Eight Common Flaws in Shopping Center Market Research Studies
Eight Common Flaws in Shopping Center Market Research Studies
Too many shopping center market research studies read more like economic development reports than practical guides for developers, architects, and landowners. They provide lengthy discussions on job growth, housing trends, and industry expansion—all of which are useful background information but fail to deliver the most critical insights needed for the planning and design of a viable retail development.
At their worst, these studies present dated demographic data for concentric circles drawn around a site as if retail trade areas were uniform and predictable, ignore how consumers actually shop and how competition truly shapes the retail market, and conclude with projections of average market comps, and a proposed merchant mix characterized by a “dress shop, “pizza parlor”, and “coffee shop”.
A meaningful market study must go far beyond baseline demographics and employment figures; it must provide a clear, prescriptive strategy for what should be built, who will shop there, and how it will succeed.
A well-executed study provides a holistic, integrated approach that ties together a real polygon defined trade area, consumer segmentation studies, a deep analysis of competition including their actual trade area, the sale and rent potential of the subject site, market benchmarks, a merchandising strategy, and financial feasibility. Without this level of depth, the research is little more than a broad economic snapshot—not a study that guides real-world retail development.
Defining the Trade Area as It Actually Exists
One of the most common flaws in shopping center research is the reliance on concentric circles as a method for defining a trade area. In reality, trade areas are shaped by existing retail competition, consumer behavior, transportation networks, and natural and man-made barriers. They are irregular polygons, not neat circles.
A credible study will break the trade area into sectors that recognize real market influences:
The Primary Market, consisting of the core consumers who will shop the center on a regular basis.
The Secondary Market, which includes shoppers who will visit frequently but also have alternative options.
The Tertiary Market, where retail trips will be occasional and highly dependent on specific offerings.
The In-Flow Market, which includes tourists, commuters, and visitors who will generate significant but less predictable spending.
Consumer Segmentation: Understanding the Shopper, Not Just Counting Them
A study that presents basic demographic data—population, households, and income levels—without deeper analysis misses the point. The real question is not just who lives in the market, but how they behave as consumers.
For each segment of the trade area, a strong study will quantify:
Total population and households in each market sector.
Household incomes, household expenditures, detailed spending projections on online and brick & mortar shops, dining away from, and entertainment.
Consumer segmentation insights, defining the life stages, lifestyles, and shopping behaviors of the market.
Merely knowing how many people live in a trade area is insufficient. A strong study will define how those consumers shop, what they seek in retail experiences, and where gaps in the market exist.
Competitive Landscape: Understanding the Strengths and Weaknesses of Existing Retail
Shopping centers do not operate in a vacuum. Every new development competes against an established set of retail centers that have already captured portions of the market potential. A meaningful market study must provide an in-depth analysis of competing properties, including:
The trade area’s competitors, how far their reach extends, and what consumer segments they serve.
Performance indicators such as estimated sales per square foot, tenant occupancy rates, and rental levels.
A SWOT analysis outlining the strengths, weaknesses, opportunities, and threats posed by competing shopping centers.
Understanding the competitive landscape is not about identifying similar retail centers. It is about recognizing where and how the market’s retail and dining potential is captured, understanding the unmet demand and how a new project can differentiate itself to meet the unmet needs and to capture a share of the existing market.
Market Benchmarks: Establishing a Performance Baseline
Retail market research must go beyond a description of what exists today and compare the market to regional and national performance benchmarks. These benchmarks provide a critical framework for evaluating feasibility and should include:
Sales per square foot for grocery stores, apparel retailers, restaurants, and entertainment venues.
The cost of developing a shopping center per square foot, both locally and nationally.
Rents per square foot, comparing local lease rates with national averages for similar retail types.
Without these benchmarks, a study provides no context for developers to evaluate whether a proposed project aligns with market realities.
Market Sales Potential: The Core of Retail Viability
Ultimately, the success of any shopping center depends on the total market potential and the percentage of that demand a new development can realistically capture. A strong study will model:
Total household income in the trade area and how much is allocated to retail spending. Spending allocated by category, including groceries, GAFO (i.e., apparel, home goods), dining, and entertainment.
The impact of e-commerce and the breakdown of online vs. in-store sales.
Projected capture rates for the proposed development, based on competitive positioning and tenant mix.
Without this level of analysis, developers are operating on assumptions rather than quantifiable market potential.
The Intersection of Costs, Rents, and Sales—A Holistic Approach
Some developers argue that market studies should not include cost and revenue projections, leaving those to later financial modeling. But the reality is that retail feasibility is not a linear process.
This is the way it really works:
Costs drive rents.
Rents determine the financial pro forma.
Rents must be justified by sales performance.
Sales performance is shaped by trade area strength and competitive positioning.
A strong market study will connect all of these elements, identifying potential refinements in tenant mix, opportunities to extend the trade area, and critical adjustments to project size, cost, and other key areas to ensure the project is viable.
The Need for Clear, Prescriptive Recommendations
At its conclusion, a market research study must do more than summarize data—it must provide focused, prescriptive recommendations that guide development decisions. These recommendations should define:
How to proceed, including next steps in site planning and leasing strategy.
What should be built, detailing the optimal mix of anchors, shops, restaurants, and services.
What should not be done, outlining potential missteps that could undermine success.
A strong study of research is not just informational—it is directional. It provides clarity, focus, and a roadmap for execution.
Demand More From Market Research
A shopping center market study should not be a static report. It should be an interactive tool that informs design, leasing, and financial modeling. It should define what should be built, who will shop there, how much they will spend, and how the project will be financially sustainable.
If a market study does not provide these essential insights, then it is just another collection of data without direction—and that is not market research. That is just busy work.
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