Five Questions with geoVues VP of Sales and Marketing, David Powell
The downturn in the economy is impacting retailers due to increasing
costs for both transportation and raw goods. Editor-in-Chief Joe
Francica asked geoVue Vice President of Sales and Marketing David
Powell about the technology solutions available to retail and real
estate executives who, as a result of this downturn, are facing
declining patronage and revenues.
Joe Francica (JF): We've seen announcements in recent weeks, such as
those coming from Starbucks and Metromedia Restaurants, of retailers
looking to close stores. How has the downturn in the economy affected
the expansion plans of retailers, and to what services, data or
enterprise software solutions are retailers turning for their site
David Powell (DP): Undoubtedly, many retailers and restaurant
chains are feeling the effects of the sluggish economy. Market
conditions, however, are varied depending on specific lines of business
and retail segments. While upscale concepts may be struggling, many
bargain-based retailers or discount stores are capturing new customers
from a broader demographic base. This customer migration, along with
increased Internet shopping due to the price of gas, has diffused
expansion plans for some companies. As a result, you might think
purchasing location intelligence solutions would be deferred along with
store development plans; yet analytics and optimization tools can be
used to provide guidance in slow growth or even shrinking markets. This
is accomplished by factoring poor revenue performance, lease
expiration, physical condition and other indicators prior to running
the optimization model. Retailers then gain confidence they are making
good decisions about store closures, remodels and relocations. The key
is that the market planning models have the ability to handle dynamic
status changes for existing stores so that a variety of scenarios can
be run to determine how the closure or remodel will affect total market
share. The same technology and data used to grow certain markets
can therefore be used for market "right sizing."
JF: On what criteria do retailers depend to determine whether an
outlet should close? Is it simply recent sales, historical sales? How
much of a factor is location, even when a store which normally performs
well begins to underperform?
DP: Smart retailers are always evaluating store performance and
comparable yearly revenues, in every market. It's not always downturn
or flux in socio-economic conditions that drive stores to poor
performance. Oversaturation of competing concepts, cannibalization
effects of too many stores of their own, poor operations or store
management, local environmental or weather-related conditions and other
issues can contribute to under-achieving units. Location, however, can
certainly be a primary factor itself if sound business practice and
research were not invoked when the site was originally approved. When
stores begin to underperform against minimum standards for the chain,
all these factors should be investigated as part of the overall market
analysis and decision making.
JF: When the economy finally does turn around, what location-based
information will retailers look to first to see this recovery? What
econometric models will be used to establish the turnaround and what
location-based data will be factored into the solution?
DP: When we begin to see an economic rebound, retailers that plan
to significantly grow their store base should make sure they are well
equipped for the challenge. The days of relying solely on broker
networks, gut instinct and "follow the big box leaders" are behind us.
Everyone is fighting for prime locations in the market and the
companies that have adopted market planning and site screening
technology as part of their development process will "catch the worm."
Computational efficiency, precision and reliability of market
optimization software have gained tremendous momentum over the past
five years. Feeding these models with the best sources of demographic,
psychographic, consumer expenditure and other pervasive business and
retail data is the fuel that drives the optimization engine. The best
approach is to collaborate with the selected analytics vendor to make
sure the appropriate data sources are being used.
JF: Are we truly past the days of "gut feel" in real estate site
selection? How much more sophisticated is the retailer today than five
DP: Believe it or not, many companies still rely heavily on human
interactions, broker advice and gut instinct as their primary
approaches to site selection. Even these companies are given some
demographic data report from somewhere before signing a new lease.
Still, the best solution providers in location intelligence will tell
you that "gut feel" should never completely come out of the equation.
The best practice is to deploy a sound analytics program and use the
output from the system to guide decision makers and real estate
professionals in the field. Companies that find the "sweet spot"
between retail analytics and human intellect usually have the most
success in developing new stores.
JF: How is geoVue positioning its solutions to help retailers
relocate stores to optimize their networks?
DP: geoVue's iPLAN Lynx Market Optimization solution, released in
February 2008, lets retailers optimize markets through a series of
market planning "scenarios." Things like total market capacity,
cannibalization impact and market opportunity are three examples of
planning scenarios in the new software package. When using the iPLAN
Lynx optimization software, flagging a specific location for Closure,
reModel, or Relocation allows the application to treat selected sites
differently from proposed locations or existing stores. Real estate
professionals running the system use these "levers" to manage the list
of remodel and relocation candidates. More information on iPLAN Lynx is