APPLICATION OF THE RETAIL GRAVITY MODEL IN SINGAPORE

Abstract

Profound changes have occurred in the retailing patterns of many cities in the post-war period. Changing lifestyles and consumer demand, growing affluence and the impact of technology have all combined to transform the business of retailing. In the face of increasing competition, investment in retail development assumes greater importance. In recent years, retail forecasting techniques have gained in sophistication and in this particular study, the application of the retail gravity model comes under scrutiny. This model postulates that the market share of a retail centre varies directly with the size of the centre and inversely with the distance to the centre. It is a tool which produces quantitative results for analysis. This technique for retail development evaluation has met with creditable success overseas but has yet to be widely accepted locally. To test its validity, the author applied the model to predict annual supermarket sales. The results reveal that the model produces accurate results for one of the five supermarkets. The factors underlying shopper behaviour were also examined and it was found that convenience and availability of merchandise significantly affect shoppers' decisions to patronize a particular retail destination. This analysis corresponds with the gravity model formulation. Although inherent limitations and operational problems of the model abound, the model is simply formulated and is easy to work with. Empirical evidence also supports its usefulness as a good predictive tool for planners and developers.