Spendmapp Case Study: Escape Expenditure Creates Business Opportunities in Warnambool

Clawing Back Escape Expenditure Can Create Local Business Opportunities

Escape expenditure (also called expenditure leakage) refers to expenditure transactions made by cardholders outside of their municipality of residence. While a degree of escape expenditure is inevitable, in some places, particularly peri-urban and rural councils, it can amount to a significant economic loss. By comparing escape expenditure by category with the average turnover for local businesses in that category, we can measure ‘headroom’ for supporting more local businesses.

What is escape expenditure

By way of example, if a local government area has annual bulky goods escape expenditure of some $10 million p.a., we know that resident cardholders are looking for at least $10m of bulky goods p.a. that they cannot purchase locally. If the average turnover of bulky goods businesses is $1million p.a., then there is adequate headroom for supporting up to 10 businesses in the local area ($10m/$1m). Local governments can use this information as a starting point for discussions with bulky goods enterprises that could consider establishing a local outlet, or for local enterprises to expand. 

What's going on in Warrnambool

Here we look at some potential opportunities for business growth in Warrnambool by looking at escape expenditure in two particular expenditure categories. The key findings are: 

  • Total escape expenditure for Warrnambool in the 2017 calendar year was $137.5 million, averaging $10.6 million per month. This was relatively evenly split between business and non-business hours. If we look at the last six month of 2016, we see escape spend has increased (Figure 1).

  • Breaking this down by expenditure category, dining and entertainment is by far the largest escape spend category. It averages about 23% of escape spend by month and sums to $29.9 million for the year. Given how large it is, we'll just look at this category. 

  • Headroom analysis indicates that this volume of escape expenditure would support 36 average sized Warrnambool dining and entertainment businesses. Obviously, though, with dining and entertainment, many cardholders are spending while away on holiday or for work. There would be few circumstances in which they would spend that money in Warrnambool, so we cannot claim there is scope for 36 new businesses in Warrnambool.

  • If we exclude dining and entertainment escape spend in major destinations (Melbourne, Sydney, the Gold Coast and so forth), total escape spend drops to $22.5 million. This would support just 27 local businesses if 100% of it was clawed back. 

  • Alternatively, if we look at just the escape spend in the neighbouring towns (e.g. Port Fairy), it sums to $2.2 million , which would be sufficient to support up to 3 local businesses (Figure 2).

  • Given the destination of this escape spend is quite close to Warrnambool, it is conceivable that local (Warrnambool-based) providers could compete to win back this market. 

  • As expected that the escape expenditure volatility over the year is a little higher than for total escape expenditure, which would make it a very competitive environment during the spend trough (in February).

Figure 1: Total Escape Expenditure, 2017 (Source: Spendmapp Warrnambool)

Figure 1: Total Escape Expenditure, 2017 (Source: Spendmapp Warrnambool)

Figure 2: Dining and Entertainment Escape Expenditure to Neighbouring Towns, 2017 (Source: Spendmapp Warrnambool)

Figure 2: Dining and Entertainment Escape Expenditure to Neighbouring Towns, 2017 (Source: Spendmapp Warrnambool)


Obviously there are more factors to consider than just the total market size (e.g. whether there is available local commercial floorspace or labour; whether the business inputs can be delivered locally; or whether it makes sense for customers to consume dining and entertainment goods and services locally). However, the headroom analysis provides a useful fact-based starting point for discussions with relevant businesses. Using Spendmapp for this market research is both more accurate and more affordable than market research based on surveys or models

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Kevin Johnson