7 ESSENTIAL QUESTIONS FOR BRICKS & MORTAR OUTLET PLANNING
The announcement in early January that Restaurant Brands would be closing its Otahuhu Carl’s Jr store due to ‘under performance’ serves as a timely reminder of the importance of bricks and mortar outlet planning. While the growth in online sales tends to feature prominently in any ‘retail’ business news, the fact is that the bulk of the retail business continues to be done in bricks and mortar stores — and online is only a small contributor to overall retail sales. Statistics from the November 2016 Retailwatch (which now includes online spends), for example, shows the value of New Zealand online sales sitting at only 10% of overall retail.
Whether you’re a retailer or a service business, your bricks & mortar store is a big investment and one you can’t get wrong. While a quick decision comes with inherent risk, too long a delay can bring its own issues and the complexity of the required decision can often lead to analysis paralysis. And we’re not talking here only about new stores — existing locations should also be re-evaluated from time-to-time — particularly as leases are coming up for review as surrounding demographics will have changed during a 5-year lease.
Suffice to say, outlet planning shouldn’t be done using the following methods:
• Going with gut feelings
• Producing a map of outlets and looking for white space
• Drawing a circle around existing outlets and calling that the catchment
• Only considering some market segments and channels, rather than all of them
So what should you do? Depending on the nature of your business, your size and your product range, the decision will be a complex one — and the skill in the equation is in working out the appropriate level of complexity for your unique circumstances. To this end, understanding the nature of your market share is critical as it puts your turnover figures into context and forces you to ask questions like whether or not you’re keeping pace with market growth? And if not, which competitors are you losing out to? Operations will need to go beyond this and consider outlet benchmarking and identify gaps and over-supply in physical presence.
For brands with a national presence, here are 7 questions you should ask to ensure your bricks & mortar outlets are in the right place:
1. Is market share consistent across the country? If not, why not?
2. Does market share correlate with physical presence? If not, why not? This is especially relevant for service businesses.
3. For retail, are you achieving your expected turnover for each outlet? Is your product profile and pricing right for your catchment area? This can be calculated by understanding the local market and its potential to spend in your category. There’s nothing like benchmarking to get focus!
4. What about store cannibalisation? What impact will a new store have on the turnover and profit of existing locations?
5. What population and economic changes are occurring and what opportunities might be presented by greenfield sites? New housing developments and traffic routing can make a big difference to future site performance.
6. What opportunity exists for automating processes and servicing?
7. Which potential shoppers could be migrated to digital platforms, and if they were, could online provide a better return on investment than a bricks & mortar store?
These are critical questions but fortunately, all of them can be underpinned by data.
Case Study: Briscoes Matamata Catchment Cannibilisation
Briscoes was presented with an opportunity to open a new store in Matamata. Of concern, however, was the potential impact the new store would have on existing Briscoes locations throughout the greater Waikato district. Briscoes approached Datamine in order to gain a better understanding of what impact a new Briscoes in Matamata would have on its sales in other stores nearby.
Datamine used its exclusive Business Insight data source to understand more about the homeware spend in the region - and assess potential spend should Briscoes open a Matamata store. By looking at the catchment areas of the surrounding Briscoes in Hamilton, Te Rapa, Tauranga, Rotorua and Cambridge, Datamine was able to estimate the potential cannibalisation of Briscoes customers should a Matamata store be opened.
Datamine presented Briscoes with an accurate gauge of the market size and potential (in actual projected sales dollars) for a future Matamata store given the competitors already in the area and typical market share patterns.
Cannibalisation was quantified and this assessment ranked a Matamata store at the lower end of the total group in terms of likely sales. Based on this assessment, a Matamata store for Briscoes was deemed unlikely to reach the group’s internal requirements. Following the delivery of the Datamine analysis, Briscoes decided not to proceed with its expansion plans in Matamata
“Not only were Datamine easy to work with and providers of an excellent quality of service, they also helped us to avoid launching a store which would have, at best, been marginal.”- Peter Burilin, Chief Operating Officer, Briscoe Group Limited.
ABOUT THE AUTHOR
Sally Carey is a director of Datamine and has over 20 years experience consulting on data analytics solutions across a range of industry sectors. Carey specializes in delivering clarity from the complexity of big data – advising organizations on a host of predictive analytics disciplines - including quantitative decision making, loyalty programmes, organisational change and marketing strategy.