Groc Sales Mall Case Study

Fall 2015                              QMB 6358           Indicator Variable Assignment

An “answer collection” mechanism will appear on Canvas shortly

One

The data set GrocSalesMall.xlsx contains information on the annual sales of 25 stores in a grocery chain.  In the file are:

Sales                Last year’s sales per store in $1000 units

Customers        Number of Customers last year (in 1000s)

Mall                1 = store located at a mall, 0 = otherwise

To do:

1. Create a scatterplot between Sales and Customers.  Use different symbols for the Mall and nonMall Stores

[pic 1]

1. Run a regression of Sales on number of customers

[pic 2]

1. Run a regression of Sales on both variables.

1. Interpret the coefficient on the Mall variable
2. Is this coefficient significant?
3. Is the regression in part 3 an improvement on the one in part 2?  Look at the change in R2 and adjusted R2.
4. Show what is really “going on” in the regression by deriving the equation for sales in mall stores and for sales in non-mall stores.

[pic 3]

A: For the same number of customers, stores in a mall have an average of 202.573 more sales than stores outside of malls.

B: This is significant (t=2.711 and p-value = .013)

C: R-square increased by 0.092 and adjusted R-square by 0.083.

D: Non mall: Sales = -82.464 + 9.505 Customers

      In Malls: Sales = 120.109 + 9.505 Customers

1. Create an interaction variable for Customers and Mall and add it to the regression.

1. Interpret the coefficient on the interaction variable
2. Is this coefficient significant?
3. Is the regression in part 4 an improvement on the one in part 3?  Look at the change in R2 and adjusted R2.
4. Show what is really “going on” in the regression by deriving the equation for sales in mall stores and for sales in non-mall stores.

[pic 4]

A: For stores in a mall, each 1000 extra customers increases sales by 5.493 more than stores not in a mall.  This is a slope adjustment.

B: This is significant (t=2.223 and p-value = .037)

C: R-square increased by 0.053 and adjusted R-square by 0.046.

D: Non mall: Sales = 336.675 + 6.598 Customers

In Malls: Sales = (336.675 – 590.449) + (6.698 + 5.493) Customers