Estimating the spatial impact of neighboring physical environments on retail sales

Abstract

Active retail shopping is important for the (re)vitalization of a city. However, very few studies have dealt with the impacts of neighboring physical environments on local retail location and performance by considering spatial dependence and heterogeneity of retail performances. I estimated and identified the spatial interaction impacts of spatial dependence and heterogeneity of retail performances on retail sales in Seoul, South Korea. The spatial autoregressive model with autoregressive disturbances with generalized spatial two-step least squares estimation method was employed to this effect. The results of the analysis revealed three findings. First, failure to consider spatial interaction and heterogenicity leads to bias in the estimated results on the effect of the neighboring physical environment on retail sales. Second, despite the spatial heterogenicity and interaction, the significance of the factors that affect retail sales remains the same even when the spatial scope of the retail catchment area changes. Third, interdependence between retail areas within a city-region should be considered for urban retail (re)development. These findings reveal how urban regeneration efforts need to consider interdependence with other retail areas while examining the factors that affect retail sales.