A game of information arbitrage

By Gil Castle

The Way Things Are

Most of the nation's major retailers have a department charged with using GIS technology for site selection.The sophistication and diversity of GIS applications vary widely:
  • Simplistic uses include simply plotting the locations of current stores, sites under consideration, competitors, and base map features (e.g., roads, jurisdictional boundaries, water bodies).
  • More advanced applications encompass trade area summaries of demographics, the labor force, demand generators, environmental hazards, and so on; the trade areas can be based on concentric rings, travel times, gravity models, etc.
  • Still more complicated are GIS-based revenue forecasting methodologies, usually involving an analog store model, and ongoing store performance/asset management systems.

Almost always, though, the GIS will be used for preparing - with widely varying degrees of automation -- the "deal package" for site selection decisions by upper management.

The most frequently used desktop GIS is either MapInfo or ArcView.Many retailers rely on GIS modules developed specifically for retail site selection, such as the packaged software and data products from geoVue, Anysite, and SCAN/US.Small retailers rely on Web-based subscription systems, notably Anysite.com, Demographicsnow.com, and Mapscape.com.

All retailers use demographic information, from Claritas, CACI (now ESRI Business Information) or AGS.Some also rely on lifestyle segmentation databases such as MicroVision and a Prizm.Retailers that lease space in shopping centers frequently will have NRB's database on 38,000 malls and strip centers.Few move beyond these databases to consider, for example, aerial photography, manmade environmental hazards (e.g., Superfund sites, leaking underground storage tanks), natural hazards (e.g., flood zones), traffic counts, crime, etc.

Most importantly, few if any people outside the GIS department have direct access to or knowledge of GIS tools and databases.The GIS department essentially serves as an in-house service bureau.

The Way Things Could Be

Real estate is essentially a game of information arbitrage; all else being equal, whoever knows the most and/or the soonest, wins.Moreover, GIS is the best technology developed yet for assembling, integrating, analyzing and displaying real estate-related data.(Recall the adage about the three most important factors in real estate: "location, location, location.

Accordingly, everyone involved in retail site selection and asset management should have easy access to GIS databases and tools.

"Easy access" has several facets.Ideally the GIS will:

  • Be customized to the specific needs of each user,
  • Require virtually no training,
  • Automatically assemble routine data and analyses (e.g., trade area reports on candidate sites),
  • Seamlessly and constantly exchange data with other applications (e.g., work flow collaboration system, a lease tracking system, the corporate accounting system),
  • Be accessible anywhere and anytime via the Internet (with a standard browser and few or no plug-ins), and
  • Be enterprise-wide (i.e., actively used by all relevant in-house personnel and out-of-house agents, service providers, alliance partners, and so on).

Concerning the last point, such an enterprise solution becomes an Industry Operation System (IOS) for the real estate facet of a corporation, in a manner similar to Siebel for corporate sales, PeopleSoft for human resources, and SAP for accounting.

Additionally, since the above capabilities arguably are best provided under an Application Service Provider (ASP) business model, the retailer will be able to subcontract out numerous tedious data processing functions such as database updating, security, hardware and software maintenance, back-up, disaster recovery, and so on.

This is not to say that retailers will no longer need GIS professionals.On the contrary, GIS power users will still be needed for specialized analyses, improvements to decision models (e.g., fine tuning analog store methodologies), and other non-routine activities.Happily, the GIS power users will have more time for sophisticated endeavors because much of the tedium of their current responsibilities will have been transferred to the ASP; examples include data assembly and updating, responding to interdepartmental requests for certain types of maps, preparing deal packages for upper management, etc.

The bottom line is that employees will be more productive while simultaneously enjoying their jobs more.The company as a whole will be more competitive, because the enterprise-wide approach results in stores coming on line more quickly and performing better, coincidental with data processing costs actually declining.

Consequently, the way things should be is the way things will be.

Published Thursday, January 17th, 2002

Written by Gil Castle

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