Put aside, for now, predictions of how Amazon and e-commerce will engulf business at brick-and-mortar stores: The reality is that 94% of retail sales are still rung up in physical stores, and where merchants place those stores plays an outsized role in determining whether their chains fly or flop.
“You can’t do business in a brick and mortar store without the presence of customers, and proximity to customers is as elemental to a brick-and-mortar store as air, food and water are to each of us as human beings,” Mark Cohen, professor of marketing in the retailing studies department of Columbia University’s business school, and former CEO of Bradlees and Sears Canada, told Forbes.
“Back in the day, Jack Kilmartin, CEO of [now defunct] Mervyns, drove the neighborhoods that surrounded the site of a potential store looking for validation that the Mervyns customer was as present as the researchers said they were.
“I doubt anyone does that today, but the need to accurately assess the market is as vital as it always was — maybe more so given the overabundance of retail real estate,” he said.
“Retailers not only need to know where their potential customers are, they need to know where they will be over the 10-to-25 year lifetime of the investment they make in physical space.”
Retailers are now turning to big data (another big industry buzz term, but one that largely warrants the attention) to help them do just that.
Simon Thompson, director of commercial business for location-analytics company Esri, shared with Forbes how ArcGIS Online, its technology platform for visualizing data in the form of maps, is helping retailers ranging from Starbucks to Dress Barn fine tune how to pick a store location with the goal of driving more traffic and boosting sales.
“Petco staff members began using Esri’s mapping software to determine any potential risks associated with building new stores. The more stores Petco opens, the higher the risk that the company will build a store in an undesirable location.
“For example, a store in a community that has a low concentration of pet owners would hurt sales. Also, opening a store in close proximity to another Petco or a competitor would also impede the store’s performance. Esri’s software provided data analysis and demographics, giving Petco executives more confidence in their decisions.”
“Wendy’s, the world’s third largest quick-service hamburger chain [with more than 6,500 franchise and company-operated restaurants in the U.S. and 27 countries], integrated Esri’s mapping solution to help determine new store locations. Specifically, Wendy’s surveyed its customers in Land O’ Lakes, Florida, to determine how far customers are willing to travel to come to a Wendy’s.
“They also looked at how far customers are willing to travel to get to a Wendy’s from home, work and a retail shopping center.
“Esri’s software allowed staff to easily view sales records and customize demographics on existing restaurants without any additional training. The software also enabled Wendy’s to predict and assess the value and risks for new and existing restaurant locations by simply clicking on the map,” Thompson said.
“Demographic data and location analytics are critical components when making investment decisions to build new restaurants,” said Dennis Hill, vice president, real estate. “Everything we need— including mapping, analytics, and modeling— can be done on one platform that is scalable across our organization.”
“In the future, Wendy’s would like to use Esri’s software to look at the customer data to better understand how they want the interior of certain store locations to look in terms of their flow based on if it is a larger lunchtime or breakfast crowd. This could have a potential to change the way they set up the kitchen,” Thompson said.
“In 2007 and 2008, Starbucks’ CEO Howard Schultz was forced to come out of retirement to close hundreds of stores, and rethink the company’s strategic growth plan.
“This time around, Starbucks took a more disciplined, data-driven approach to store openings and used Esri’s mapping software to easily analyze massive amounts of data about planned store openings. The software analyzed location-based data and demographics to determine the best place to open Starbucks stores without hurting sales at other Starbucks locations.
“The software is also helping to determine where the next 1,500-plus stores should be placed not only to help the company expand, but drive revenue for new store developments.”
Ascena Retail Group
“Ascena’s Dress Barn, Maurices and Justice brands are all focused on meeting the needs and preferences of three distinct types of consumers. To address those different shoppers appropriately, Ascena worked with Esri’s mapping solution and demographic data to better analyze, manage and view information about retail locations.
“Adopting Esri’s technology allowed Ascena to follow a customer-centric approach for marketing. It enabled the company to identify characteristics of shoppers that live in the area surrounding each store, ensuring that each store is tailored to meet the needs of those shoppers.”
The Shopping Center Group
“As a retail-only real estate firm, The Shopping Center Group needed to be able to provide accurate information about demographics, consumer behaviors, traffic patterns and competition to its clients.
“Location analytics enables employees at The Shopping Center Group to combine their research experience, knowledge, and instincts with analytics to create critical insight into decision-making. Esri’s location analytics solution allows The Shopping Center Group to collaborate across its 22 offices across the country and share information anywhere on any device, including phones and tablets.”
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