Climbing the Stairway to Wisdom

There’s a broker who’s sure that all sites turn to gold
And she’s selling the stairway to heaven.
When she gets there she knows, if the sites are all sold
There’s a vacancy coming to save her.
And she’s selling the stairway to heaven. 

– Led Zeppelin (adapted)

One of the popular metaphors for decision-making in the information age is the “Knowledge Hierarchy.”  It is based on the idea that we start with raw data and gradually process it through stages until it becomes wisdom suitable for making good choices.

Some people apply this to professional development over the career of a chain store real estate executive.  When you’re young, you simply see data, but as you get more experience and insight, you are able to use your wisdom to evaluate sites.

The fact is, each site must be evaluated through a process that starts with raw data that is enhanced with verification, context, and benchmarks until it is ready for the application of human wisdom. 

The human brain uses pattern recognition and analogies to analyze complex decisions.  This is why “analog stores” are popular in site selection.  If we can find existing stores that are similar to a proposed location, we can adjust the details and apply our knowledge of its sales performance to the new site. Continue reading

Analytics vs Modeling: “Democratizing” Decision Support

Mistakes are expensive.  Everyone wants a model to help them avoid mistakes and repeat successes.

We want a good business model that provides a framework for success.  If the business model works and we stick with it, we will make money.

In the chain store business, we want to make good site selection decisions.  Avoid bad real estate; pay the right price for good real estate.  We want a sales forecasting model that will help us estimate the top line number to plug into our pro forma operating model for a store (which is based on our business model, of course). 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

And now, the rest of the story…

The retail marketplace is a complex system that is constantly changing and is full of surprises.  Sometimes these surprises are positive; and other times they are not!  It never ceases to amaze me how many different combinations of factors lead to success and failure in chain store performance. Complexity drives statistical models crazy (as well as the people who use them).  There seem to be as many exceptions as there are rules, and the best way to understand these exceptions is by listening to experts tell their stories about what happened.

AND NOW… I’m pleased to announce the unveiling of a new page in this blog:

“Site Selection Surprises – Stories from the Field”

Please click on the new page above for the rest of the story…

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

Take Me Out To The Ballgame

It’s hard to miss the similarity between baseball and site selection, right?

“That store is a home run.”

“We’re going to have to step up to the plate and do the deal.”

“She threw me a curve ball with that percentage rent clause.”

“We’re going to have to knock it out of the park to catch up to our competiton.” Continue reading