Why the GIS business analyst may also be the Chief Strategy Officer
Geographic Information Systems (GIS) software is the backbone of location intelligence because it’s designed to capture, store, analyze, and visualize spatial data. Most of the advances in GIS over the last 4 decades or so have been operationalizing circles (i.e. 3 miles) and drive-time (i.e. 5 minutes) trade areas. But these trade areas require the input of a size assumption (i.e. distance or time), most likely by the GIS business analyst, which can vary the final results significantly.
To ensure that trade areas are as accurate as they can be, GIS business analysts often map an organization’s point-of-sale data and use that as a guide for trade area definition. For example, define the trade area radius so that it includes at least 80% of all sales. But the problem with mapping sales data is that you don’t have all the customers’ sales data. You only have the sales spent in your retail establishment. Consumers shop across multiple trade areas for most goods and services, and that sales data you won’t have. For example, consumers may shop at (1) a nearby neighbourhood trade area for daily or weekly grocery needs, (2) a community trade area with big box stores located a little further away for weekly and monthly needs, and (3) a regional indoor mall trade area located even further away for monthly and annual needs like clothing and gifts.
The household in the above example, therefore, would be included in up to three overlapping trade areas for the neighbourhood, community and regional shopping centres, depending on the retail category. This effectively double-counts consumers because the retailers in each trade area count the same consumer to be in “their trade area”. This grossly overestimates the actual size of each site and makes the final analytic results highly dependent on the actual size and overlap of the trade areas. But the simplicity and speed of GIS trade areas is too hard to resist and therefore too often trumps the accuracy of more complex scientific methods.[i] It means that trade area size and methodology assumptions, most likely made by the GIS business analyst, have a surprisingly large influence on a firm’s capital expenditure strategy and decisions.
[i] CSCA Ryerson University – What’s in a Trade Area, p 52.
