Main Spotlight: The Art of Market Analysis (Part Two)

Last month, we introduced our approach to market analysis that emphasizes the art of using context to understand strategic opportunities in downtowns and neighborhood commercial districts. Market analysis is often seen as a purely data-driven exercise, but the reality is that effective market analysis goes beyond just crunching numbers. By blending data with a deep appreciation for design, assets, and connectivity, you can find a deeper understanding and authenticity when answering the question ​“what makes us unique within the marketplace?” 

In this second installment, I will explain how to identify key themes in the data to inform transformation strategies through a combination of data analysis and an understanding of the local context. Using a case study from Galax, Virginia, I will show how you can use data to develop themes that can be analyzed alongside contextual information to identify strong transformation strategies. 

Stay tuned for part three of this series to learn how to implement your strategy(s) using a planning process that examines your current work and partnerships, explores ​“closet cleaning,” and considers the new activities your district can support. 

Developing Themes as You Review Your Data: A Case Study

Themes are a powerful tool to help you draw conclusions from your data. While perhaps not a common practice in the market analysis field, this qualitative approach helps us discover patterns in meaning across many different data points. Themes can take the form of repeated ideas, topics, or patterns of relationship that impact how you interpret the data through the lens of particular transformation strategies. 

Galax, Virginia, has a population of 6,730 people and is located near the North Carolina border in Southwest Virginia. Using data from ESRI, Plac​er​.ai, and other sources, we can begin to break down the geographic, demographic, and social trends that define and impact their market. Through this process, we will identify a few key themes for Galax: regional hub, convenience and fast casual, home furnishings, entrepreneurship, outdoor recreation, pets, restaurants, and arts/​music.

Use ESRI Trade Area Data to Identify Regional Hubs

One of the first things you notice when looking at a map is that Galax isn’t close to any larger communities. As such, it likely captures much of the convenience services market and serves as a hub for smaller communities within its region. Using a trade area map from ESRI data as the first input illuminates this by showing drive time boundaries. For Galax, the map highlights a 5, 15, and 30-minute drive time boundary, which shows the lack of market density from the satellite view. This further supports the understanding of Galax as a regional hub.

Use Demographic Profiles to Identify Retail Opportunities

When looking at the demographic shifts in Galax over a five-year period, a few things stick out: 

• Like many rural communities, Galax’s population is declining (note: this measure only examines births and deaths; we will explore migration below). 
• Annual household incomes are also rising slower than the national rate, suggesting price sensitivity and a preference for convenience and fast casual services. 
• Growth in the 35 – 44 years of age range points towards an increase in households with school age children who may be buying or updating their homes. 
• Finally like most rural communities, people in Galax are aging in place to a greater extent, suggesting further needs for home services to meet the needs of aging. 

This data supports the themes of convenience and fast casual retail, as well as some demand for home furnishing or home renovation services. 

Using Internal Revenue Service Migration Data to Explore Economic Growth

IRS data on annual changes of new filers is a highly useful dataset to help understand any potential population growth that census data doesn’t show. (Tip: Click on your state and examine the ​“County Inflow” tab.) For example, our research shows that most remote workers that move into an area have 3 – 4 times the income of local residents. New filers can be sorted into three groups: remote workers, young families seeking school systems and affordable housing, and new retirees. While the data is presented at the county level only, it still offers valuable information for municipal-level analysis. In Galax, we found 744 new filings and 1,339 new individuals, which represent about 8 percent of the population. This growth from migration suggests opportunities for entrepreneurial support and ecosystem building. Another potential opportunity: early retirees are one of the largest demographic segments starting new businesses.

Using ESRI Psychographics to Identify Retail Opportunities

Psychographics is the study of personality, values, opinions, attitudes, interests, and lifestyles. It helps us to better understand the shopping characteristics of our local customers. The largest segment in Galax was the ​“Rooted Rural Segment.” Common in many rural areas across the U.S., this group enjoys things like gardening, outdoor recreation, and spending on their pets. They buy American-made products, are cost-sensitive, and represent strong faith communities. This psychographic analysis supports the themes of outdoor recreation, pet care, and convenience and fast casual in Galax. 

Using ESRI Retail Trade Demand to Identify Retail Opportunities 

The retail demand analysis in ESRI examines a number of different retail and service sectors and the anticipated growth in those sectors over a five-year period. It’s critical to note that this data is based on population and income shifts. It doesn’t take into consideration visitors, tourists, or residential gains through migration. As such, it’s typically lower than the true number. Secondly, this number comes from an analysis of the entire trade area, not just your downtown or commercial district. Based on how you think of your current strengths (here’s where the art comes in, folks) there is likely a recapture range (i.e. the amount of the market that is captured by your downtown). It is typically higher for things like restaurants (which are stronger in Main Streets) and lower for consumer items that can easily be purchased online.

TIP: You can do a quick calculation to better understand square footage demand for certain sectors. For example, when looking at restaurants in Galax, the capture rate would likely be 30 percent of demand, which is $1,830,000. Combine this with the wider context: Galax draws regionally, most business activity is centrally in and around the downtown, and there is currently a dearth of restaurants in downtown Galax. These factors further increase the capture rate. Based on data from BNG Point of Sales, a cross-blend between a full-service and limited-service restaurant would average $175/sq.ft. in revenue. Thus, based on the captured sales, supportable new square footage for restaurants would be 10,457 sq.ft.

Using a Community Asset Map to Understand Your Unique Features

The asset map exercise is based on the understanding that one of the best ways to drive the local economy is by leveraging the unique assets within your community. These maps are created through a comprehensive and inclusive community engagement approach that identifies natural, service/​civic, built, economic, and social assets. Based on a review of the Galax asset map, there were three primary themes that really stood out: regional shopping and services hub, outdoor recreation, and arts/​music.

Learn how to create your own asset map with this guide >

Using Plac​er​.ai to Explore How People Use Your Downtown

The data location service Plac​er​.ai aggregates location data from users’ mobile app usage and allows us to understand how our downtowns and neighborhoods are being used by visitors and locals alike. For example, you can generate a ​“heat map” showing the density of visitation to the downtown. Galax’s map supports the idea of the city as a regional hub, drawing tourism from larger cities like Winston-Salem, Raleigh-Durham, and Charlotte, North Carolina. 

Putting it All Together

Once you have explored the data, you can apply the art of market analysis that we presented in part one of this series. An approach that only uses data analysis might just add up the themes we identified and apply the most common theme as a transformation strategy. But your understanding of your district, and your gut instinct, should also play a role here. 

In Galax, we used the art of market analysis to identify two transformation strategies focused on building out a support system for two key business sectors: arts/​music tourism and outdoor recreation. To select these strategies, we examined the data above alongside some key contextual information to identify the following opportunities:

• The Chestnut Creek School of the Arts has the potential to support new artisan and maker-related businesses.
• With increased connectivity, there is potential to draw visitors from New River Trail to Downtown Galax.
• There is potential for opportunities to scale food-based businesses from the highly successful farmer’s market.
• The regional hub market is ​“hungry” for unique dining options, and this is supported by the retail demand data.
• There is increased spending capacity in the critical 35 – 44 age group.
• The psychographic profile showed that people in Galax spend time and money on outdoor recreation.

What about the regional hub scenario? We saw this as a market overlay that would further support the recommended strategies, but the emphasis on convenience shopping makes this a difficult strategy to deploy, as much of our transactional economy is moving online or to more big box retailers. 

Key Considerations

It is important to remember that market analysis is not intended to be an off-the-shelf process. There is nuance here, and you should seek to be as clear as possible when defining your market position. For example, while many communities may have an outdoor recreation market, there are many subsets within that category. Some, like Galax, are more focused on the food scene and supporting infrastructure. Others may focus on a genre of outdoor recreation, like birding, hunting/​fishing, or extreme sports. If you are unsure how to organize your themes, you can refer to this resource. Other tips to consider:

• Your themes should focus on a business or consumer segment — e.g., outdoor recreation as a business segment or remote workers as a consumer segment.
• Some of your data may not relate to a specific market theme but can be just as valuable by illuminating areas in which you may want to focus more on a particular point of the Main Street Approach. For example, applying design strategies when looking at ways to connect the New River Trail with Downtown Galax.
• Market understanding is great, but it’s just the start. Once you have identified your transformation strategy, you need to work toward execution. We’ll cover more of that in part three. 
• While market understanding is focused primarily on economic vitality, the implementation may focus more on other approaches, like design connectivity, new partnerships, building organizational skills and capacity, and rethinking our promotional calendars. 

The data we explored above provides a powerful foundation for market analysis, but it requires a strong understanding and artful interpretation to reach its full potential. By examining the data alongside the local context, you can identify robust transformation strategies that are rooted in your unique demographics, geography, assets, and social trends.

In part three of this series, we will dive into the implementation stage that follows your market analysis. I will introduce a planning process that examines your current work and partnerships, explores ​“closet cleaning,” and considers the new activities that your district can support. 

Redevelopment Resources, a Main Street America Allied Member, is this quarter’s Main Spotlight advertiser. For more information about the services they provide to Main Street organizations, click here >