An entrepreneur trying to find a location for a sporting goo

An entrepreneur trying to find a location for a sporting goods store has decided to use the index of retail saturation as a guide. She knows that Site 1 has a trading area with 42,374 potential customers who spend an average of $87.50 on sporting goods per year. The only competitor in the trading area has 16,000 square feet of selling space. Site 2 has 38,649 potential customers spending an average of $91.25 per year on sporting goods. In this trading area, two competitors occupy 17,100 square feet of space. The index of retail saturation for Site 1 is: a. 182.86 b. 206.24 c. 231.73 d. None of the above.

Solution

Index of retail saturation, IRS = (Number of customers x Average spending per customer) / Area in square foot

IRS for site 1 = (42,374 x $87.50) / 16,000 sq ft

= $3,707,725 / 16,000 sq ft

= $231.73 per sq ft

Correct option (c).