Post on 12-Dec-2014
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TIPS FOR THE PUBLIC SECTOR
FROM A RETAILER’S PERSPECTIVE
RETAIL SITE SELECTION
DECISIONS
A COMMONSTORY
“City A” wants to recruit new retail, but doesn’t seem to be getting anywhere with the retail real estate decision makers. The retailers aren’t returning the city’s calls, and the ones who do listen to the city’s pitch give a quick “don’t call us, we’ll call you” response. Residents are going to nearby communities to shop, which means critical tax revenues are leaving town too.
Sound familiar?
IT’S TIME TOTHINK LIKE A RETAILER
Recruiting retail is asking a company to make a long-term investment in your community. It’s a big step, and there’s a lot of thinking that goes into that step.
If you want to convince a retailer that your community is worth the investment, you have to understand how that retailer thinks. You need to know what factors are most critical so you can present the information the retailer needs and wants to see before making a decision.
You need to think like a retailer. Here’s how.
DEFINE WHO YOUR BEST
CUSTOMERS ARE
IDENTIFY WHERE MORE BEST
CUSTOMERS ARE FOUND
UNDERSTAND THE VALUE OF
YOUR BEST CUSTOMERS
WHO WHERE VALUE
At the heart of “Thinking Like a Retailer” is a concept Buxton likes to call “Who, Where, Value.”
Let’s illustrate how this works with a simple example.
GET BEYOND DEMOGRAPHICS
DEMOGRAPHICS ONLY TELL RETAILERS A PIECE OF THE STORY
CUSTOMER
DEMOGRAPHICSAGE: 35-50INCOME: $75 – 100KMARRIED
CUSTOMER
DEMOGRAPHICSAGE: 35-50INCOME: $75 – 100KMARRIED
Do Customer 1 and Customer 2 have the same shopping habits?Hard to tell, isn’t it?
GET BEYOND DEMOGRAPHICS − TALK ABOUT CUSTOMERS- UNDERSTAND CONSUMER
BEHAVIOR- AT THE HOUSEHOLD LEVEL
CUSTOMERBEN SHAW1010 IMPERIAL WAY
CONSUMER TRAITSSHOPS AT SAM’SDRIVES GMCEATS AT CHILI’SONE CHILDNETFLIX SUBSCRIBER
CUSTOMERTOM KING1308 BRYN MAWR CT
CONSUMER TRAITSSHOPS AT COSTCODRIVES VOLVOEATS AT P.F. CHANG’STHREE CHILDRENPREFERS MOVIE THEATERS
Now try again: do these customers have the same shopping habits? No! True customer insights are what retailers need. They need to know that
THEIR customers live in your community.
Retailers know that people shop for convenience – not based on geographic boundaries. It’s the heart of their day-in, day-out customer base. So show them how many of their customers live within their preferred drive-time radius (e.g. 15 minutes).
UNDERSTAND WHERE THE CUSTOMERS COME FROM
DRIVE-TIME TRADE AREA = WHAT REALLY COUNTS
FACTORS INCLUDE:• DRIVE-TIME CORE CUSTOMER GRAVITY METHODOLOGY• CANNIBALIZATION• COTENANCY / COMPETITION
• STORE SIZE / FORMAT
• MARKET TYPE / REGION
• 1,000’s OF VARIABLES TESTED
$$
$
PERFORMANCE & OPPORTUNITY POTENTIAL FACTORSWhen evaluating a potential new retail site, retailers consider several
performance and opportunity factors, beginning with how many core customers live within a specified drive-time.
FACTORS INCLUDE:• DRIVE-TIME CORE CUSTOMER
GRAVITY METHODOLOGY
• CANNIBALIZATION
• COTENANCY / COMPETITION
• STORE SIZE / FORMAT
• MARKET TYPE / REGION
• 1,000’s OF VARIABLES TESTED
PERFORMANCE & OPPORTUNITY POTENTIAL FACTORSRetailers also consider cannibalization, which is simply the sales the
brand loses at existing store locations when shoppers switch to the new store location. Retailers look for new sites that minimize cannibalization.
FACTORS INCLUDE:• DRIVE-TIME CORE CUSTOMER
GRAVITY METHODOLOGY
• CANNIBALIZATION
• COTENANCY / COMPETITION
• STORE SIZE / FORMAT
• MARKET TYPE / REGION
• 1,000’s OF VARIABLES TESTED
PERFORMANCE & OPPORTUNITY POTENTIAL FACTORSCo-tenancy and competition are important to retailers as well. Some
retail concepts are complementary and together draw more customers than they would if they were separated. But other concepts can hurt each other’s sales if they are located too close together. Retailers want to be near good co-tenants and away from those that hurt sales.
FACTORS INCLUDE:• DRIVE-TIME CORE CUSTOMER
GRAVITY METHODOLOGY
• CANNIBALIZATION
• COTENANCY / COMPETITION
• STORE SIZE / FORMAT
• MARKET TYPE / REGION
• 1,000’s OF VARIABLES TESTED
PERFORMANCE & OPPORTUNITY POTENTIAL FACTORSStore size and format play an important role in retail site selection
decisions as well. Simply put, the size of the store needs to fit the available space. Furthermore, some retail concepts do best in special locations, like an “end cap” (end of a row of stores).
FACTORS INCLUDE:• DRIVE-TIME CORE CUSTOMER
GRAVITY METHODOLOGY
• CANNIBALIZATION
• COTENANCY / COMPETITION
• STORE SIZE / FORMAT
• MARKET TYPE / REGION
• 1,000’s OF VARIABLES TESTED
PERFORMANCE & OPPORTUNITY POTENTIAL FACTORSAnother important factor that retailers consider is market type and
region. Think about it: is an agricultural supply store likely to thrive in an urban area? Additionally, there are distinct regional differences in shopping and dining preferences (e.g. Tex-Mex in the south) that impact retailers’ success.
FACTORS INCLUDE:• DRIVE-TIME CORE CUSTOMER
GRAVITY METHODOLOGY
• CANNIBALIZATION
• COTENANCY / COMPETITION
• STORE SIZE / FORMAT
• MARKET TYPE / REGION
• 1,000’s OF VARIABLES TESTED
PERFORMANCE & OPPORTUNITY POTENTIAL FACTORSFinally, many retailers use custom predictive real estate models that
consider 1,000s of variables and determine the ones that are most important factors in predicting future success. These factors vary for individual retailers.
PEAK INTO ARETAILER’S CHECKLIST
Now that we’ve gone through the basics of what retailers consider when making site selection decisions, let’s see how a specific retailer applies those principals.
The following are site selection guidelines from an actual Buxton restaurant client, and provide helpful insights for communities hoping to better prepare for the retail recruitment process.
• Flex-Casual and Delivery service models
• 45%/55% Lunch to Dinner
• Lease 2,600 – 3,000 SF
• Highly visible end cap, leased
• Start up cost $550K-$600K
• Average unit volume $1.2MM
RESTAURANT BRAND: BACKGROUND INFO
RESTAURANT
CUSTOMER PROFILE
0
2
4
6
8
10
12
14
16
A01
A02
A03
A04
A05
A06
A07
B01
B02
B03
B04
B05
B06
C01
C02
C03
C04
C05
D01
D02
D03
D04
E01
E02
E03
E04
E05
E06 F01
F02
F03
F04
F05
G01
G02
G03
G04
H01
H02
H03
H04 I01
I02
I03
I04
I05
J01
J02
J03
J04
J05
K01
K02
K03
K04
K05
K06
L01
L02
L03
Segment
Percent
Customers Trade Area The restaurant’s core customers skew highly toward the upper end of the lifestyle segments – meaning that they tend to have more disposable income and live in more affluent areas. The restaurant will seek locations that put them close to these types of customers.
DEVELOPMENT PROCESS
1. Identify potential markets for development
2. Secure qualified franchise partner for market (or larger area)
3. Work together with franchise partner on Site Selection process
4. Confirm qualitative and quantitative inputs for site
5. Approve site and sign lease
6. Construction and design process
7. Train and open to public
MARKET SELECTION: EARLY DEVELOPMENT PHASES
• Qualified franchise partner interest
• Quantitative – Buxton market analysis
• Economic growth in retail, residential, commercial areas
• Multiple retail submarkets (3 legs)
• Demand for product (not over saturated in segment)
• City easy to do business with
• Established and active Chamber of Commerce and other related organizations
SITE SELECTION: LATER DEVELOPMENT STAGES
• Site economic model and timing of delivery
• Qualitative – access, visibility, parking, co-tenants
• Quantitative – Buxton site analysis and scoring variables
• Complementary uses and competitor analysis
• Trade area analysis – 12+ min drive-time, day time and residential traffic
• Delivery analysis – 8 min drive time
OBSTACLES TO DEVELOPMENT
• Availability of quality property/space
• Access to capital
• Availability of adequate workforce
• Permitting complexities
– Timing, inspections, signage, etc.
• Licensing complexities
– Alcohol, business, etc.
• Other costs and complexities
– Taxes, utilities, insurance
– Minimum wage levels (state v. federal)
TIP: When possible, streamline development approval processes to help retailers shave time off the development process, which increases the project’s ROI.
WANT TO LEARNMORE?
Buxton is the retail development expert. We’ve been trusted advisors to over 2,000 retailers and 650 communities, and can provide the data-backed analytics on your community that retailers know and trust.
CONTACT US
TODAY
Call us at 888-2BUXTON or email us at buxton@buxtonco.com to learn how our proven customer analytics can give your community the insights it needs to successfully recruit new retailers and retain existing businesses.
www.buxtonco.comTwitter: @Buxtonco