Presented by Evan Zaletel Gray Bigler Alex Knecht Jesse Kedy
Best Buy Profile Specialty retailer: consumer electronics, home‐office products, entertainment software, appliances & related services Competition: other electronics stores, mass‐merchants, home improvement stores Store development program Primarily in existing markets •Presence: 23 stores in VA •Goal: increase market share (18%)
Main Issue & Goals • • • •
Expanding Market Share Reaching Under-served Markets Strategic Locations (i.e. major intersections) 2007 Expansion Goals – 90 New Stores in U.S. & Canada – Leveraging Existing Infrastructure
Problem with Initial Regressions Reg. IV’s PSport; #1
Problems
M40‐49; F40‐49
Multicollinearity (M40‐49 & F40‐49)
#2
PSport; Income M40‐49;
Adjusted R Square too low (0.943)
#3
PSport; Income; Mobile; M40‐49
Adjusted R Square (0.949); Mobile Beta (‐0.086)
#4
PSport; Income; Housevalue M40‐49;
Adjusted R Square (0.950); PSport Beta (0.072)
Regression # 5
No Multicollinearity Problems!
Regression # 5 95.2% of the variance in the number of electronics and appliance stores is explained by the variation in the IVs. All IVs are significant.
Interpretation of IVs Coefficients a
Model 1
(Constant) Number of males 40 to 49 years of age Median household income in 1999 Median value of owner-occupied housing units Median year structure built
Unstandardized Coefficients B Std. Error 417.055 102.058 .002
.000
.000
.000
8.14E-005
.000
-.211
.052
Housevalue: As the median value of owner occupied housing units increases by $100,000, the number of electronics stores increases by 8.
M40‐49: As number of males 40‐49 increases by 1000, the number of electronics stores goes up by 2. Income: As median household incomes increases by $10,000, the number of electronics stores increases by 2 (0.0002) Yearbuilt: As the median age of a structure decreases by 10 years (i.e. the newer the structure), the number of electronics stores decreases by 2
Summary: Regressions & Disregarded Variables
1
Electronics
PSport, M40‐49, F40‐49
Multicolinearity (Males & Females)
2
Electronics
PSport, M40‐49, Income
Removed Females 0.943 (Males=main target) (Prefer > 95% )
3
Electronics
PSport, M40‐49, Income, Mobile
Added Mobile (least 0.949 important IV)
4
Electronics
PSport, M40‐49, Income, Housevalue
Replaced Mobile (least important IV)
0.95
5
Electronics
Housevalue, M40‐49, Income, Yearbuilt
Replaced PSport (least important IV)
0.952
NA
Final Answer!
Sorting Procedure Retail Potential Calculated by comparing expected number of electronics stores in a county to actual number of electronic stores in a county •Saved from regression as ‘unstandardized residuals’ •Result shows to what extent stores are “missing” •more negative = higher potential for a new store
•Sorted counties by retail potential •Seeking greatest retail potential while fulfilling other criteria
Top 10 Counties in Virginia by Retail Potential 1. Augusta County 2. Portsmouth City 3. Chesterfield County 4. Bedford County 5. Prince William County 6. Hampton City 7. Roanoke County 8. Richmond City 9. Clifton Forge City 10.Norfolk City
Selecting a County Six Main Criteria 1. Retail Potential: At least 5 less stores than expected All 10 counties qualified
2. Population (sufficient size): Above 100,000
3. Income (sufficient means): Above $45,000
Selecting a County (cont) 4. PElectronics (demand): between 2% and 4% To demonstrate a market exists for electronics in that county
5. PSport (Music/ DVD demand): between 4% and 7% To demonstrate a market exists for music/DVDs in that county
6. PMales: at least 48 percent Best Buy stores tend to target males more than females
Selecting a County (cont) Tabulated criteria to evaluate based on multiple factors
Augusta
‐9.84006
1
5,696
$43,045
65,615
Portsmouth city
‐9.38079
7
6,737
$33,742
100,565
Chesterfield
‐8.40461
36
22,262
$58,537
259,903
Bedford Prince William Hampton city Roanoke Richmond city Clifton Forge city Norfolk city
‐8.1322
2
5,281
$43,136
60,371
‐7.84942
38
22,726
$65,960
280,813
‐7.22696
17
11,203
$39,532
146,437
‐6.80851
7
6,955
$47,689
85,778
‐6.34982
28
13,620
$31,121
197,790
‐5.90242
0
279
$26,090
4,289
‐5.65534
30
14,603
$31,815
234,403
Selecting a County (cont) And the Winner is… Chesterfield county Only county to satisfy all requirements
Augusta
4.67%
50.29%
0.47%
$110,900
1977
Portsmouth city
4.41%
48.31%
2.37%
$81,300
1961
Chesterfield
6.18%
48.71%
3.84%
$120,500
1982
Bedford
4.35%
49.87%
2.17%
$127,000
1982
Prince William
7.76%
49.88%
4.15%
$149,600
1983
Hampton city
6.42%
49.56%
3.31%
$91,100
1969
Roanoke
4.46%
47.26%
3.47%
$118,100
1974
Richmond city
7.31%
46.55%
2.76%
$87,300
1955
Clifton Forge city
0%
44.11%
0%
$52,800
1939
6.43%
51.12%
3.27%
$88,400
1959
Norfolk city
Selected County: Chesterfield
Refining the Selection Based on Tract‐Level Census Data:
Criteria ‐ Males/ 100 females (>= 85) ‐ Median Household Income (>= $49K) ‐ Median Value, Owner‐Occupied Housing Units (>= $90K) ‐ Persons per square mile (>= 1,250)
Males per 100 Females, Tract Level Eliminating tracts based on each criterion
Males per 100 Females, Tract Level
Median Household Income, Tract Level
Median Household Income, Tract Level
Median Value of Owner‐Occupied Housing Units, Tract Level
Median Value of Owner‐Occupied Housing Units, Tract Level
Persons Per Square Mile, Tract Level
Persons Per Square Mile, Tract Level
Two Possible Locations
And the Winner is…
Existing Best Buy Store Locations…
Census Track 1009.15 Males/ 100 Females: 86–93 Males per 100 Females Median Household Income: $52,167 Adjacent to highest income area
Median Value, Owner‐Occupied Housing: $102,800 Adjacent to highest value area
Persons Per Square Mile: 1,976–2,976 Adjacent to large, underserved area
Median Age: M: 37.8 years | F: 41.1 years Average Household Size: 2.36 people
Approximate 12 min drive from nearest BB
Limitations
Any Questions?