also under served when looking at the market penetration. The
location of the store also allows it to tap into southern Minnetonka which is
under served as well. These two areas also have higher than average amount of
people shopping at surrounding Trader Joe’s.
Site Two:
(6060 Clearwater Drive Minnetonka, MN 55343)
The second site was selected with the same geographic information in mind as
the first site: located near a major road and a large retail district. This
store is situated farther north than the Eden Prairie site. Located in southern
Minnetonka, it has access to towns such as Hopkins with large population bases
as well as desirable income levels. These cities also have shoppers who want to
spend their money at Trader Joe’s stores.
Site Three:
(4150 Berkshire Ln N, Plymouth, MN 55446) The
third site was mainly selected due its location in Plymouth which splits the distance
between the two cities of Minnetonka and Maple Grove. While the central part of
Plymouth where site three is located does not high income level compared to
other parts of the city, its location on the intersection of 494 and Highway 55
could make it an attractive option to suburbanites leaving the city from work
to home.
This map shows the position of the three possible sites for Trader Joe's. Site Three is the northernmost, Site Two resides in the middle of the two other sites, and Site One is the furthest south.
7 Ranking of Sites
A ranking of the three
sites by Business Analyst would allow the user to determine which site may
outperform the others given a set of criteria the user selects. Variables used
to determine how the site would possibly perform are as follows: total
population, median household income, average amount of money spent per week by
households at food stores over 150 dollars on an individual basis, and number
of people who shopped at a Trader Joe’s in the last six months.
The sites were ranked in
the order that I thought they would appear. Site One’s high income level base
as well the number of shoppers who shopped at Trader Joe’s made it the most
attractive option of the three. Option Three was in a location that had much
lower income levels compared to the other two options so its ranking of third
is not surprising.
This final map shows the ranking of the three sites with each site possessing a 1.5 mile buffer.
8 Selection of Site and Conclusion
Based on all the data
presented, I believe the best site for the new Trader Joe’s location is quite
clear. Site One in Eden Prairie is the best option to open a new location in
Hennepin and Ramsey counties. Its position near some of the highest income levels
in the area means consumers would be willing to spend money at a high end
grocery store. With a large population in Eden Prairie as well as Minnetonka
and Shakopee, there is ample room for growth. Its position near 494, a major
thoroughfare in the Twin Cities, and its proximity to a large retail center
makes it a viable area for consumers to access the store. With a large amount
of customers already residing in Eden Prairie who spend their money on Trader
Joe’s, it is only logical to make this the home of the newest Trader Joe’s.
This site will allow the chain to continue to keep hold of its image as the
preeminent grocery store in the Twin Cities area.
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