If you’ve been reading my blog, you won’t be surprised to find that I believe that people are key to accurately identifying which retail sites to target. I believe this because identifying good retail sites is a difficult pattern recognition problem—and the human brain is the universe’s most powerful pattern recognition system.
Now, you might ask, “What about IBMs Watson? It won on ‘Jeopardy!’ ” or “What about Deep Blue? It beat chess grandmaster Garry Kasparov.”
Yes, computers can defeat grandmasters at chess, which is a complex game but operates under a limited set of rules. And “Jeopardy!” is more about fact gathering. Retail site selection, however, comes with a much wider set of variables.
Let’s review some of the factors that go into picking a good site. Please note, this list is in no way exclusive:
- Trade Area: What will it look like?
- Road network: How will people get to the site? Are there any factors that might harm draw
- Barriers: Is there anything that will prevent people from getting to this location?
- Demographics: —Who will shop with us?
- Current demographics: Who will shop here if we build it?
- Daytime demographics: Will the store do business during business hours or only during nights and on weekends?
- Future demographics: Will changes in the future help us or hurt us?
- Chain preferences: Do the people in this trade area prefer our chain or our competitor?
- Product demand
- Proximity to demand generators: These include places such as schools and churches. Is there enough demand for our product in the trade area that we’ll be successful in this location?
- Current competition: Who will out-position us if we go here?
- Future competition: Who could out-position us in the future, and in what area?
- Site characteristics
- Co-tenancy: Will these anchors be able to draw our customers to this trade area?
- Access: Is the area convenient for our customers to get to?
- Visibility: Will a significant amount of our target customers know where we’re located?
- Parking: Are there enough spaces? Are the spaces in a location that’s convenient for getting to our store? Will other tenants use too many of our spaces?
- Traffic counts: How many cars pass by this site? Will they stop?
- Does this location justify the rent?
- What kind of lease terms can we negotiate?
When you consider the possible responses to all of these questions (along with others that are specific to certain types of retail), you have a complex problem on your hands that computers won’t be solving anytime soon. People, with their 85 billion neurons(each!) are more reliable in identifying sites that will work for a given type of retail—especially when those people are working in groups as a team.
So, we know we need people, but how do we help them develop the ability to recognize good retail sites? Well, when a new retail rep, even an experienced rep, is hired, he or she must learn the business from the perspective of that particular retailer. If someone goes from one type of retail to another, the learning curve will be steep. Moreover, if a retail rep works with a low-price, low-frills supermarket and moves to a high-end, high-service grocery store, there will much to learn about what makes a good site at the new company, even if the rep has years of experience in the grocery business.
For people to improve their ability to recognize good sites, they’ll need:
- Education on how the company differentiates good sites from bad ones, from someone who actually understands the difference
- Easily accessible information that’s relevant to what drives store performance, including store performance data; the seven categories above are a good starting point
- Information that’s presented in a consistent format—i.e., reports that are all be same and maps using the same break points and color scheme*
- Time to review information available for existing stores in the context of store performance
In addition to these items, real estate reps need a way of seeing or generating meaningful trade areas for new sites in order to apply their pattern recognition skills. When this is combined with consistent access to information relevant to what drives store sales, reps will get good at weeding out weak opportunities sooner in the process.
Remember, although computers can beat the best chess players in the world or outduel the best “Jeopardy!” has to offer, the best use of technology in retail site selection is to use it to give your people the information they need to make better decisions.
* Note that different density markets (density classes) may require different break points, but consistency within the density classes is crucial.