Frederick’s of Hollywood “uncovers” the secret to retail site selection

By Joe Francica

This past week, I had the opportunity to speak with John Kroon, Senior Vice President-Operations, on Frederick's of Hollywood's acquisition of a geographic information system solution for demographic analysis and site selection.Used currently in the real estate department, the geoVue ISITE system will be used to augment store planning but with the intent to expand usage for assisting their Internet catalog operations.

Kroon says he needs the flexibility to extract two, key demographics such as the number of females, aged 18 to 34 within a certain radius of the store site and the percentage of owner-occupied housing that helps him to facilitate the site selection process, plus the ability to extract the National Research Bureau's (NRB) database of shopping center locations.This allows him to plot his competitor, Victoria's Secret, along side Frederick's' locations, in which they go "head to head" in about 90% of the malls.

Frederick's is currently evaluating Las Vegas as a new market, and so Kroon is mapping out the location of all shopping centers above a certain size.They have a relatively straightforward classification system for malls, which allows them to quickly prioritize the "hot" malls in which they absolutely must be in as soon as possible.Kroon sees two immediate benefits of using GIS to him: the first is the ability to create an excel spreadsheet of the demographic statistics with respect to location, and the second is to visually "map out" the entire battle field for his CFO and CEO so that a sound site decision can be determined.In addition, with existing stores, Frederick's can now view sales performance and better understand their spatial relationship.

Kroon readily admits that Frederick's was not very sophisticated in the past at choosing mall locations and the mall developers themselves drove much of it.They would choose a market in which they wanted to be and then try to find a mall suitable for their store footprint.However, throughout the process of restructuring the company, they employed a "big five" accounting firm which reported "anecdotal evidence" of their success.For example, they thought that they did well when their stores were located next to a military base.Kroon dismissed this notion as a key success driver.And, in the end, they found that it was very expensive to look to an outside consultant when in-house resources could be trained with existing technology to arrive at better information to supply to executive management.Added Jim Stone, president of geoVue, "Does it make sense to outsource strategy?"

Given the system that is now in place, Kroon can rank the malls according to his business model (competition, sales potential, etc.) and go to the property owner with his choices.Frederick's currently has a staff of four in the real estate department and they work with many real estate "landlord" firms such as General Growth, and Macerich Company.They have 175 stores at present and feel there are many more malls in which they could locate in order to approach their intended expansion of approximately 350 stores within five years.

Published Wednesday, March 27th, 2002

Written by Joe Francica

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