Running Room Site Selection

Introduction

In order to guide The Running Room's continued expansion in the Minneapolis/St. Paul metropolitan area, this report analyzes the company's current market situation by considering current store locations, competitors, and potential growth areas. 

Using ESRI Business Analyst software, this analysis will include looking at:

• market structure/saturation
• drive-time trade areas
• hot-spot analysis
• gravity model.point of indifference
• optimal store locations
• ideal customers

Based on this analysis, four site proposals will be examined and ranked to present one recommended location for Running Room expansion. 

Case Study

The Running Room, started in 1984 and based in Edmonton Canada, has a stated focus of expanding into the U.S. market. As a result, there are now more than 110 stores throughout the United States and Canada. Spurred by a huge boom in the areas of running and walking, this very specific niche store has seen further growth opportunities beyond high-density CBDs which would typically be required to provide the needed customer base. Metropolitan areas, in particular, where there are a large number of high-income suburbs are ripe for expansion on the part of running/walking focused companies. 

 Running Room’s reputation has been built on product innovation, quality, and the knowledge of the sport of running. Its private-label products have been developed to provide customers with the best in style, functionality, fabric innovations, and reasonable price, and have been developed with the input of customers and staff alike. 

Though there are currently eight Running Rome locations in the metropolitan Twin Cities market, it remains an area they would like to expand into as the reputation of the city has been spurred by recent recognition for health as well as overall growth in the running/walking market.  

Study Area

The city of Minneapolis was recently rated by Forbes Magazine as the #1 Healthiest City in America. Thus, it is little wonder that the Running Room has expanding rapidly into the larger Twin Cities metropolitan area. Typically a store with such a specific focus would only find the needed concentration of customers by being located directly in the urban core of large cities. However, The Running Room has begun to expand into the greater metropolitan Twin Cities area seeing a huge market opportunity in high-income suburbs. Now, stores can be found in Woodbury, Eden Prairie, and Apple Valley, cities located far outside the urban core (see Figure 1).

Figure 1: Current Running Room store location in the Twin Cities metro

As a result, the study area considered for Running Room expansion goes beyond Hennepin and Ramsey counties which contain both Minneapolis and St. Paul. Also included in the study area are Anoka, Washington, Dakota, Scott, and Carver Counties (see Figure 2).

Figure 2: Twin Cities Metro Area under consideration for The Running Room store expansion

Methods

Drive Time Analysis

As previously stated, much of the recent Running Room expansion in the Twin Cities market has taken place in suburban cities. Invariably this cities have 50,000 residents and push beyond the urban core. As such, there business model is clearly focused on car traffic. Drive-time analysis reveals the area where a particular location can be reached within a certain segment of time. Using 10, 20, and 30 minute buffers reveals the drive time situation that applies to the current Running Room store inventory. 

Current store location show little, if any overlap for the 10-minute buffer indicating they prefer that individual stores be spread apart far enough where two store could not be reached by one location in 10 minutes or less (see Figure 3). New store proposals should be placed at bare minimum outside of another location's 10-minute buffer. In addition two stores in the urban core tend to have longer drive times indicating they do not fit the typical model and appeal more to people utilizing public transit, walking, and biking to reach their locations.

Figure 3: Drive time areas for current Running Room store locations 

Current Competition

While there are certainly other stores that sell running shoes and equipment, the Running Room's direct competition comes from other stores that focus exclusively on running/walking clothing and equipment. The Twin Cities metro contains nine direct competitor locations from 6 different companies (see Figure 4). Run N Fun is the only competitor with more than one location. 

Figure 4: The Running Room faces direct competition in the Twin Cities Metro from nine store locations representing six different companies

The Running Room has outpaced are equaled their competition in most directions/locations. Expansion to Maple Grove to the northwest, Eden Praire to the southwest, and Apple Valley to the South has preceded or been met with other competition. Suburban expansion is seen as a viable option by multiple companies. It also indicates the growth potential for suburban expansion is seen to be able to support more than one running-specific store.

Currently, the Running Room is the first company to expand to the west while Right Fit is the first to expand directly to the north. Future expansion may be too saturated moving generally south and west from the Twin Cities Metro while options to the east and north still exist.

As noted before, running store locations tend to be located on or near major highway arteries to facilitate customers who travel by car.

Hot-Spot Analysis
In order to get a sense of the overall market the Running Room faces in the Twin Cities Metro, Hot-Spot Analysis on the following variables was undertaken.

• Median Household Income
• Bought athletic shoes in last 12 months
• Participated in running/jogging in last 12 months

The hot spot analysis reveals that the variables chosen correlate well with current Running Room locations. Typically they are found at the transition point, with high median income areas proceeding out from the urban core after Runnin Room store location (see Figure 5). There are also downtown locations that fit a different model.

 Figure 5: Hot Spot Analysis centered on Median Income with support from Running Purchases/Activity shows that current store locations tend to be located at transition points with areas of high income proceeding out toward the suburbs after running store locations (Running Room and others). 

Using  the analysis, further expansion to the West toward Plymouth and Minnetonka as well as possible exapnsion to the north and northeast should be considered. 

Ideal Customers
With no customer data available, the process of identifying an ideal customer is hampered somewhat. However Business Analyst software allows for the selection of variables applied to a given geographic area in order to determine areas containing the most suitable customer base for a specific type of retail operation.

In order to determine the ideal customers for the Running Room expansion, variables used include:

• median household income > $75,000 
• total population greater than 45,000
• bought athletic shoes in last 12 months > 3500 persons
• bought athletic shoes for walking > 1500 persons
• participated in running jogging in last 12 months > 3500 persons
• participated in walking for exercise in last 12 months > 1500 persons

Because current store locations for the Running Room and its competitors have done a very good job addressing the current needs of the market, lower variable floors were set in order to identify areas where more than one zip code fit the criteria. For example, higher floors may have only indicated one zip code meets the criteria as you move northwest from the urban core while slightly lower variable floors reveal there is a progression leading from the northwest where placing a location at the earliest location proceeding from the urban core could meet the needs of many areas (see Figure 6).

Figure 6: Ideal Customer locations based on zip code show potential expansion opportunities to the north/northwest and and the northeast. 

Somewhat surprisingly, proceeding directly west from the urban core past St. Louis Park toward Plymouth and Minnetonka did not contain any ideal customer zip codes. Moving south and southwest from the city, you will see many ideal customer areas, but the current store locations appear to meet their needs. Proceeding west shows some ideal customer areas but not enough to warrant any more than the Running Room's expansion to Woodbury. Areas to the northwest, northeast appear to present the best options for expansion based on ideal customers.

Site Proposal Identification
Without customer data to help identify some optimal sites for baseline, four sites were chosen based on previous analysis. Important to this process is knowing that the Running Room is not currently located in any city in the Twin Cities Metro with a population less than 50,000. As such cities considered for site proposals had to meet that minimum baseline.

Secondly, the direction in which there were both a limited number of current running stores, if any, and a pattern of zip codes with ideal customers were required. As mentioned previously, this ruled out expansion to the south and southwest, and east for saturation of the current ideal customer base.

This left expansion to the northwest and northeast.Three towns were identified as possibilities based on the population threshold and nearby ideal customer zip codes. These include Coon Rapids and Blaine to the north and northwest and Maplewood to the northeast (see Figure 7).

Figure 7: Four site proposals were identified based on previous analysis. Three are based ideal customer locations, and is based on hot-spot analysis.

In addition, despite no ideal customer locations directly to the west, hot-spot analysis showed expansion this direction fit the current model of Running Room locations (see Figure 5). Therefore, an additional location was selected in Ridgedale between two cities (Minnetonka and Plymouth) with ideal city populations and along Highway 12 proceeding west (see Figure 7). 

All locations are located on or near major highway arteries in prime retail locations. Also, each site proposal is located outside of the 10-minute buffer of all other Running Room locations.

Ranking Sites

Business Analyst was employed to rank the four selected sites based on the following variables. 

• median household income 
• total population
• bought athletic shoes in last 12 months
• bought athletic shoes for walking
• participated in running jogging in last 12 months
• participated in walking for exercise in last 12 months

Based on this analysis process, the Coon Rapids location was identified as the top-ranked location for Running Room expansion (see Figure 8).

Figure 8: The four site proposal were ranked based on six variables in order to determine the best site location for a new Running Room location

Point of Indifference
After identifying an ideal store location, the point of indifference is determined between Coon Rapids and three surrounding cities (Anoka, Blaine, and Fridley) in order to understand how far out a Coon Rapids Running Room location can market and advertise and have people prefer to come to Coon Rapids rather than go to the other city. This is calculated using the formula:

 

This formula compares the distance between each city to the population. The end result is the distance in miles to the point of indifference. In this study, three different cities were compared to Coon Rapids, MN. The three cities and their point of indifference are listed below.

• Blaine, MN    2.37 Miles
• Anoka, MN    2.75 Miles
• Fridley, MN    5.1  Miles 

All three cities are located less than 10 miles away from Coon Rapids and their influence out toward each of these cities will be relatively small as a result. Blaine is nearly the size of Coon Rapids, and thus if a resident living between Coon Rapids and Blaine leaves more than 2.37 miles away from Coon Rapids they will go to Blaine whenever possible. Fridley possesses the greatest reach potential for Coon Rapids.

All this being said, there are no specific competitors located in either of these three towns. So, there is a very strong possibility that a Coon Rapids Running Room can capture a large percentage of the market share in each of the surrounding cities despite a very low point of indifference.

Discussion

As the analysis revealed, Running Room expansion has taken place along major transportation arteries at the transition point between the urban core and suburbs where moving away from the urban core past their locations will be into areas with high median household income. In addition, the Running Room has made a point of not locating in a city with less than 50,000 people. 

Site 4 located in Ridgedale between Minnetonka and Plymouth (two cities fitting the Running Room profile) appears to have suffered from not having enough zipcodes with an ideal customer base nearby. So, despite hot-spot analysis painting a different picture, this was the lowest-ranked of the four site proposals.

Site 3 located in Blaine also may have suffered from not being located directly in an ideal customer zipcode. Despite huge expansion in Blaine and many ideal customer areas all around it, the lack of concentration as well as being located on a less-traveled highway artery relegated it to the third ranking. 

Maplewood does appear to be a good site. However, it sits just below the Running Room population threshold at just over 45,000 residents. In addition, there is typically fewer ideal customer areas to the east of the Twin Cities Metro as well as smaller populations.

Conclusion

The top-ranked site for Running Room expansion based on the analysis performed above is located at 1258 Riverdale Boulevard in Riverdale Village in the City of Coon Rapids (see Figure 9).

Figure 9: The top ranked site for a new Running Room is located at 1258 Riverdale Boulevard, Coon Rapids, MN

With a population of 60,000+, a large growing population nearby in Blaine, and ideal customer zip codes all along Highway 10 both before and after the city, this location is the ideal site proposal for Running Room expansion. It is also situated to receive north-south traffic from Highway 47. 

Trader Joe's Site Selection

Introduction

In order to guide Trader Joe's expansion in the Minneapolis/St. Paul metropolitan area, this report analyzes the company's current market situation by considering current store locations as well as looking at potential growth opportunities. 

Using ESRI Business Analyst software, this analysis will include looking at:

• market penetration
• hot-spot analysis
• optimal store locations
• ideal customers

Based on this analysis, four site proposals will be examined and ranked to present one ideal location for consideration. 

Study Area

While the Minneapolis/St. Paul metropolitan area is far-reaching, the scope of this analysis applies only to Hennepin and Ramsey county containing both major cities in the metro (see Figure 1).

Figure 1: Site selection analysis will be conducted for Hennepin and Ramsey counties as a single entity

Methods

Current Store Locations and Customers

Ramsey and Hennepin counties contain six current Trader Joe's locations. This, combined with current customer location data provided by the company paint the picture of the current market situation for the company (see Figure 2).

Figure 2: Six Trader Joe's locations are currently located in Hennepin and Ramsey counties leading the identified customer base

Market Penetration

Using the current store locations and customers, a market penetration report reveals the level to which the store distribution is reaching the identified market. The numbers produced indicate the ratio of customers to total people.Figure 3: Market penetration shows a highly-saturated eastern half of the study area with a less-saturated western half

Market penetration analysis reveals that the six current Trader Joe's locations hive a high level of penetration (anywhere from 32% to 229%) for the entire eastern half of the two-county area with lower level of saturation, between 0% and 32%, typically found in most of the eastern half (see Figure 3). With both Minneapolis and St. Paul located in the western half of the study area, this result is to be expected.

Hot-Spot Analysis

In order to better understand the market found in Ramsey and Hennepin counties, hot-spot analysis applied to both total population and median income will show areas of high density and high income. 

Total Population

As expected, areas with high population are located in and tightly around the city limits of Minneapolis and St. Paul toward the Southeast of the study area (see Figure 4). In addition, the eastern half of the study area is almost exclusively low-populated areas. Current Trader Joe's locations tend to be located at the transitional edge between high-population and low-population areas.

Figure 4: Highly populated areas in Ramsey and Hennepin county are located toward the southeast of the study area with Minneapolis and St. Paul at the heart

Median Household Income

Conversely, hot-spot analysis shows that areas with high median household incomes are located along the fringes of the study, especially as seen in the eastern half of the study area (see Figure 5). Areas of lower median household income correlate with areas of higher total population from Figure 4.

Figure 5: Median Household Income tends to be high in the eastern half of the study area and along the fringes

Optimal New Store Locations

Business Analyst software allows for the identification of the exact center (optimal locations) based on current customer locations. For purposes of this analysis, three optimal locations are determined. The intent of this process is to help determine ideal locations for a new store. 

As such the three optimal locations identified correlate nicely with current customers (see Figure 6) with one located to the northwest, one in the south-center, and one to the mid-east. In general, these optimal locations split the distance between two current Trader Joe's locations suggesting they may prove useful in determining new site locations.

Figure 6: Three optimal locations are identified by determining the mean ideal location based on distance from current customers.

Ideal Customers

Ideal Customer areas can be found utilizing Business Analyst Software and the data contained therein about people located within each area. For the purpose of this analysis, the variables used to identify areas of ideal customers are:

• total population
• median household income
• average spent per week by household at food stores >$150
• shopped at Trader Joe's in the last 6 months

Thirty areas were ranked in order to get a large semblance of areas of influence within the two-county study area as well as its outskirts (see Figure 7). These areas will be important in determining locations for final consideration.

Figure 7: Thirty areas containing ideal customers were identified in and around the study to guide the selection of locations for a new Trader Joe's store

Site Proposal Identification

Using the three optimal site locations identified in Figure 6 in coordination with Trader Joe's ideal customer areas from Figure 7, four sites were selected for consideration. In addition, the location of current stores was considered. 

Based on the pattern established by current Trader Joe's locations, other considerations that played a part include proximity to a main transportation artery, and location at the transition point between the high median-income suburbs and the densely populated urban core. All exact sites sit in areas with other high-traffic seeking businesses. 

The first site proposal, located in the heart of Plymouth, Minnesota is located within one of the top ideal customer areas with several other ideal areas around it. In addition, it is located approximately between two current Trader Joe's locations (see Figure 8).

Figure 8: Four site proposals are identified based on three optimal locations and thirty ideal customer locations

The second site proposal, proceed counter-clockwise, is located in the heart of Eden Prairie. While it is not located directly in an identified ideal customer area, there are several all around it where the traffic arteries will make Eden Prairie a natural hub for each area to utilize a potential Eden Prairie location. Especially important to this location is closing the distance to a Trader Joe's location for one of the top ideal customer areas between Chanhassen and Chaska.

For the third optimal location, two sites were identified for consideration. Thus, the third site proposal on the east edge of St. Paul was chosen because it is located on the edge of the Minnesota State campus where there is some new development taking place along the diagonal moving transportation artery proceeding northeast from St. Paul. 

The fourth sit proposal is located in the heart of Maplewood and sits more centrally between two Trader Joe's location in terns of distance while also being more closely located to one of the top ideal customer locations in and around Oakdale on the eastern outskirts of the study area. 

A site proposal in the heart of Richfield, while being one of the top ideal customer locations did not possess enough additional areas without strong proximity to current Trader Joe's locations.

Ranking Sites

The four proposed sites for a new Trader Joe's location were analyzed using Business Analyst. This process involves comparing each site proposals characteristics based on chosen variables to the other other current Trader Joe's location. The four site proposals were ranked by their similarity to other Trader Joe's locations in the study area using:

• total population
• median household income
• average spent per week by household at food stores >$150
• shopped at Trader Joe's in the last 6 months

Based on this analysis, the top-ranked site was the Plymouth location to the east of the study area (see Figure 9).

Figure 9: The four site proposal were ranked based on four variables in order to determine the best site location for a new Trader Joe's

Discussion

Current Trader Joe's stores are located at the transition point between high-income suburbs and a dense urban core in order to capture the largest number of potential customers. In addition, grocers tend to locate in relatively close proximity intent on capturing traffic and do not seem to be phased by being near their competitors. This is especially true in the case of Trader Joe's because they are clearly distinctive from all but a few competitors nationwide. Locating on or very near main arteries allows Trader Joe's location to capitalize on the mass exodus from the city center to the suburbs. 

Not surprisingly, therefore, these factors make the third proposed site just to the the east of the heart of St. Paul the worst location based on the analysis. It is located along the smallest artery as well as being too embedded in the urban core. 

The second-lowest ranked site suffers by not being close enough to ideal customer areas despite being in a high income area in Eden Prairie while also being surrounded by many ideal customer areas all with main arteries leading them to the areas. 

While the Maplewood location may still be a strong choice the growth in high-income population is happening at a slower rate and over a smaller area moving to the east of the cities when compared to the west. 

Conclusion

The top site revealed through this analysis is located at 15600 36th Avenue N in Plymouth, Minnesota (see Figure 10).

Figure 10: The top-ranked site for a new Trader Joe's is located at 15600 36th Avenue N in Plymouth, MN

 The Plymouth site proposal benefits from two main arteries proceeding into it as people leave the cities while also establishing itself as the nearest Trader Joe's outpost for the high-median income residents located in the entire area to the east of the city. In fact, Highway 55 is currently the only highway proceeding west from the urban core into the high-income suburbs that does not have a Trader Joe's location nearby. Also, Interstate 494 being nearby allows this location to draw in north-south traffic, as well. A very large Lifetime Fitness facility located directly across the street only enhances this potential location.