A Study for Locating of a New Store Considering Competition for Trading Area: Focusing on the Case of Hypermarket in Seoul Metropolitan Area Kyoung-soub Tae* Byeong-jun Rhim** 4 Abstract Finding the ideal location for your business is one of the most critical and important steps you will have to undertake. Otherwise, done in the wrong way you will only end up paying an expensive cost for an unsuitable location. Therefore, to select the perfect location for your business, this study makes a reasonable and simple model for retail shops by calculating occupation population for each store applying Huff s Probability Theory to Hypermarket in Seoul. Then, this study, based on occupation population, has divided every unit section (dong scale) into 4 market types which represent the state of the competitive markets, including monopoly, oligopoly, competitive, and noncompetitive markets. Consequently, the most reasonable place to locate a new store is where it can take most of the customers, that is, a place which can take non-competitive market as much as possible and is distant far enough from competitive market where competition is severe. : commercial location, location analysis, change of trading area, competition for trading area, Hypermarket 2009 (Teacher, Anyang Girl s High School, Doctoral Student, Department of Economics & Real Estate, Hansung University), taean38@empal.com (Professor, Department of Real Estate, Hansung University), bjrhim@hansung.ac.kr 609
1993 2008 11 386 10 (total life service) 1 3 000m 2 2 3 4 Huff(1962; 1964) 1 2 5 4 4 610
Table 1. Administrative districts in Seoul in 2000. Symbol Districts Symbol Districts Symbol Districts Symbol Districts A Jongno-gu(19) B Jung-gu(15) C Yongsan-gu(20) D Seongdong-gu(20) E Gwangjin-gu(16) F Dongdaemun-gu(26) G Jungnang-gu(20) H Seongbuk-gu(30) I Gangbuk-gu(17) J Dobong-gu(15) K Nowon-gu(24) L Eunpyeong-gu(20) M Seodaemun-gu(21) N Mapo-gu(24) O Yangcheon-gu(20) P Gangseo-gu(22) Q Guro-gu(19) R Geumcheon-gu(12) S Yeongdeungpo-gu(22) T Dongjak-gu(20) U Gwanak-gu(27) V Seocho-gu(18) W Gangnam-gu(26) X Songpa-gu(28) Y Gangdong-gu(21) Notes: Parentheses is number of dongs. Figure 1. Location of Hypermarkets in study area in 2001. 2 6 2002 7 2000 2001 2000 2001 8 2000 2001 522 26 611
13 572 2009 424 2002 2009 29 12 296 9 10 Hong 1991 2001 1 2002 1 (trading area) 75 1 (primary trading area) 15 2 (secondary trading area) 3 (fringe trading area) 60 65 30 5 10 1 30 2 10 3 5 Lee 2009 11 1 3 Reilly 1929 (law of retail gravitation) Converse 1949 Reilly Ellwood 1954 Reilly Huff 1962 1964 2 1 S P ij jd ij 2 1 S kd ik k Ni 612
P ij i j S j j D ij i j N i i 1990 1990 1990 Jun 1996 (GIS) Kim and Lee(1997) Im and Lee(1999) Kim 2002 Ha 2002 Yuh and Lee(2003) Lee(2004) 2 5km Lee et al.(2006) 21 35 Kim 1996 12 613
Table 2. Hypermarkets in this study. Floor Turnover/Day Floor Turnover/Day Symbol Store space (Million Won) Symbol Store space (Million Won) (m 2 ) 2000 2001 (m 2 ) 2000 2001 E-J E-mart Changdong 05,092 356.0 390.9 E-Y E-mart Cheonho 08,580 337.1 389.7 Ha-V Hanaro club Yangjae 11,880 820.2 836.4 G-P2 Grand mart Gangseo 07,362 153.4 149.6 K-V Kim s club Gangnam 09,431 587.4 601.6 H-K Home plus Junggye 09,820 215.2 252.5 G-N Grand mart Sinchon 06,174 209.1 217.8 E-P E-mart Gayang 11,220 707.0 653.3 L-E Lotte mart Gangbyeon 05,280 236.4 243.3 E-G E-mart Sangbong 09,570-395.8 Ha-C Hanaro club Yongsan 04,275 118.3 107.6 GS-X GS mart Songpa 12,210 335.0 385.7 Ha-J Hanaro club Changdong 10,890 782.3 790.0 H-P Home plus Gayang 10,147 201.5 186.8 L-X Lotte mart World 12,738 421.8 455.7 H-O* Home plus Mokdong 10,649 323.0 L-U Lotte mart Gwanak 05,148 213.4 224.8 E-D* E-mart Seongsu 11,220 363.3 G-P1 Grand mart Hwagok 04,950 116.3 084.1 L-R* Lotte mart Geumcheon 12,200 268.5 E-W E-mart Yeoksam 06,600 115.7 154.0 H-R* Home plus Siheung 08,271 239.1 E-Q E-mart Guro 08,250 387.0 457.1 L-S* Lotte mart Yeongdeungpo 12,540 243.9 H-G Home plus Myeonmok 06,825 292.5 286.5 E-L* E-mart Eunpyeong 12,000 704.8 Notes: * New store in 2001. Order is opened time. The first alphabet represents Hypermarket, and the second represents gu. Source: Korea Chainstores Association. A D 2 1 Huff A 1 50 2 3 1 5 1 (monopoly market) B 1 30 2 3 2 1 5 1 1 2 3 2 1 5 (competitive market) D 5km 13 (non-competitive market) 14 Table 2 2 1 10km 15 614
Table 3. Distance from Sindorim-dong office and visit probability of Sindorim-dong residents in 2000. Store Ha-C G-N E-P H-P G-P1 G-P2 E-Q L-U Distance(km) 9.1 8.3 6.5 7.7 6.9 6.9 3.5 6.0 Visit probability(%) 3.1 5.4 16.1 10.4 6.3 9.4 40.7 8.7 Notes: Not including stores over 10km. Figure 2. Market type of Hypermarket of Seoul by dongs in 2001. A D 2000 24 148 (E-Q) 8 250m 2 3 5km 673 5 1 653 673 5 1 653 40 7 40 7 24 148 40 7 9 838 2000 20 (Q01) 16) Table 3 615
(E-Q) 40 7 16 1 (E-P) 10 4 (H-P) 1 30 1 2 3 1 5 2 2 5 B 522 A D Figure 2 2001 6 26 Table 4 2001 (L-S) 20 9 2000 1 (E-Q) 17 9 Table 4. Distance from Sindorim-dong office and visit probability of Sindorim-dong residents in 2001. Store Ha-C G-N E-P H-P G-P1 G-P2 Distance(km) 9.1 8.3 6.5 7.7 6.9 6.9 Visit probability(%) 1.4 2.4 7.1 4.6 2.8 4.1 Store E-Q L-U H-O* L-S* L-R* H-R* Distance(km) 3.5 6.0 4.1 4.0 4.9 6.9 Visit probability(%) 17.9 3.8 16.9 20.9 13.5 4.6 Notes: * New stores in 2001. Figure 3. Market type of Hypermarket of Seoul by dongs in 2001. 616
Table 5. Change of Sindorim-dong s market type. 2000 2001 Store Market share Store Market share Rank 1 E-Q 40.7% L-S 20.9% 2 E-P 16.1% E-Q 17.9% 3 H-P 10.4% H-O 16.9% 1/(2+3) 1.5 0.6 1/2 2.5 1.2 Market type B C Table 6. Change of market type from 2000 to 2001. Before After A B C D A 128 32 18 0 B 5 52 26 0 C 10 13 115 0 D 29 21 5 68 (H-O) 16 9 1 30 1 2 3 0 6 2 1 2 C 2001 522 A D Figure 3 Figure 2 Figure 3 C A A C D 6 Table 5 2000 B 2001 C Table 6 30 5 159 A B 32 A C 18 B C 26 D B 21 D C 5 102 64 2 617
B A 5 C A 10 C B 13 28 D A 29 (L-S) m 2 (H-O) m 2 17 D m 2 Table 7 2001 6 Figure 2 Figure 3 (E-L) D (L-R) (H-R) m 2 m 2 m 2 1 6 (E-D) (H-G) (L-E) D 2001 2000 2001 6 2001 Table 7. Number of customers and turnover of new stores in 2001. (a) (b) Floor Store Number of customers Turnover/Day space (a)/m 2 (b)/m 2 (1,000 persons) (Million Won) (m 2 ) E-L 683.37 704.76 12,000 0.057 0.059 E-D 608.06 363.34 11,220 0.054 0.032 H-O 410.21 322.95 10,649 0.039 0.030 H-R 204.23 239.05 8,271 0.025 0.029 L-R 432.44 268.47 12,200 0.035 0.022 L-S 500.33 243.88 12,540 0.040 0.019 Source: Korea Chainstores Association 618
Table 8. Difference between expected number of customers and observed number of customers. Store Number of customers (2001) a b (a) Expectation (person) (b) Observation (person) Difference Ratio { 100 } a E-J 333,680 323,785-3.0% Ha-V 247,478 224,496-9.3% K-V 608,933 476,150-21.8% G-N 971,108 419,462-56.8% L-E 264,527 206,437-22.0% Ha-C 394,272 239,615-39.2% Ha-J 637,615 621,586-2.5% L-X 520,905 459,452-11.8% L-U 619,161 360,583-41.8% G-P1 267,585 150,932-43.6% E-W 351,511 293,421-16.5% E-Q 901,520 389,312-56.8% H-G 590,249 492,146-16.6% E-Y 498,264 462,376-7.2% G-P2 297,061 180,597-39.2% H-K 705,243 673,462-4.5% E-P 591,730 307,171-48.1% E-G 646,307 566,594-12.3% GS-X 428,392 402,616-6.0% H-P 433,791 242,427-44.1% 6 Table 8 2 5 56 8 20 2001 26 2001 6 A 20 21 100 6 18 (E-Q) 619
Table 9. Influence of new stores to existing stores. New Existing store E-D E-L H-O L-S L-R H-R Total store E-J 2.4 0.6 3.0 Ha-V 4.5 1.6 2.5 0.6 9.3 K-V 12.8 0.9 0.7 4.2 2.5 0.7 21.8 G-N 2.6 36.0 5.4 11.3 1.1 0.4 56.8 L-E 21.9 21.9 Ha-C 6.3 14.9 3.6 11.5 2.2 0.8 39.2 Ha-J 2.0 0.5 2.5 L-X 11.8 11.8 L-U 0.1 0.2 4.7 11.0 16.6 9.2 41.8 G-P1 0.2 9.2 15.8 11.5 5.0 1.9 43.6 E-W 14.2 0.1 0.9 1.1 0.3 16.5 E-Q 0.1 7.6 10.9 24.1 14.2 56.8 H-G 16.1 0.5 16.6 E-Y 7.2 7.2 G-P2 0.1 4.9 15.7 10.9 5.4 2.2 39.2 H-K 4.0 0.5 4.5 E-P 9.5 17.5 13.3 5.6 2.2 48.1 E-G 12.1 0.3 12.3 GS-X 6.0 6.0 H-P 11.6 15.2 11.4 4.3 1.6 44.1 (unit: %) 901 520 389 312 512 209 6 56 8 (L-S) 748 704 152 817 800 502 19 1 512 209 97 781 901 520 10 9 10 9 6 20 Table 9 Table 8 y a bx 5 1 620
Table 10. Ratio of the encroached number of customers and turnover of existing stores. Ratio of the Ratio of the Store encroached number encroached of customers turnover E-J 3.0 0.9 Ha-V 9.3 0.8 K-V 21.8 6.8 G-N 56.8 30.9 L-E 22.0 9.3 Ha-C 39.2 23.7 Ha-J 2.5 0.7 L-X 11.8 5.5 L-U 41.8 21.9 G-P1 43.6 29.9 E-W 16.5 12.9 E-Q 56.8 22.6 H-G 16.6 12.5 E-Y 7.2 3.8 G-P2 39.2 20.9 H-K 4.5 4.7 E-P 48.1 11.8 E-G 12.3 7.9 GS-X 6.0 2.8 H-P 44.1 23.1 (unit: %) Figure 4. Relation between the encroached number of customers and encroached turnover. M 2001 M e 2001 21 M j1 I j1 x y 19 x 20 a b y y M e M M e n 5 2 M e M (M j I j ) 5 3 j=1 M y 1 n M (M j I j ) j=1 5 4 x (P e P) P e P 2001 P e 2001 22 5 5 Table 10 Figure 4 5 6 y 0 692 0 476x R 2 0 812 1 682 0 054 5 6 23 0 476 1 621
1 0 476 24 Figure 4 Figure 4 Table 11 1 2002 2009 29 2 53 25 Table 11. Turnover per m 2 and floor space of stores in square in 2000 from Figure 4. Store Turnover/m 2 day Floor space ( 1,000) (m 2 ) E-P 139 11,220 E-Q 76 8,250 L-U 42 5,148 H-P 40 10,147 G-P2 30 7,362 G-N 41 6,174 Ha-C 23 4,275 G-P1 23 4,950 source: Korea Chainstores Association A D Figure 5 2001 A C D 2009 Table 12 (E-B) (H-N) (E-L1) 2009 1 1 12 17 1 2 Kukminilbo 2009 12 22 2008 7 1 26 622
Figure 5. Market type of Hypermarket of Seoul by dongs in 2009. Table 12. Number of customers by stores in 2009. Store E-B H-N E-L1 H-Y E-K K-V E-D2 Gs-X Number of customers 394,341 389,110 372,780 352,158 314,214 289,123 287,008 277,235 Store H-J H-F L-X E-O2 H-R2 E-I L-Q E-S2 Number of customers 270,907 257,821 256,683 253,530 252,092 248,087 248,010 246,301 Store E-E H-X L-R L-K E-C E-G E-D1 E-W Number of customers 232,376 229,527 218,072 215,449 213,869 208,491 208,133 203,401 Store L-S E-Q H-K H-G H-S Ha-J L-B E-Y1 Number of customers 198,512 197,007 191,407 188,365 177,100 169,528 165,665 164,380 Store H-Q Ha-V H-G G-N H-P2 H-O L-J E-P Number of customers 155,128 154,359 152,455 149,284 147,291 144,737 144,196 140,065 Store E-Q H-R1 E-P Ha-O E-V E-L2 H-P1 E-Y2 Number of customers 137,256 124,090 123,918 123,833 120,330 112,071 106,667 101,042 Store E-S1 E-J L-E Ha-C G-P Number of customers 95,196 92,278 86,971 82,608 79,598 Notes: Order is following the number of customers 623
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