We work all the time with retailers, and trade area is a basic assumption that is taken for granted in most analysis. We actually spend a lot of time to define this as it's the common denominator for most higher level analysis such as buying behavior, preferences, branding, price points, etc. If you get the initial denominator wrong, the rest of the analysis is exponentially wrong!
Recently with some of the mall work we've done, I've heard statements from developers and government officials such as, "Our trade area is 500km. People will come here from the next province." Now you can start to understand why there are so many non-performing assets creating heartburn for asset management companies and banks across China. How do you define wild expectations? A 500km trade area comes to mind.
The link below is a very interesting, though somewhat dry, explanation of how to define trade areas. Do understand that this is geared completely towards an American style retail environment, and it's not the same as China, but the logic is the same. It becomes more entertaining if you imagine the speaker is actually George Castanzas from the Seinfeld TV series.
Video: Creating retail trade areas...
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