Solving competitive location problems with social media data based on customers’ local sensitivities

Abstract

Competitive location problems (CLPs) are a crucial business concern. Evaluating customers’ sensitivities to different facility attractions (such as distance and business area) is the premise for solving a CLP. Currently, the development of location-based services facilitates the use of location data for sensitivity evaluations. Most studies based on location data assumed the customers’ sensitivities to be global and constant over space. In this paper, we proposed a new method of using social media data to solve competitive location problems based on the evaluation of customers’ local sensitivities. Regular units were first designed to spatially aggregate social media data to extract samples with uniform spatial distribution. Then, geographically weighted regression (GWR) and the Huff model were combined to evaluate local sensitivities. By applying the evaluation results, the captures for different feasible locations were calculated, and the optimal location for a new retail facility could be determined. In our study, the five largest retail agglomerations in Beijing were taken as test cases, and a possible new retail agglomeration was located. The results of our study can help people have a better understanding of the spatial variation of customers’ local sensitivities. In addition, our results indicate that our method can solve competitive location problems in a cost-effective way.