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University of Washington
Geography
350
Market
saturation
Consider the degree of competition
within
different market areas:
In comparing alternative potential
market areas, we might want to characterize each with respect to
the degree of competition present.
How much competition exists already
within a market area?
Here's an approach to estimating the saturation index (SI) for
market
area i.
SIi = ___Ri
/ (Pi
Ei)___
max [R / (P E)]
where P is a measure of population, E is a measure of
per capita expenditure (on consumer items in general, or on your
particular
product category), and R is a measure of the amount of retail
space
(or space devoted to your particular product category), each within the
market area
where max [R / (P E )] is the maximum value of R /
(P E)
that can be achieved in any market
area.
SI is a real index; it must
take a value between
0 and 1. (Would a retailer be more attracted to a market area
with
an SI near 0 or near 1?) Alternatively, the denominator could be
a national average of retail space divided by retail market size, in
which
case the SI would be a saturation quotient, analogous to a location
quotient.
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