How Data Is Helping Mid-Market Retailers Expand With Confidence

By Jim Robeson, co-founder and CEO at PiinPoint

While online brands such as eBay, Amazon, and Zappos are now household names, according to a study by AT Kearney, 90% of shoppers still prefer a brick-and-mortar retail experiences over shopping online. Further, 94% of all retail transactions still take place in a traditional brick and mortar setting.

So for the majority of retailers, particularly those in the mid-market segment, a physical store presence still holds tons of value.  And opening a new location (or two, or three) allows that business owner to reach more customers, penetrate the market with their products and increase sales.

But expanding a brick and mortar retail operation into new locations and geographies does not come without significant challenges. It is a very expensive expansion option. Business owners need to find a new location, build out or renovate the physical space to suit the business need. Typical expenditures include a leasing security and utility deposit, first and last month’s rent, location improvement costs (construction, fixtures, other renovation costs) or new construction costs, inventory, technology/systems. The business also needs to hire additional employees to staff the new location and market the business and its products to an entirely new geography and (possibly) demographic audience.

Expansion is also a process that once it is underway cannot easily or quickly be undone. So finding the right location is a critical element in a retail expansion strategy, and one of the most important decisions a retail business owner or management team will make. Selecting the wrong location is one of the top reasons behind retail closures, and it can bring even the largest retail operation to its knees. One needs only to look at Target’s multi-billion dollar mismanaged expansion into Canada (17,000 jobs lost and $5.4 billion in pre-tax dollar loss) to appreciate the consequences that come with misreading the needs and potential associated with a new market.

Finding The “Perfect” Spot

Every retailer dreams of the perfect location. A spot where the lease costs are low and customers flock through the doors. But there’s a bit more to it than that. It can take the average retailer months, if not years to find the perfect location. Key conditions to search for in a location search include, access to a large base of customers of the right demographic and psychographic makeup; a healthy surrounding retail/real estate environment; presence of competitors; sufficient space; access to parking; and a good neighbourhood free of crime. As part of the location search, business owners should also conduct an analysis of traffic patterns (vehicle, public transportation, pedestrian) and have a solid understanding of zoning (permissions and restrictions, planning, by-laws and other municipality-related conditions.

Just a few years ago, business owners looking to expand relied upon instinct and on the ground research, such as driving by locations or talking to other businesses in the area, to make help determine the best spot for expansion.  Traditionally larger retailers have turned to a variety of information sources, retail GIS technologies and retail consultants when crunching the numbers and performing potential analysis. Indeed, the largest of retailers employ entire real estate teams responsible for scouting, analyzing and selecting locations for expansion.  But these approaches can be very expensive and often produce hefty paper-based reports that take hours and even days to review and distract development professionals from critical activities that contribute to growth and preserving the bottom line, such as finding the best franchisees and investigating new markets.

Data Analytics For Retail Go Mainstream

But there are some new technology trends emerging that are making the process of identifying, selecting a new location easier, better, more accessible and affordable for mid-market retail.

Open Data

Driven by programs such as the Open Data Initiative, governments around the world are looking at ways to provide civilians, businesses and other organizations with better access and ability to harness the thousands of data sets collected and amassed by publicly funded entities.  This opens up huge potential for retail businesses as they will have the ability to mine and leverage a rich variety of information related to transportation, crime, mortality, population wealth, property and footfall data in their location search.  A recent report by Deloitte UK reports that the UK government has to date opened up 8,000 unique datasets collected by public sector organizations, and retailers taking advantage of the UK’s progressive stance on open data include Boots and Marks & Spencer. These leading retail brands are now analyzing workplace zone and workplace statistics open data published by the UK Office for National Statistics to better understand local markets based on where people work, rather than just where they live, to help decide where to place retail stores. The open government movement advocates free access to government GIS/geospatial data, and many governments are now converting their records into accessible Web-based formats, making this information not only accessible but affordable to smaller retailers and retail organizations.

Customer Loyalty Data

Many retailers from Starbucks, to Shoppers Drug Mart, to Capriotti’s Sandwich Shop now have customer loyalty programs to reward regular shoppers and boost customer retention. According to a report by Boston Retail Partners^[1], loyalty programs are now a top priority for 46% of retailers, and 62% of surveyed plan to increase their budgets this year to enhance loyalty programs and supporting technologies. While 73% of retailers currently do not offer mobile access to their loyalty programs, 47% of retailers are investing in mobile marketing budgets this year. This mobilization of retail will not only offer retailers additional ways to interact with customers. Points systems, reward redemption at point of transaction and a loyalty program’s interaction with other retail-based technology systems will provide mid-market retailers with game-changing real time data on how, where, when and why customers buy as well as the frequency of their transactions, allowing them to provide a more personalized experience for each customer, while providing a wealth of customer demographic and psychographic data to inform new location decisions.

Beacons

New beacon technology installed into retail stores and shopping malls can track customer movement, greet customers at the door and push notifications of offers and rewards to customer’s mobile devices. In the back end, data gathered by beacon interactions provide significant insight into foot traffic entering and leaving a specific brick-and-mortar location. Data captured by beacon technology, especially when combined with other data sources (i.e. municipal data, customer loyalty data) can again inform a retailer’s location selection process and decisions.

Location Analytics

Given the majority of retail revenue is still generated by brick-and-mortar locations, retailers continue to need detailed information to inform their location decisions. A location analytics platform allows retailers to move away from paper-based reports, using a mash up of a variety of data sources to visualize a location’s true potential.  Wider access to open data, an increasing number of data capture methods (such as identified above), coupled with Cloud based data visualization technologies are now making location analytics platforms more affordable and available to the mid-market retailer. This allows smaller, but fast growing retailers to make better, quicker and more informed decisions, visualize location options in the context of rich data, and predict a location’s success (or lack thereof) with pinpoint accuracy.

About The Author

Jim Robeson is the co-founder and CEO at PiinPoint and a Y Combinator 2014 alumni.  He drives the company’s vision, strategy and growth for PiinPoint as it provides a reliable platform for businesses to discover, validate, and grow locations with ease. Under Jim’s leadership, PiinPoint continues to evolve and innovate the location intelligence sector, and today supports many of the world’s fastest growing retail brands. Jim met co-founder Adam Saunders at the University of Waterloo (UW) where he received a Masters in Business, Entrepreneurship, and Technology.