Applying Geographically Segmented Markets to Retail Sales Forecasts
by Mark Lebovits © 2006

The purpose of this research paper is to determine the importance of geography within retail sales forecasts. As the retail industry relies on location as a key ingredient to success, location analysis as well as site assessment are critical in the development of a short and long term retail strategy. The framework developed in this paper will provide retailers with the methodological process of developing a geographically-based retail sales forecast. A case study of a Canadian specialty retailer is used in the analysis to accurately predict sales at existing stores and potential future locations. This paper examines the effect geographic variables as well as a geographically segmented study area has on sales forecasts. The development of an overall study area regression model will be contrasted with a geographically-based regression model to clearly depict the influence geographic variables and geographically segmented markets have in a sales forecasting model. The goals of this research paper are to provide a methodological framework for developing geographically-based regression models as well as determine if geographically segmented sales forecasts provide more precise, statistically sound and logical models to assist in the location decision strategy of a retail firm.