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A market-area approach to determining optimum store size

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Abstract:

This paper investigates the issue of optimum store size by empirically examining the relationship between a firm's store performance and its level of presence in the market area. This relationship is explored for a general merchandise chain with eighty-one stores in the southeastern United States. A weak correlation between store size and market-area size suggests that many of the firm's stores are not appropriately sized. Evidence is found for the existence of a range of market presence that results in maximum store performance. This range in market presence is used to determine the optimum size of store in each of the eighty-one markets. Less than 50 per cent of the eighty-one stores fell within the optimum size range for their markets. The method illustrated in this study can be used by firms to make decisions regarding the modification of store size in existing markets and the appropriate sizing of stores for new market entries.

Keywords: LOCATION; MARKET AREAS; MARKET PRESENCE; OPTIMUM STORE SIZE; STORE PERFORMANCE

Document Type: Research Article

DOI: https://doi.org/10.1080/095939699342453

Publication date: 1999-10-01

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