Everyone knows the value proposition for chain store real estate research:
“If you avoid closing one or two stores it pays for itself.”
So why are people so hesitant to invest in analysts, predictive analytics, and information systems to support better real estate planning and site selection?
I’ve been asking this question for nearly 20 years, and I think I’m finally beginning to see the answer.
It’s about measurement.
Here’s how the argument goes:
Summary (simplified): If we invest in better research, we can use a predictive model to estimate sales performance for proposed sites. If we know the population and income of the trade area, the distance to our competitors, and the quality of the site, we can use the weighting factors in the model to calculate the sales potential. We’ve heard that it’s possible to have a model where the estimate will be +/- 20% reliable at least 80% of the time. In the past we have only been +/- 20% correct 65% of the time.
Therefore, the avoidance of bad stores alone will more than cover the investment in people and tools to build and use the predictive model. Continue reading →
I have become obsessed with the realization that chain store operators are leaving billions of dollars of sales on the table by failing to properly train and develop their talent in the real estate teams (total sales of US retail establishments is around $4 trillion according to the 2007 Economic Censuspublished in 2009).
Why is this? Laziness? Ignorance? I don’t think so. Some of the most clever AND street-wise people I’ve ever met are senior executives in chain store companies. I think that the training challenge is relatively new and requires adapting to new market conditions. It’s the natural evolution of the chain store business. Sears built an empire with selection (“Sears Has Everything”). Wal-Mart revolutionized retailing with their supply chain management. Apple has seemingly cornered the market on “cool” and “easy.” Here are some of the driving factors that have increased the priority of training from low-moderate to high: Continue reading →
We have some preliminary information about the state of training for analysts based on several different types of chain store operators: apparel retailer, casual dining restaurant, shopping center developer, and a quick serve restaurant. Continue reading →