Anyone in retail research knows that there are many factors that contribute to the success or failure of a site. The question, of course, is how do you replicate your winners and avoid opening locations that end up as losers? One of our most valuable tools within SiteSeer can help you do just that: the hotspot analysis tool.
As brokers and developers know, retailers use such information to point themselves to the locations where they are most likely to find successful sites. And if they’re leaning on you for expertise, hotspots can augment your insights and minimize the amount of time you waste on sites and areas that don’t meet most of their criteria.
Bottom line: hotspots can save you time.
In the world of closing deals, time is money. A hotspot analysis will guide you—and your clients—toward areas/sites that make sense. As we encourage SiteSeer users all the time, it’s important to think like a retailer when assessing a market.
Some hotspots are better than others.
If your goal, then, is to think like the retailers/chains you’re serving, you must understand that not all hotspots are created equal. A hotspot analysis can be very valuable for decision making, but only if it is in-depth enough to be useful to the chain clients with which you’re working. And to achieve that, the hotspot tool you use should have these essential qualities:
It should evaluate supply and demand.
Many hotspot tools on the market look at consumer demand, but fewer analyze supply as well. Retail chains ask themselves questions like these:
- Where are my competitors located?
- Where are our sister stores?
- Where are the holes in my store network?
Make sure the hotspot you create looks at supply gaps as well as demand gaps.
It must be capable of modeling as many variables as you want.
Most tools allow you to thematically shade one variable (for example income or population density). Fewer products allow you to combine a small number of variables into a hotspot. Many retailers have complex site criteria that with a dozen or more factors, such as demographics, lifestyle segmentation, spending data, workplace (daytime) proximity variables, competition, and psychographics.
It needs to be trade area based, not neighborhood based.
Your hotspot needs to be representative of a trade area, not just a neighborhood. When choosing a location, it’s most important to know where customers are coming from. The people living in closest proximity to a location might or might not be customers. So, a high-income neighborhood isn’t necessarily the perfect location for a high-income store.
Its data should be up to date.
Hotspots need to be refreshed regularly because the world of retail changes all the time: stores close, new ones open, people move, and other competitive factors that didn’t exist before come into play. Make sure to partner with the best data sources, as an infrequently updated data source might be affordable, but it will not give you the best information when making important site decisions.
If your client has provided you a list of qualities that they’re seeking in their next site, hotspots are a great way to visualize where the opportunities lie or narrow down a list of sites or shopping centers to the best opportunities. But remember that the quality of the tool you use is important. Done correctly, a hotspot analysis will provide you useful insight about best-fit locations. That way, you can avoid chasing after sites that don’t fit your clients’ goals and criteria.
If we can answer additional questions about hotspots or how SiteSeer’s hotspots are built, give us a call. We’ll share more about how we use the hotspot analysis with our clients and what it can do for your growing business.