This study looks at how effective Pensacola is in meeting the retail demand of its residents and attracting non-local retail customers. This information should be useful to individual area merchants, chambers of commerce, and other businesses organizations interested in our local economic development. The answer to this question requires defining the potential retail market. To determine this market we must calculate the area from which Pensacola's retailers draw their customers. Economists have found that consumers are willing to travel longer distances in order to have more alternatives available, but only up to a point.
Larger communities tend to offer consumers more alternatives.
William J. Reilly devised a model that assists in determining the trade-off that consumers make between community size and distance. This model is known as Reilly's Law of Retail Gravitation, and it can be used to calculate the maximum distance consumers will travel to shop in a given community. Reilly's Law states that the tendency to shop at a given place increases with the size of the place and will decrease by the square of the distance traveled. It is used to calculate the boundary between the trade areas of two communities. To illustrate, consider rural consumers living midway between a small town and a large town.