"If you can't measure it you cannot improve it." Lord Kelvin
And if you don't have targets on your metrics you don;t know where you are.
What is the Local Market Potential for retail stores?
The Local Market Potential is a critical factor in investing wisely in your growth, and building long term value.
In this competitive market where online companies are taking market share away from local stores every day understand the potenti lin the local market is a tool store owners and operators can use to fight back.
The process starts with data, which need to be updated regularly, since the world is changing quickly and old data is not of much use.
The value of Local Customers
It's no secret that local customers are more profitable for retail stores and it makes sense to capture more of them.
Customer Acquisition Cost (CAC): For local customers, CAC is generally lower than for non-local customers. Marketing campaigns targeting local audiences can be more precise and cost-effective (e.g., community events, partnerships with local organizations, and local online ads). The lower CAC means acquiring local customers can provide a better return on investment compared to broader, less targeted campaigns.
Average Order Value (AOV): The AOV for local customers can vary but is often higher compared to distant or one-time shoppers. Because local customers are more familiar with the store and its offerings, they are more inclined to trust and spend more per transaction, especially when offered personalized service, local promotions, or loyalty incentives.
Lifetime Value (LTV): Local customers typically have a significantly higher LTV relative to non-local customers. This is because they are more likely to become repeat buyers due to convenience, familiarity, and community ties. Over time, these repeat purchases accumulate, leading to a substantially higher LTV. This long-term relationship is beneficial for sustaining business growth and stability.
Question is how we do capture more of the local market.
Unfortunately this topic is not talked about much in the retail circles, specially for smaller stores and chains where resources and budgets are limited.
Here's is where the Visional Market potential calculator https://getvisional.com/local-potential comes in, a free tool for retailers to get a better understanding of the potential in their immediate, local, and hyper local market.
Let's look at an example: Furniture market potential in Manhattan
THis is a high level executive summary format and the actual report is more detailed.
We start with demographic and economic Indicators:
Population Distribution and Income: Manhattan’s higher-income neighborhoods are key markets for high-end or boutique furniture stores. The target demographic often includes adults aged 30 and up, especially those in households with incomes above $100,000.
Homeownership vs. Rental Markets: Manhattan has a high percentage of renters, but the luxury rental market often includes furnishings. The Upper East Side, Tribeca, and West Village have a mix of affluent renters and homeowners, making them strong areas for both permanent and rental furniture needs.
Then we look at consumer spending on furniture:
Annual Furniture Spending: In high-income Manhattan households, the average annual expenditure on furniture and home décor can range between $2,000 and $5,000 per household. This includes luxury furniture, designer home décor, and seasonal items, with higher spending often seen in ZIP codes with luxury apartment buildings.
From there we can get an idea about the market size. There are more details and factors to build a better profile but this is a good start.
Estimate of Potential Market Size: With an estimated 300,000 households in target ZIP codes (such as 10021, 10013, 10014, 10011, and 10028) and an average expenditure of $3,000 per household, the annual furniture market potential could be around:
300,000 households × $3,000/year = $900 million
Takeaways
Data by itself is not usefful until applied, so even more important is what retail stores can and should do with this data. The report also provides recommendations on actionable steps to take to work towards this potential, or even expand it.
Feel free to share this page and the report with retail stores in your community, and do tell us what you think about the concept.