Conventional Distance Decay Curves for Retail Activities

Conventional Distance Decay Curves for Retail Activities

Even if located at the same location, different retail-based activities will draw a different customer base either because of their size or function. Large stores tend to have a lower distance decay function as they offer a wider range of goods, often at lower prices (mainly due to economies of scale). While a customer is unlikely to travel a long distance to a convenience store, a department store (also known as a superstore or a “big box” store) is likely to draw customers from a substantial distance. A convenience store usually offers goods that are purchased regularly and in small quantities. In contrast, large stores focus on purchased goods less frequently and in greater quantities or big-ticket items. While someone wishing to purchase a beverage will do so in the immediate vicinity, someone wishing to purchase an appliance will either elect for a specialized store or a department store, which may require a longer trip. The area under each curve represents the number of customers patronizing a store.

The introduction of e-commerce has provided a new dimension to the distance decay curve, which becomes flat. Since the buyer of an online good does not travel, this is technically no effect of distance, outside parcel distribution constraints. Delivery time becomes an important factor in the generation of customers.