Will “Big Data” lead to “Big Answers” for Chain Store Operators?

One of the hottest topics in business analytics today is “big data,” defined by Wikipedia as “a term applied to data sets whose size is beyond the ability of commonly used software tools to capture, manage, and process the data within a tolerable elapsed time.”

How big is “big data?”

Last year, consumers and businesses around the world are estimated to have stored more than 13 exabytes of information on PCs, laptops and other devices — the equivalent of more than 52,000 times the information housed in the Library of Congress. An exabyte is 1 followed by 18 zeros, or a billion gigabytes.  And the amount of data stored in such “technological memories” is growing 25 percent a year, said Martin Hilbert, a researcher at the University of Southern California.  These were some of the estimates shared at the The Economist Big Data Conference last June in Santa Clara, CA. (for complete story see http://pittsburghlive.com/x/pittsburghtrib/business/s_745039.html). Continue reading

What Women Want

I don’t watch many movies, but I just saw “What Women Want” with Mel Gibson and Helen Hunt.  It may sound strange, but it made me think of the changes in the chain store real estate business in the last couple of decades and consider the changes that are still ahead.

Twenty years ago, most of the dealmakers in the chain store industry were men.  Business was conducted on golf courses, in restaurants and bars, at sporting events, and other venues of the “good ol’ boy network.”  Cambridge Dictionaries Online defines a good ol’ boy  as “a man from the southern US who enjoys having fun with his friends, and disapproves of ideas or ways of behaving that are different from his own (see  also http://en.wikipedia.org/wiki/Good_ol’_boy_network). Continue reading

At Least We Don’t Have To Worry About Cannibalization…Or Do We?

Tens of thousands of chain stores and restaurants have closed in the last three years.  Few chains are expanding at all and many aren’t done shrinking their fleets (Collective Brands is closing 475 shoe stores as we speak).  Maybe the only good news about all this downsizing is that we don’t have to think as much about cannibalization, which is a big part of the problem that got us into this mess.

If the chain store business was simply fighting through another recession and waiting for the economy to turn around, this might be the case.  Unfortunately, we are also going through a fundamental change in the way customers shop and dine.

On the shopping front, e-commerce now captures about 6% of all retail sales.  But that’s only part of the story.  Analysts are now tracking “Web-Influenced” retail sales which account for more than a trillion dollars, or 40% of total retail sales.  Both of these numbers are expected to rise in coming years which clearly demonstrates the need for retailers to approach marketing and store planning with an integrated plan that utilizes stores, websites, and social media to create a powerful brand and a rich customer experience.

Continue reading

Doers and Viewers: Division of Labor in Real Estate Research

After 3 ½ weeks, my blog page called “Site Selection Surprises:  Stories from the Field,” has more than twice the average page views of the other blog articles.  What’s so compelling about this article?  The stated purpose of the page is to provide a forum for chain store real estate dealmakers and analysts to share stories of success and failure in order to build our experience base for evaluating future deals.  Makes sense, who wouldn’t want that?

Continue reading

A Vision for Profitable Chain Store Development

I have had the good fortune to get a close up view of many chain store operators in action over the past 20 years.  It’s amazing to see the wide variety of approaches used to find, open, relocate, and sometimes close stores.  There are many different org charts and reporting structures that sometimes place the real estate function directly below the CEO and in other cases reporting to the CFO or VP Marketing.  There are Real Estate Research Directors who have large staffs and tight controls over deal approval as well as companies who give the dealmakers responsibility for research. Continue reading

Different Problems Different Questions – The Challenge of Context

Years ago I was trying to sell site evaluation software to the commercial lending group at Freddie Mac.  They had fifteen underwriters around the country with huge piles of loan requests on their desks and very little time to analyze each deal.  The person I was working with described his problem like this:

“There are only about ten criteria we need to evaluate in order to approve or reject the loan.  Unfortunately the ten criteria are usually different for each deal!” Continue reading

Connections: the Key to Success in Chain Store Real Estate

Not too many years ago, chain store real estate was almost entirely a “people” business. The ICSC was the formal organization that provided regular gatherings among landlords, tenants, brokers, and all the other suppliers to the shopping center/chain store industry.  “Going to Vegas” has become an annual pilgrimage for dealmakers since 1986 (the first convention was held in New York in 1958). The telephone and the automobile were the primary research tools.  The research department was often located at one of the many bars, restaurants, coffee shops, and golf courses across the country. Continue reading

Top Questions of the Week

1. What’s the best way to make better real estate decisions?

 Make better real estate decision-makers.

And by the way, don’t try                       to replace them with                             mathematical models.

      

2. How do you make better real estate decision makers?

Train them.

And by the way, don’t train                   them to be better                                   bureaucrats; train                                 them to recognize the                           difference between good                     locations and bad                                 locations.

3. What’s the hot trend among chain operators today to make better real estate decisions?

Replacing decision-makers with mathematical models and training the                       remaining ones to be better bureaucrats. Continue reading

How Can We Make Better Real Estate Decisions?

All of us in the chain store industry would love to believe that we are making better real estate decisions today than before we had digitial maps, demographic data, and predictive models.  There is no question that some companies have reduced capital losses from store closings and increased profitability of their stores with these tools. Continue reading

The KISS of Death

Most chain store modeling experts will tell you that a “good” sales forecasting model will estimate sales +/- 20% in 80-90% of the cases.

Most chain store real estate dealmakers believe that they need a model with no more than +/- 15% error 85% of the time.

Most people don’t agree on how this error is measured or what the role of human judgment should be in determining the “official” sales estimate used in calculating the projected return on investment. Continue reading