The holy grail of store location planning
November 25, 2019
Where to put new stores is a question that can be challenging and quite daunting for many retailers. There being very little science currently in location planning, many brands rely heavily upon property consultants or “local brokers” to go after micro-markets and locations within the micro-markets.
I’ve heard people in Store Expansion roles talk about ‘gut feel’, ‘luck’ and ‘good sense’. Some others make decisions based on where competitors locate their stores, assuming that what works for another brand should also work for them!
To rush headlong into locations without enough data to back you up could be disastrous. A series of bad decisions could wreck a company and blow to bits an otherwise healthy-looking P&L statement. In fact, retail real estate is the most prime commercial asset in any micro-market that is worth top dollar in rentals per square foot. Yet, many a brand add stores without having any real idea of the size of the market or its potential.
A safe way to play the expansion game perhaps is to hedge the risk by opening a store in a successful mall. Mall options though don’t come cheap. The efficiency of space could be very low, which means that you end up with only half the space you actually paid for.
A mall also constricts and controls every aspect of store location, branding, promotion and to top it all malls charge hefty rentals, exorbitant CAM charges, power back-up, and HVAC fees.
While malls are expensive choices, they do guarantee footfall. There are different types of malls: neighbourhood malls, CBD malls and an increasingly common variety called the ‘Weekend malls’! This variety has its peak footfall usually only on the weekend.
With annual sales forecasts being a blend of same-store sales and new store sales, the pressure is always on the Real Estate team to deliver locations that are winners. Unfortunately, some business development folks place bets on locations that can’t even put up a fight! Add to that the costs of fit-outs, salaries, marketing, etc. and retailers may be locked-in with a loss-making store that helps with branding building, but adds little to the bottom-line.
The onslaught of online retail hasn’t helped much either. Omni-channel retail maybe the flavour of the season, but there is a real risk that physical stores may soon become only trial rooms for online sales. With shoppers using showrooms to touch & feel the product before booking the same online.
This only makes the usage of data essential while planning future stores. The use of big data is the single biggest differentiator between fact-based decisions and everything else. This is why there is an increasing shift to blend the right big data with location planning expertise to build a pipeline of store locations. Using a synthesis of the right data sets such as demographics, trade area catchments, drive times, competitor locations, prosperity indices, device data, and generator patterns, an expansion manager can do away with subjectivity, biases, differing opinions and vested interests.
This is where new-age tools such as GapMaps help. GapMaps is a platform that provides data & insights to assist retail & omnichannel businesses to establish & refine store network strategies. Brands are empowered with a breadth and depth of datasets and a simple user interface without any of the complications of regular GIS tools. This enables users to set and refine network strategies and make fact-based decisions regarding growth opportunities. The platform is widely used by a wide variety of sectors ranging from large format retailers, QSR chains, apparel retailers, cafes, fuel retailers, childcare companies to fitness brands and even industry associations.
About the author
Fahim has been working in the real estate sector for over 10 years. He’s passionate about retail real estate in particular. He’s currently Director at GapMaps for South Asia & Myanmar. Talk to him at firstname.lastname@example.org.