Tag Archives: social media

2012 Predictions for the Chain Store Real Estate Industry

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I guess it’s a good time to do a “2012 Predictions” post.

I’ve been talking to a lot of people about best practices in real estate planning and site selection during the past year.  Many of my observations and insights have appeared in this blog since May 2011.  Looking ahead to the next year, there is evidence that some of the “forward looking” comments from last year will begin to appear in the practices of leading companies in 2012.

Retail store sales during the 2011 holiday season were flat compared to last year (there are so many stats I don’t even want to quote one).  The bigger news was the increase in online sales, and the biggest news of all was the increase in purchases from mobile devices such as smartphones and tablets.  This puts “teeth” in the trend toward “omnichannel retailing” that signals a new paradigm in consumer behavior and requires a new approach to retail real estate planning.

Here are two general predictions about the chain store real estate business for 2012:

#1 Betting on Clicks or Bricks

Given the continuing weakness in the economy, capital investment in store development will be more carefully scrutinized by senior management than ever before.  Given the growing success of the online and mobile channels, there will be more conversations between The CEO, CFO, CMO (Chief Marketing Officer), and CDO (Chief Development Officer or VP Real Estate in most companies).

New questions will be on everyone’s minds and lips.  Instead of “how many stores should we add this year net of closings,” people will be asking “how much can we grow sales without adding stores?”  Another way to ask the same question might be “what’s the ROI on store development compared to promotion and discounting through other channels?”

These questions will lead to some innovative planning and business models that will look very different from the traditional approaches that have not changed much in the past few decades.

#2 Performance Improvement

Investments in technology to improve real estate planning and site selection have grown dramatically in the past five to ten years.  Most of the larger chains and many smaller ones have a Real Estate Research Director or Senior Analyst who is responsible for delivering strategic plans and sales performance estimates to the decision-makers.  They have armed themselves with mapping and demographic programs, databases, and analytical tools based on everything from excel to sophisticated statistical models.  Almost everyone agrees that research can improve performance and that the investment in analysts and their tools is worthwhile.

The question remains:  how much of the potential value from research activities is being realized?  Is there room for improvement?

My prediction for 2012 is that investments in analysts and technology will continue, especially for companies that have been slower to get on the analytics bandwagon.  However, the new focus will be improving the “people” side of research.  This starts with benchmarking business processes against best practices in the industry and extends to consistent training programs to align the deliverables from research with the decision requirements of everyone in the real estate process including senior management, dealmakers in the field, and people in other departments such as marketing and merchandising. 

There’s been a lot of talk about “enterprise GIS” and “localized assortment planning” in the past few years.  The reason this is on my list of predictions is that all of the prerequisites to actually implement such performance improvements are now in place.

a)       The technology is good and has become affordable, especially with “cloud computing” which allows companies to build a platform gradually with variable costs instead of committing to a huge IT infrastructure investment to get started.

b)       The need to integrate real estate planning with other channels at the highest level is crystal clear based on the growth in online and mobile sales and the social media phenomenon

c)        The large capital investment required for bricks and mortar stores has become harder to justify in a weak economy that shows no signs of bouncing back quickly as in past cycles.

By this time next year there will be some great case studies of companies that are actually doing these things and reaping the financial benefits (although it might take another year to quantify this in a convincing manner).

In the interest of accountability, I have marked my calendar to follow up on these predictions one year from now.  I hope I can find some good cases to talk about then or we may not have a very happy new year in 2013 and beyond!

Real Estate Research Knows the Score!

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I just got back from the annual research conference of ICSC (International Council of Shopping Centers) in San Diego.  It was the same bunch of people with a few new faces, but the topics and conversations were very different!

Three years ago everyone was sighing with relief that online sales were not completely replacing bricks and mortar stores.  Social media was the personal ads in the local underground newspaper.  Web-based demographics and reporting were designed for running trade area reports in your hotel room.

This conference is clear evidence that the real estate research profession is keeping up with the changes in the marketplace!  First of all, hats off to the program committee that developed the topics and arranged the presenters.  I found myself having a morning conversation with one viewpoint and an evening conversation with a very different viewpoint!

There were three major takeaways from this conference:

  1. Most companies are trying to move real estate research tools to the web and provide access to dealmakers.  This was clear in the “Best Practices” session and the game plan is not just to provide maps and demographics, but analytics as well!  The need for “a single version of the truth” in data management was a recurring theme.
  2. Social media are generating critical data about the “voice of the customer” and changing the way we look at customer profiling, marketing, and merchandising.
  3. The bricks and mortar store is no longer the only way that shoppers can have a powerful shopping experience with the merchandise.  High bandwidth on computers and mobile devices (including tablets) are making it possible to create rich virtual applications such as Me-tail (http://metail.co.uk/how-it-works/) that will continue to feed the growth and market share of online sales.
It’s amazing to look at the last 20 years in the real estate research profession and compare the rate of change in practices and trends in the past three years to the previous 17 years.  However, I’m very pleased to see that the more senior members of the group are not being stubborn and sentimental about the past, but embracing the exciting changes and reinventing their practices to be useful and relevant.  Maybe it’s driven by concerns about job security, since many of us will be working into our 70’s to pay off college loans.  Or maybe we realize that technology may change the way we do things at an unprecedented pace, but the “art” of real estate planning and site selection is based on experience, and we will all have more of that as we get older!
Stay thirsty, my friends.

The Voice Of The Customer: Can You Hear It Through The Screaming?

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Listening to the “voice of the customer” has been the hallmark of successful retailers, restaurants, and service businesses for years.  Technology has greatly increased our ability to capture and analyze customer data.  With the explosive growth of Facebook, Twitter, and other networks, social media are becoming the loudest, clearest, most current voice of the customer yet!

The challenge today is finding the “signal” in the data so that we can reduce the voice of the customer to actions such as real estate planning, site selection, marketing campaigns, and assortment planning.  With data warehouses full of customer transactions, household files with demographics, and feeds from social media, it’s harder to understand what the customer is saying than to guess the Dow Jones average by walking onto the trading floor of the New York Stock exchange! Continue reading →

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

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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

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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?

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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 →