Five Questions with geoVue’s 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 selection strategies?

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 years ago?

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 available (pdf).