Site selection technology isn't just about choosing real estate anymore. It's about creating targeted marketing, managing consolidation, valuing customers and even determining merchandise mix.
Sure, the technology still does wonders for finding and choosing greenfield sites. But faster computers that can now crunch more complex data let retailers and retail real estate companies fine-tune merchandising and store management long after a site is selected.
“Site selection technology is a great vehicle for constantly keeping a finger on the pulse of existing stores,” says Bob Buckner, site selection technology and market expert at MapInfo Corp. “On top of providing ever-more granular demographic information, it asks the question: So what? Now that we have all this data, what do we do with it?”
One of MapInfo's customers, Charming Shoppes, which acquired women's plus-size apparel retailer Lane Bryant from Limited Brands in 2001, is using the company's tools as it looks for sites to put Lane Bryant stores in place of budget-priced Fashion Bug stores and Catherine's Plus-Size shops. “We can understand where our customer lives, her propensity to spend, how far she will drive and what she looks like,” says Andrew Galasso, vice president of real estate finance and analysis for Charming Shoppes, which operates 2,245 stores in the U.S. By identifying those stores that are less relevant to nearby consumers and targeting sites the company would not have found otherwise, that information is used to manage the consolidation and expansion of the different chains.
“We want to answer every question a real estate executive may have — from greenfield to infill to store consolidation,” says Buckner. To do that, the systems have to capture information about what is happening in the stores and even with individual customers, he says. “It's important to know how well you expect a store to do,” says Buckner. “But what you do within the four walls of a store is critical to success.”
Site selection technology isn't cheap — a system can range from $50,000 for regional companies with fewer needs to $100,000 for those national players that require a full suite of services, according to Keith Peterson, president of Claritas' Integras division. But retailers say that it's a good investment if they avoid opening stores in the wrong locations, which is a greater risk for established chains that are now looking for growth in less obvious places. For these customers, the site selection and chain management equation becomes far more complicated and site-selection systems have to help them avoid oversaturation.
The vendors are responding. Claritas created Integras early this year to focus on the needs of larger retailers, which require more than rudimentary site selection. Integras is supposed to provide customers with a solution that weaves together marketing and site selection services. “Our customers want to accelerate the profitability of new stores, so at the same time they can look at how to put marketing dollars behind these stores,” says Peterson. To this end, Peterson adds, the company has begun integrating retailer point-of-sale data into site selection forecasts, because knowing the details about what certain customers are buying “improves our modeling and forecasting techniques.”
Similarly, MapInfo says its Optimizer program can value individual customers of particular stores to determine if they are profitable or not, which helps a retailer decide where to spend marketing dollars. “Why would I want to spend millions doing catalog drops to every household in a particular neighborhood?” says Buckner. “Why wouldn't I be specific about who I mail it to?”
Other site selection experts are focused on refining the way their systems sort bad and good sites. San Francisco-based Market Insite Group, whose clients include women's apparel maker Chico's, luxury retailer Coach and Apple Computer, has updated its scoring methods and other forecasting services. Its automated sales forecasts vary by about 6 percent to 7 percent, compared with the 15 percent or higher rate of variance in forecasts set by many retailers, says co-founder and Chief Executive Kathy Huber.
One customer, Pilates chain Curves, credits geoVue software with helping it expand by 3,500 locations in the last year alone. “It's enabled us to be smarter,” says Don Fortenberry, territory/location director for Curves. He adds that software will be a vital aid in its ongoing expansion from 6,800 to 10,000 clubs.
That's possible because the new technology was able to pinpoint a greater opportunity. A previous mapping technology provider had determined that communities of fewer than 100,000 residents would not support a Pilates center. geoVue's software showed that some markets could be carved into smaller sections — supporting up to three clubs rather than one. “We thought we would slow down, but it really has kept going,” says Fortenberry. Curves initially signed on for one copy of geoVue software. Now it has 15 in-house operators to do nearly real-time calculations and analysis for its sales reps.
geoVue, whose clients include electronics retailer RadioShack, home improvement store Lowe's and Outback Steakhouse, has continued to grow through the tech spending drought — by about 100 percent, says company President Jim Stone. In recent years, its offerings have become more practical for clients thanks to better sources of raw data and faster computing power. Customers can easily download large files like maps and spatial analysis graphics. “We can push computers to the absolute edge,” Stone says.
FAST TURNAROUND TIME
Fast-food restaurant giant AFC Enterprises has 4,071 franchise or company-operated store outlets of its Popeye's Chicken and Cinnabon chains in the United States and abroad. But it is trying to narrow its focus amid accounting problems. In addition to revising financial statements for 2001 and 2002 — which the company claims is not the result of fraud or misconduct — it also recently sold its Seattle Coffee stores to Starbucks and will use the proceeds to pay down debt.
AFC uses site selection technology from Orange, Calif.-based SRC, whose clients include May Department Stores, supermarket chain Albertson's and fast-food goliath Yum Brands. Since adopting SRC technology in 1999, the company has cut site selection time dramatically, says AFC director of market development Jamie Goldberg. “The turnaround on sites is faster.”
The Internet has sped up the process of locating sites. In 2000, AFC began to use SRC's web-based version, which allows users to remotely access tools like maps and competitive analysis. AFC's five real estate and market development managers still have to go out and scout locations in person, but the entire network is more effective because the database of potential sites and markets is “not as cluttered with ones we would never really consider,” says Goldberg. Combined with a 2002 upgrade, the SRC software can provide custom demographic analysis, specialized reports and aerial photos. “It's a much more dynamic system now,” says Cheryl Murphy, AFC's senior market development strategist.
AFC, like most American fast-food chains, has been a long-time user of site selection technology as part of an ongoing effort to be efficient. In the midst of a cost-cutting campaign, software improvements should help the company better understand its strongest and weakest markets, and to do so in a more streamlined manner than before. Even for retailers not under the pressure of public scrutiny, increased site selection capability is becoming essential as some of the most attractive markets approach saturation.
Site Selection Technology Providers
The Buxton Co.
Ft. Worth, Tex.
San Diego, Calif.
Dripping Springs, Tex.
Market Insite Group
Site Analytics Co.
Thompson Associates (part of MapInfo)
Ann Arbor, Mich.