The grand opening is finally announced for the Orchad Town Shopping Center! This shopper center is an outdoor center with nearly one million square feet of stores, restaurants, and attractions. Although there are malls are being erected regularly in developing areas, there usually is a little more to it.
When opening a new shopping mall, many efforts and analyses are considered before actual implementation. To forecast the success of the mall, a decision maker may hire a consultant to create a simulation model.
The simulation model can predict demand for the shopping mall based on attractiveness, such as square footage, how much demand it can grab from other potential competitors, and the distance from consumers.
However, other qualitative factors may affect the shopping center's success as well. The attractiveness may not be the size of the shopping center, but rather the actual stores and specialties that the new place offers. In addition, the decision making team must look at demographics within the area such as age, gender, and household income. The amount of traffic passing through the location may also be an important factor. Nevertheless, the cost of land may be too high and business may not be successful.
The simulation model can predict the demand and find a center of gravity to help decision makers pick a feasible location with potential positive profit margins. Although the center of gravity is a heuristic and can not find the optimal location, the center of gravity helps decision makers by centering itself based on weighted customer demand. From here, decision makers can find a location close to the center of gravity.
Although the simulation results may find high demand and a great location for the shopping center, other factors (as mentioned before) such as demographics, traffic amount, and cost of land are things to also think about before implementation.
References
Grand opening set for Orchard Town Center. Denver Business Journal. 2 April, 2008. Retrieved April 2, 2008 from http://www.bizjournals.com/denver/stories/2008/03/31/daily48.html
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1 comment:
Interesting problem. But, I am not sure why you propose simulation. In general, it is not a good model for estimating demand. Why should it work here? You have identified many of the factors to be considered. How does the region and competition come to play?
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