Question

What is trading area overlap? (1 mark) Are there any advantages to a chain retailer having some overlap among its various stores? Why or why not ?

Answer 1

What is trading area overlap?

Trading areas are geographic regions where customers are attracted to the retail stores. If two stores cater portions of the same area, then customers of the same area are served by both the stores. This causes encounters between the stores for the same trading area. This phenomenon is known as a trading area overlap.

Are there any advantages to a chain retailer having some overlap among its various stores? Why or why not?

When more than one store is operating in one trading area, the chances of capturing a customer and hence the overall sales increases. The customers, instead of moving to a competitor's store, will show a higher probability of landing up into one of the stores. Another advantage of trading-area overlap is to be able to provide a high service level to the customers residing in an area. For example, Canadian Tire Corporation, through its closely spaced stores, has ensured that more than 90% of their customers can live within a 15-minute drive of a Canadian Tire store.