Intalytics helps supermarket chain develop national U.S. expansion plan

Client situation

A supermarket chain was interested in expanding into new markets in the U.S., and wanted to develop an expansion plan that would provide profitable new store deployment opportunities. The chain had historically employed a gravity model approach to forecast sales for new potential stores, but found that the analyses required to identify successful deployment opportunities were both expensive and time-consuming. Further, the chain had a distinct appeal to a subset of households, which could not be effectively accounted for by using a gravity model.

Client questions

  • What types of households are most likely to patronize my stores?
  • What is the impact of competition on store sales performance?
  • How can we decide which new sites to consider?

The Intalytics approach

Intalytics collected relevant data for the client supermarket chain, including store locations, store size and amenities, store sales, customer addresses, site characteristics, demographic/psychographic information, and competitive locations. Intalytics then conducted a statistical analysis to determine the impact of each independent variable on store sales performance. The results of this analysis were used to build a sales forecasting model, which was back tested by forecasting sales for all existing stores. Intalytics then conducted a national supportable store analysis. More than 80,000 “seed points”, or potential store deployment opportunities, were identified across the U.S. Intalytics then defined a trade area and generated a sales forecast for each seed point. Intalytics further estimated the cannibalization, or sales transfer, impact that each seed point would have on existing stores.

The output

Intalytics identified those seed points which were projected to generate acceptable sales levels while not having an undue cannibalization impact on one another or on existing stores. The result was a national deployment strategy that accounted for the unique characteristics of the client supermarket chain, enabling their real estate team to proactively seek new store locations that had the highest probability of success.