Data Providers: Teaching Retailers Where to Open Shop
Retail is changing; brick-and-mortar stores are facing increased competition from online retailers. As noted by AdWeek, online-first brands like mattress company Casper and clothing maker Everlane have now opened traditional retail locations. Meanwhile, more familiar brands such as Toys R Us, Walgreens and Best Buy are closing hundreds of under-performing stores across the United States this year. As a result, retailers need to take a page from their online counterparts and leverage data providers to discover the ideal location for new brick-and-mortar stores.
By the Numbers
It's tempting to see the aggressive increase in online sales as some kind of "death knell" for brick-and-mortar locations, especially as traditional brands continue to fold and once-mighty retailers shutter longstanding locations. But a look at the numbers tells a different story. As noted by Entrepreneur, while e-commerce growth outpaced retail last year by more than 10 percent, the total value of transactions isn't even close. Online retailers brought in almost $460 billion in sales while traditional stores delivered $4,877 billion.
The wide availability of online goods and services, however, is having an impact on physical stores. According to Forbes, product abundance combined with pricing availability means "good enough" is no longer enough for retail brands. Customers expect a digital-first experience that allows them to begin their "journey" online and carry it seamlessly through a brick-and-mortar location. This demands applications that accurately reflect current sales, promotions and stock levels at local stores in addition to geo-tagged services which offer special deals or promotions if users are near brick-and-mortar businesses.
In some cases, stores simply aren't profitable — no matter how digitally diverse they become. But with online sales forcing a rethink of the "more stores, more profit" mentality, companies need to be careful when selecting new retail locations. Relevant data and data providers can help.
Real Estate Reality Check
Location, location, location. House or store, the rule applies: the "where" upstages virtually any criteria when it comes to success. For retail locations, finding the ideal "where" isn't measured by lot size or parking lot access — relevant demographic and real estate market data offers valuable clues about long-term success. As noted by Bis Now, data providers such as HouseCanary are leveraging publicly-available real estate data to deliver actionable retail insights.
HouseCanary uses more than 200 million real estate transactions across the last 40 years to provide property insight for "every metropolitan statistical area, ZIP code and block in the country." For retailers, this could mean getting a sense of house price trends or potential customer demographics before purchasing land and committing to large-scale expansion stores.
Stanford University startup LocateAI is using artificial intelligence (AI) and machine learning to predict store success. Using data such as consumer GPS locations and retailers' target locations, LocateAI can help fill in the blanks — how will a new store perform in the area and for how long? What factors will influence success or failure? While there's no way to achieve perfect accuracy, data providers such as LocateAI offer retailers the potential to reduce reactionary tactics — such as cutting staff and closing stores — and instead proactively select locations which offer the greatest return on investment.
Established retailers often make the mistake of assuming that they know what customers want — instead of asking customers directly. It makes sense — surveys can be complicated and time-consuming, but when it comes to spending big on new retail locations and boosting brand recognition, it helps to know what consumers want. That's the goal of data provider Space Jam, which uses information crowdsourced from social tools such as Instagram and Facebook.
Brands considering a new location can use Space Jam to ask customers if they'd consider shopping there — and if so, what they'd want to see from a new brick-and-mortar store. Already, mall ownership groups are using the service to help identify gaps in vendor presence; companies planning to expand their retail presence could use it to gauge consumer interest and then select real estate based on favorable consumer sentiment.
Brick-and-mortar stores aren't dead, but the era of untamed expansion as the key to revenue has come and gone. Now, traditional brands face both increased online sales and the prospect of e-commerce companies opening physical locations down the street. Now, retailers must leverage data providers to discover ideal locations, best-case predictions and prevailing customer sentiment.
For more information contact Alex Buecking, Regional Executive, Income Property Group at email@example.com or 720-904-4022.