Having been a buzz phrase for several years, ‘changing consumer behavior’ has come into sharp focus during the past 18 months. The acceleration of e-commerce as a preferred shopping channel has caused many to re-assess their brick and mortar portfolios.
But what information do retailers need to make sure their portfolio is the right fit for their customer? Here, we explore some of the insight our clients use to inform their rightsizing strategies.
Let’s start simple. A quality GIS tool allows retailers with customer data to visualize their locations on a map to determine trade areas, service areas, market penetration, potential cannibalization, and more. Real estate professionals can then use insight to identify where demand for their good/services may be high, but reach is low, for network analysis and potential new store planning.
This is the obvious starting point when rightsizing your portfolio, but a gateway to much deeper levels of insight that can support a successful strategy.
Much discussed but rarely mastered, the e-commerce halo helps retailers understand the relationship between online and in-store transactions.
Retailers with data on e-comm customers can visualize this segment to understand how they prefer to engage with physical stores. This can be useful in understanding online reach versus in-store and, most crucially, the overlap. Once visualized, this data can also be used in store optimization exercises to determine where more – or fewer – stores are needed based on the habits of those consumers. For example, where more customers are inclined to shop online with delivery, you may seek to optimize your distribution strategy. If shop online for in-store pickup is a preference, how you can serve those needs better. Some customers are likely to make additional spend when they do collect items in-store.
Once you understand where your customers are and how they access your stores, you can begin to identify any cannibalization concerns.
As TAS, this is something we help retailers with a lot. Clients create trade areas for new stores using analytics and/or mobility data to determine potential cannibalization and understand the impact of portfolio change at an individual store level. This insight is valuable when it comes to making big portfolio disposition decisions about consolidating, closing stores, or adding stores in markets that could be at risk of saturation.
If you’re unable to accurately forecast cannibalization, it’s likely your real estate strategy has a serious blind spot that will ultimately undermine your chances of successfully optimizing your portfolio.
Quality e-commerce data on your customers can also contribute to selecting the right distribution model. Retailers that get last mile distribution right see significant positive impact of their bottom line and it’s an important consideration when rightsizing a real estate portfolio.
Most retailers shipping to customers should have lots of data about delivery addresses, which can be used to see where they may need better coverage for faster shipping, last-mile delivery, and more. In recent years, more and more TAS clients are using data and analytics to consider shrinking the retail space and add warehousing and distribution capacity within their existing fleet.
Good customer data also supports segmentation analysis to help retailers assess the preferred types of media consumption. This is valuable insight to drive potential sales through selecting the appropriate marking channel. At TAS, we often work with clients to help them execute marketing plans to support new store openings, increase sales in existing stores, or attempt to convert consumers shopping at competitors using strategic sales, coupon offers, and more.
By understanding how to best reach a target audience, and what their shopping behaviors are most likely to be, retailers can better optimize their network by understanding and predicting target customer behavior and open stores that are already “right-sized” and suited to the consumer profiles they intend to serve.
The TAS approach
Because every retailer’s customer base is different, there’s no single correct approach to rightsizing. The data sets and approaches discussed above provide the context for starting to think about how to optimize your real estate portfolio to grow your bottom line while continuing to best serve the needs of your customer.
At TAS, we start with our clients’ proprietary data – usually they have much more than they expect, but it’s not centralized in a way to provide actionable insight. Once you begin to collate your data alongside third-party sources available on the market, you can have far greater confidence that your rightsizing decisions will deliver on your goals.
If you’d like to know more, reach out to speak to a member of the TAS team.