Assignment 4: Trader Joe’s Site Selection

1 Introduction

1.1  Purpose of this Study

The purpose of this study is work with Trader Joe’s in potential site selection for future development of their grocery stores. Trader Joe’s is looking to create a profit, therefore, an analysis of what is happening in the Minneapolis-St. Paul area will be conducted. In the end, there will be enough information to decipher where a new Trader Joe’s can be placed.

1.2  Scope of this study, sources, and methods

Customer data has been given for six different Trader Joes in Hennepin and Ramsey Counties in Minnesota (Figure 1). Each customer is also fixed to the Trader Joe’s store they are loyal to.

Figure 1. Location of Trader Joe'e in Hennepin and Ramsey Counties.

To understand the study area, a series of analyses will be completed: a market penetration report, finding the optimal store location, locating ideal customers, and selecting three sites and ranking them. Market penetration is a method that determines how well the market is being reached. The number of customers are divided by the total number of people in each area (zip codes) to give a percentage of how well the market is being penetrated. The optimal location will be found by detecting the mean center of all of the Trader Joe's customers. The ideal customers tool uses a method that identifies the threshold of some variable at a geographic area such as zip codes. Hot spots identify areas with high values at a given geographic scale. And lastly, ranking sites allows one to see which sites could potentially out perform the others. The rank will be based on the following variables:

Variables

2016 Total Income

2016 Median Household Income

Ind: Avg. Spent per Week by HH at Food Stores $150+

Shopped at grocery store/6 mo: Trader Joe's

The sites need to be selected based on an area that would be large enough for a Trader Joe's to actually be built, not just a general location. A 1.5 mile buffer will surround the potential sites to assess the criteria listed above. 

2        Findings and Discussion

2.1  Data Provided

The customers for Trader Joe’s are sporadically located across Hennepin and Ramsey County. Six zones can clearly be spit based on the stores. Each grocery store has a clear number of customers that are loyal to a particular location shown in Figure 2. One thing to note is that there are not as many Trader Joe’s customers to the west of the study area.

Figure 2. Location of Trader Joe's customers by store.

2.2  Optimal Location

The optimal location was influenced by the customers. By finding the mean center of the customers, a location was placed near downtown Minneapolis (Figure 3). The city of Minneapolis itself does not have customers clustered in its bounds. Due to the infrastructure of businesses and entertainment that are prominent in downtown Minneapolis, there are not many customers living there. The mean center in this particular instance may not be the best because there are still current Trader Joe’s locations that could be closer to the customers.

Figure 3. Mean center of Trader Joe's customers.

2.3  Market Penetration

To inspect how well the market is reached in the MSP area, the number of customers is divided by the total number of people in each area. This is based on total population in each zip code. The 2016 Total Population is 56,104 people for the study area with a Median Household Income of $145,958. With these statistics in mind, the percentage of how well Trader Joe’s is penetrating the market is more prominent in the Minneapolis and St. Paul areas. This is where 4 of the 6 Trader Joe’s are located (Figure 4).

Figure 4. Market penetration of customers. 

2.4  Hot Spot Analysis

The map in Figure 5 shows hot spots (clusters) of high population based on the Median Household Income. Typically, those with higher incomes do not live in the heart of the city (Minneapolis-St. Paul). This is why majority of the yellow overlays the Twin Cities, while the red lies more towards the suburbs.

Figure 5. Hot spots of population based on median household income.

2.5 Ideal Customers

Locations that contain potential areas for future development are shown in Figure 6. The ideal customers are classified by zip codes and contain a population with at least 20,000 people. Contrary to past analyses, the prospecting customers are located outside Minneapolis-St.Paul specifically. In other words, the customers are not in the heart of the two large cities but in the cities around them. However, looking at ideal customers takes into consideration the entire population of the area. This could useful when looking for new markets or future potential customers. 

Figure 6. Ideal customers of Trader Joe's.

2.6 Ranking Site

After looking at the demographics of the customers, population, and store locations, three sites were selected for potential future development locations for Trader Joe’s. These sites that were selected were on empty lots in commercial areas around The Cities. With a 1.5 mile buffer around the three sites, variables were considered in order to see which sites may outperform others. The variables included 2016 Total Income, 2016 Median Household Income, the Average Spent per week by Households at Food Store $150+, and Shopped at Grocery store (Trader Joe’s). Figure 7 shows that the number one site is located North West of the cities. There is only one Trader Joe’s in that direction along with a large cluster of customers. The second best option was East of St. Paul where there is not a Trader Joe’s that close. The last site is not as ideal as the other two. After it was geocoded, the location was too close to another store. That would create competition between the customers.

Figure 7. Ranking site of potential locations for Trader Joe's.

3        Conclusions & Recommendations

The ranked sites were heavily influenced by ideal customers in the selection process. The first and second site are located closely to an ideal customer area. All three of the sites are in the highest percentage block. However, the third site is in a less populated area. Site 1 is the nearest to the mean center as well. After the ranking of the sites was completed, the northern most site was selected based on the series of variables. With all other analyses in mind, in the end, Site 1 would be the best selection for another Trader Joe's to built at 5801 Xerxes Ave. N, Minneapolis, MN 55430 (45.060469, -93.321479). 

4        References

ESRI. 2016. "Esri Business Analyst."

Assignment 3: Real Estate

Introduction

Using real estate analysis, our goal is to sell a home that is found within the Third Ward  neighborhood of Eau Claire.  This area has prices that extend from $80K to around $700K for the historic homes within the area, therefore determining the fair-house value needs to be accurately based on nearby houses with similar features along with taking into account the house's overall quality.  Simultaneously, the house will need to account for its primary customers to understand the market for this housing option.  

The price is going to be determined based on the following qualities;

• The location of the house
• Value of surrounding real estate
• Features found within the house (# baths / # bedrooms)
• Recently sold real estate prices

Figure 1: Front of house

The house being sold is located at 1111 Graham Avenue (Figure 1). The amenities of this house are as follows:

• 4 bedrooms
• 2.5 baths
• 1,929 sqft
• Lot size: 4,356 sqft
• Single Family

Unique Features (Figure 2):

• Hardwood Floors
• Attached Garage
• Large windows for large amount of light

Figure 2: Living Room

• Updated Furnace in 2012
• Large Living Room

This cozy four bedroom home is located in the Third Ward Neighborhood of Eau Claire, WI.  This house is found an equal distance from the University of Wisconsin - Eau Claire campus and the historic downtown making this house a great location for enjoying parks, downtown shops, and unique restaurants. This home was built a year after World War 2 which finished in 1946 to give this house the beautiful look of the time period giving it American appeal.  This house offers a great location, safety of Eau Claire, and the ability to make house improvements to one's unique style.

Location

Table 1. Quality of Life.

This house is located in one of the historic areas of Eau Claire which has been positioned perfectly between downtown and the university.  It also has an easy access onto the highway about 5 minutes away.  To the east up a larger ridge is more middle-end houses built around the 1960s and 70s, and to the south there is a walking trail that connects a park to the university.  With the larger hill to the east and the main roads cutting a few blocks away this house offers less outfront traffic than other roads within a few blocks, and this house still offers its proximity to downtown while still being a quiet and quaint area.  Some other reasons this location is positive is because there is a high quality of Life located in the City of Eau Claire. By having a 93.9 score of the living index this area is a great place to settle down and buy a home (Table 1).  It is close to two major hospitals, has many hotel rooms for friends and family to come and stay, and if being bought as a property to rent out, it can rent out above the $709 average rental price due to the location of the home.    

Another reason this is a great location is the crime rate within the City of Eau Claire. The crime rate within the City is 210/100,000 people which is low for a city of this size making this a safe place to raise a family and another way to add value to the home (Table 2).

Table 2. Crime Index

Local Housing Market

The Third Ward has some of the oldest houses found in the City of Eau Claire making it historic and beautiful (Figure 3).  Therefore, most of the housing stock in this area is going to be old and outdated, but still competitive for the area. The houses in the Third Ward will be taken care of better

Figure 3: Reference Map of Third Ward.

due to having less student rentals compared to the area to the Northwest, making this neighborhood more in demand compared to other neighborhoods at a similar price range. Even with having the oldest houses within the area the average number of defects is less than 2 within the third ward region (Figure 4). This can be compared to the student area housing to the Northwest that has many parcels of defects.  Therefore, the homes surrounding 1111 Graham Ave. show that the neighborhood is maintained and keep their high quality homes keeping housing prices consistent with the area.  

Figure 4: Number of Defects found within Third Ward in 2010. 

The Third ward can be divided up into a few different categories of people that live in the neighborhood.  It is rentals, single family homes, duplexes, three or more dwelling units and commercial.  With there being few large rental units except for the ones next to Bracket Hill and the elderly living places which are far away enough for there not to be a noise complaint from that area.  

Demographics

Eau Claire has a population of 67,385 according to the 2015 Census. The Dependency Ratio looks at three different cohorts:

P0-14 = Population in the 0-14 age group, also known as the Youth Dependency Ratio (YDR)

P65+ = Population in the 65+ age group, also known as the Elderly Dependency Ratio (EDR)

P15-64 = Population in the 15 to 64 age group

By using the total population data from the U.S. Census the equation can be written out as:

DR = 100 * (P0-14 + P65+) / P15-64 = (10,849 + 8,221) / 48,315 = 0.39 = 39%

Since the dependency ratio is at 39%, it can be concluded that the working age is more prominent in the city of Eau Claire. If a dependency ratio was high, those of working age face a greater burden in supporting the aging population. In this case, the dependents and the retired make up less of the total population than the working class. The largest age cohort, according to Census Data from 2015, is the 20 to 24 years taking up 15.6% of the population in Eau Claire. Eau Claire is considered a college town due to the University of Wisconsin-Eau Claire. However, people ranging in age from 25-54 also take up a large portion of the population. Eau Claire area is also a great area for families even with the University. There is many opportunities to be taken advantage of in the city ranging from entertainment to large corporation such as JAMF software and RCU headquarters.

Future Development and Attractions

Downtown Eau Claire has been known for their special events to bring people to the downtown. Eau Claire continues to find ways to bring entertainment, recreational, and cultural activities to the city. There is a plethora of indoor and outdoor activities such as music, arts, conferences and shows. These attractions include the L.E. Phillips  Memorial Library, State Theater, Children's Museum, and Boys and Girls Club. Future contributions to the city will include a community performing arts center, The Confluence (Figure 5), as well as a new Civic Center and riverfront parks and trails, considering the Chippewa and Eau Claire River adds a natural attraction to the city layout.

Figure 5: Proposed Performing Arts Center

The value of the riverfront will greatly increase when The Confluence is completed. With the combination between The Confluence and the newly finished Lismore Hotel, other investments in the South Barstow District will be created especially in the 200 and 300 block (Figure 6). The plan is to seek out for new and better restaurants, cafes, and bars in the different areas of downtown.

Figure 6: Future district growth in downtown Eau Claire.

Eau Claire is also known for it’s many green spaces, including Carson Park, Owen Park, the Chippewa River Trail for biking and recreation activities, and most importantly Phoenix Park where Eau Claire’s famous Farmers Market is held. To continue the diversity of Eau Claire’s green spaces, a small park will be placed by City Hall and the Library (Figure 7).

Figure 7: Future green space project.

Suggested Sale Price

To determine the sale price for this home there are some factors that need to be taken into account.  First, the price of nearby houses that have recently sold that are close in square footage and number of rooms/bathrooms.  Also, the quality of the overall home needs to be taken into the equation.  And finally, what the seller wants to get out of the house.  These variables all factor into the final price.  

Table 3: Housing Price comparision

Some of the houses that have recently sold around the area are referenced in Table 3 to understand the estimated price determined for this property.

Based on these factors,the consensus was to value the house at $143,864. The price was decided based on the value of similar homes in the area as depicted above in Table 3.

Sources:

Zillow: https://www.zillow.com/homes/1111-Graham-Ave-Eau-Claire,-WI-54701_rb/

City of Eau Claire: http://www.ci.eau-claire.wi.us/home/showdocument?id=10376

US Census: https://factfinder.census.gov/faces/nav/jsf/pages/index.xhtml