Finding the perfect retail location is all in the data

In every economy, there are opportunities. Developing a clever retail real estate strategy could be a key driver for growth this year with the current competitive leases and a need to reach more people than before to do similar business turnover.

But, with real estate agents glossing over only the finer points, how can you predict if that perfect new store location is going to be a winner for you? Don’t wait until you’ve spent money moving in to find out, just look to your data.

One company at the forefront of what they have coined ‘footprint analysis’, is New Zealand’s leading analytics company, Datamine. Founder Paul O’Connor explains, “Optimising geographical footprint is the challenge on many retailers hands at the moment. With directives coming from the board to open new stores, as a way of driving revenue, getting the right location is a must-do.”

What is Footprint analysis?
Retail Footprint analysis uses data to provide answers to questions such as:

• How many stores can this market support?
• How would a store perform in that location?
• Which stores are underperforming and why?
• Where are my most profitable customers?

“Finding the right pieces of information in your data can really help piece together the puzzle of store locations and can underpin consistent expansion – helping you secure the best sites, before your competitor spots them!” says O’Connor, who has overseen dozens of footprint projects for New Zealand’s largest retailers in the fifteen years since Datamine first opened.

Footprint analysis also allows retailers to explore their primary and secondary trading areas and identify what proportion of their customers come from out of town. This information, fused with advanced modelling techniques can also be used to assess potential new sites for stores, projecting likely turnover in that region and whether cannibalisation from other branches, or stores, is likely.

“This is especially important in a franchise situation, as owners are territorial and want to know the impacts that another branch nearby will have on their customer base and trading,” explains O’Connor.

While the placement of new stores is a prime consideration for the property team of the countries biggest retailers, its not just stores themselves thinking about their retail mix. In fact, several of New Zealand’s tourist centres are looking at their offering in order to ensure their local economy is performing at its best (see case study below).

Auckland’s Takapuna is a notoriously difficult retail environment to break into and has a constant turnover of retail shops – looking at the data of stores in the area can show which ones have been a success and if there’s enough of the right kind of foot traffic to support your kind of retail store.

Where do I start?
When looking for an expert to develop your footprint analysis, you should ensure you enlist someone with extensive experience in the field, who has access to both customer and market information.

Case Study: FOOT TRAFFIC HEADING OUT OF TOWN? ROTORUA DISTRICT COUNCIL FINDS OUT WHY…
Despite the global directive to ‘buy local’ in supermarket aisles, clothing and footwear retailers in Rotorua found that a phenomenon known as ‘the Tauranga Shopping Trip’ meant that 11% of locals, as well as tourists, were regularly seeking their retail therapy outside the Rotorua shopping district, stimulating Tauranga’s economy as opposed to their own.

This insight was discovered after Datamine researched data for the Rotorua District Council, who wanted to create economic growth in the region, particularly in the retail sector.

Anecdotally, they believed that Rotorua did not have the right mix of retail to service the new tourists brought in following the opening of an international airport in Rotorua. In order to explore this further, they needed to understand the key characteristics of the Rotorua retail offering, comparing it to other popular tourist centres like Tauranga and Queenstown.

Now that Rotorua District Council have a clearer picture of their retail mix, they are working to attract specific retailers that will “fill the gap” in their retail offering from mainstream to more specialist stores that are traditionally found in surplus in their neighbouring regions.