Every day, we talk with retail companies, franchise organizations, and other businesses that want to select sites that give them the best potential for profitability and success. Here’s the stark truth: most companies have room for improvement when it comes to site selection. And as we all know, hindsight is 20/20. It’s very easy to think back and wish that you knew certain things about a site when you chose it. While you should be wary of any company that promises a methodology or tool that sounds a lot like a crystal ball, there are certain things you can do to choose better sites in the future and minimize costly mistakes.
Here are a few best practices when it comes to site selection based on our years of experience guiding retailers and service providers:
1. Know your customer. If you’re adding new locations, you must get to know your customers beforehand. Whether you collect data through a customer loyalty program, memberships, surveys, or purchase third-party consumer data, it’s essential to have customer data so you only consider locations that fit the profile of your target consumer and to make sure you’re meeting your customers’ needs.
When you know more about your customers, you’ll be better able to identify new sites that fit the way your customers live, travel, and shop. That part is critical, by the way. You might identify a site that is in a hot area with high traffic, visibility, and access, but is totally wrong for the consumer segment you serve.
2. Focus your resources. Once you’ve collected data and insights about your customer, you should narrow down your potential sites by completing a “success profile” that allows you to contrast sites. Compare locations based on your customer demographics, lifestyle segmentation, spending patterns, competition, etc. You could use metrics such as customer type or traffic patterns, for example, and your analysis will identify clusters of high incidence—in other words, specific areas that match your criteria. When you see this information on a map, it will become easy to quickly identify potentially good neighborhoods for your site.
3. Get a broker’s help. A good broker can provide you with market knowledge and help you screen an area for a site in your target area. Don’t simply browse available retail space in your area. Get the help of a broker who has knowledge of the area and uses a data-driven toolset to supplement their expertise and answer questions like…
- Are there retail demand gaps in this retail trade area?
- What sites are a good match for your business based on your criteria?
- What does the future look like in terms of competition and change of resident demographics and lifestyle?
4. Don’t rely solely on technology. It’s vital that you add in the “human element” in your site search. Yes, data will help your business make better site decisions, but you cannot rely on site selection driven by artificial intelligence only . Once you have narrowed down your list to a few possible sites, ask yourself some questions:
- Do I have any current locations that are like this one? If so, what have my positive/negative experiences been with those sites?
- What concerns me about each of the sites on my final list?
And don’t forget to augment your data and machine learning models with what your own research tells you. Does your broker knows facts about a new shopping center that aren’t yet available to your models? If you’re considering a new area, what plans does the city have for the neighborhood? Are the demographics changing in an area on your short list (i.e. new young families are moving into a neighborhood that used to be retirees)?
In other words, AI and machine learning models should augment the site selection process, not overtake it.
A final word about best practices in retail site selection: have a process! If you’re over-reliant on emotion and “gut feel” analytics to make site decisions, you’re likely overlooking good options and putting too much stock into those that don’t have promising data to support them. A process also helps you focus on the right metrics and criteria and use your time efficiently. Site selection is a balance of art and science…and experience and judgment.