Finally, with 2020 behind us and some positive news nationally, we’re looking ahead to a return to some normalcy in retail. We’ve got a long way to go, but with vaccinations increasing and restrictions decreasing, people are out shopping, starting to travel, and spending. Some issues we’re seeing include serious supply chain disruptions, affecting availability of goods and price, which are holding up progress in some areas. Notably, home building and home improvement are suffering, which could lead to spending in other areas as consumers delay spending on items/services where pricing is abnormally high, and availability is low.
The impacts of COVID and the post-COVID reality
Many retailers are seeing significant rebounds in sales and margins, while others are struggling to survive. In 2020 we saw over 13,000 store closures. Of those some of the most affected included Apparel with over 6,000 closures, Footwear with over 300 closures, and even grocery with over 100 closures. As we all know, when stores close, especially anchors, there are dual issues of consumer traffic changes, and opportunity.
For those retailers with strong balance sheets, tolerance for risk, or both – there are significant opportunities to find and secure locations previously unavailable to them. In some cases, there are opportunities to increase footprints drastically through acquisitions. And for others trying to survive, the challenges of identifying locations to close or consolidate keep mounting. As discussed in many other blogs and ICSC content, understanding the omni-channel nature of your business and needs of your consumers must be weighed heavily in your real estate strategy – especially when identifying stores to close or consolidate. For example, which areas are best served online versus in-store, where reducing the number of locations will have a smaller impact on overall sales?
Both situations bring us back to the fundamental question – which sites do we need, which should we keep to protect market share, and which locations can we close? With investors anxious, board rooms asking more questions than ever before, and Wall Street using even smaller microscopes, there is another critical question being asked – why? Why do some locations succeed? Why do we need others as branding exercises to protect market share? And why did we choose locations that failed, along with why it makes sense to close or repurpose them (some using as warehousing, last mile delivery, etc.)?
The question of 'why?' is posing new challenges for many. Companies need data, processes, and analytics that are transparent, understandable, and even more than ever – explainable. When you have data you can trust for accuracy, processes that track progress and identify issues and bottlenecks, and analytics that can be explained and justified in REC, you create confidence in decision making. And when mistakes are identified, they can be measured, studied, and learned from for future improvements. Most people reading this already understand this, and if it seems I’m preaching to the choir, please forgive me. Because the reality is while many understand this, very few are practicing it all.
Which brings me to the main discussion – if your company can take advantage of the rare opportunity to secure real estate which has not been, and may not be in the future, available in a long time, how do you move quickly and be sure to “get it right”?
We’re starting again to see more store openings announced than closings. A positive sign for the economy and state of retail, to be sure. That means the pool of uniquely available real estate is beginning to dwindle. For some it may be like looking back and wishing we’d bought stock in Amazon or Apple a long time ago. But grabbing deals simply because they are A or B space and meet our rent terms in the short term, may well pose longer term risks. So, how do we “get it right”?
The game plan businesses should take
To us, it all starts with data. Centralizing the data you rely upon, and using tools to keep that data up-to-date constantly is the most critical piece of the puzzle. Without reliable, updated, validated data, your analytics, KPIs, metrics and everything else is at risk. Garbage In = Garbage Out. It still amazes me that we talk to so many people who don’t know how good the data they use really is or is not. Or that they rely on data without ever testing it or having field teams verify or validate it. Many of our clients go a step further to validate data and have their real estate and ops team use mobile applications to enhance the data with photos, attributes, adding and updating locations, and more.
With data you can trust (and explain) you can then dive into processes and analytics with a degree of confidence. I wonder sometimes if companies don’t think to hire or identify a “data champion” to make sure the baseline intel they use is actionable, or if the rush to answers leads them to ignore or under-value the importance of the data driving those answers. For anyone reading this that has the luxury of data science and analytics teams – ask them! Understanding where the data is sourced, how often it’s updated, testing it and understanding how it’s best used is the foundation for everything else. We’ve all been hearing so much about machine learning, AI, and big data now for years. Yes, it’s possible that tools tuned properly can see and remove much of the “noise” in data – you still need actionable data that’s kept up to date for any AI or machine learning to perform well enough to make multi-million dollar retail location decisions.
The potential results
Now that I’ve beaten the data argument mostly to death, back to the opportunities in real estate. For those companies that have solid data centralization with on-going validation and updates, and with processes and/or analytics that can help quickly identify key markets to target and eliminate potential sites that don’t meet certain thresholds, taking advantage of the opportunities in real estate should be easy. It becomes a matter of bulk analysis and ranking locations. From there you go after the ones you need most. Competition for these locations is getting high again, so speed counts. To move quickly, strategically, with purpose, and in a way that is easy to track and measure companies must put tools in the hands of their real estate professionals to update market data, easily assess potential locations, and submit sites for review. Putting the burden on a small team of researchers may lead to bottlenecks that slow you down, missing opportunities or inviting competition.
Finally, while speed certainly counts, we must all avoid sacrificing the data and science behind our decisions just to win. Otherwise, we’ll be right back here again, reading this from the beginning. Hopefully, we never see another pandemic like this. But let’s face it – we were “over-retailed” in many places and the reset button got pushed. How we approach real estate this year and next will determine whether we re-read this article with a smile or a frown.