“Blending art and science” has become a common phrase among retail real estate professionals when discussing physical store site selection. The term has turned out to be even more apropos as more and more of the so-called clicks-to-bricks retailers emerge on the ground.
These retailers are awash in customer and inventory data, but are just beginning to use advanced geospatial analytics to guide their decision making on bricks-and-mortar locations.
As store closures become more prevalent, those retailers who are opening new stores must be thinking about location profitability in new and different ways. Through the use of advanced geospatial analytics, clicks-to-bricks retailers are able to better quantify the true value of their brand as stores become a new customer touch point driving value across channels. The champions of these clicks-to bricks-retailers will be those who harness geospatial data to make better informed business decisions, which affect cross-channel product delivery and store location choices.
A heightened focus on data and analytics coupled with utilization of traditional site selection criteria, (co-tenancy, sales performance, customer and demographic analysis, etc.) position today’s emerging brands well to make highly informed real estate decisions. As brands have become more sophisticated with the data they collect, so too is the manner in which the information is being analyzed and used to provide transparency in the decision making process. Below, we identify three different ways clicks-to-bricks retailers are evaluating location decisions using advanced geospatial analytics.
Four-wall profit no more: Consumers today shop across multiple channels and stores and are becoming a conduit that drives brand value. Being able to quantify which channels lead to an in-store purchase isn’t as important as how retailers are calculating in-store profitability. Stores are increasingly being relied on as an effective customer acquisition tool that serves to educate the consumer while providing a physical touch point to the brand. Physical locations are places where brands can make authentic connections with consumers who are more informed today than they were yesterday. Four-wall profitability remains a critical metric, but the “halo effect” of the store as a means to engage the customer across all channels is now becoming more important.
The Cross Shopper’s customer behavior: Who’s shopping where and how spending happens, have become market fundamentals. Understanding the interaction of those customers who shop in-store, those who shop online and those who cross-shop both channels is critical in evaluating supply-chain and real estate needs for both warehouses and stores. Geospatial analysis provides the visual tools that can capture the distance customers travel to stores relative to how much they spend. Compounding this with external factors such as a new warehouse, an additional store in the market and/or competition, etc., is how market plans are best crafted. Through best-in-class machine-learning tools coupled with analysts and market experts, location scenarios can be optimized for retailers faster than ever.
Sales transfer over cannibalization: How online shopping patterns in multi-store markets interact is a geospatial question retailers are looking to answer as expedited shipping methods (faster product delivery) are shifting sales from being made in-store to online. How retailers recognize this shift is being looked at as a strategic market play. Brands are using data to understand the relationship between online and in-store sales within a market in a more sophisticated manner than ever before. It has been proven that opening a physical location can increase a retailer’s website traffic by as much as 27-32% within that particular market. As a result, retailers are able to craft a strategy that optimizes overall sales performance in an efficient and cost effective manner.
These are three of the main ways in which clicks-to-bricks retailers are using geospatial analytics to seek optimal physical store and warehouse locations within identified target markets. We anticipate that the reliance on advanced analytics will continue to increase as brands seek data-driven intelligence in an effort to help navigate a constantly evolving on-line and off-line shopping environment.
Tune in to Part III of this newCommerce series on Pure Players to Bricks-and-Mortar where we will delve into understanding the key elements of a physical store– staffing, POS systems, merchandising mixes and more!
To read Part I of this blog piece, please CLICK HERE.
Michael O’Neill is an Executive Managing Director for Cushman & Wakefield’s Retail Services. His notable experience with Pure Play brands includes his representation of UNTUCKit—where he advised on their first bricks-and-mortar store and has since represented the digitally native brand in securing more than 20 new stores nationally along with consulting and advisory services. Additional clients include Muji, Vince, Lacoste, JPMorgan Chase Bank, and Forever 21 as well as several other retailers and notable Landlords.
Jalna Silverstein leads the Retail Consulting team for Cushman & Wakefield’s Retail Services, Americas. She has extensive consulting experience with retailers who seek specialized solutions in commercial real estate—for all stages of growth from brand development to store expansion and optimization. Most recently, she has helped digitally native brands like UNTUCKit, navigate location decisions. Additional clients include Giorgio Armani, Crate & Barrel, Nike, Cole Haan, and Lacoste as well as other retailers and investors.