Three common problems when choosing a location and how to solve them

Geotech offers solutions to three common problems businesses have when choosing a location.

The Problem - Leaving Site Selection Decisions to Gut Feel – Opening Poor Performing Stores

Many organisations still leave their property decisions to the gut feel / experience of their property people (and others within the organisation). This approach to site selection is extremely costly when a site does not work, but even more so if a decision leads to a disgruntled franchisee taking the franchisor to court (as has occurred in a number of high profile cases over the last decade)

The Solution - When the brand already has a number of stores trading, there is a better (and more defendable) way of quantifying the potential of a prospective site. This also leads to the development of a sound site selection criteria, ensuring that energy is only put into sites worth the effort.
With a bit of analysis into the characteristics vs sales performance of existing stores, the factors responsible for driving sales can be identified. Given that this list of key sales drives is based on the analysis of existing store performance, it is also defendable as a ‘best practise’ methodology for setting site selection guidelines.

Even considering this type of approach from a purely ‘insurance’ viewpoint is prudent, however the reality is that having a more robust approach to site location planning will ultimately pay much more significant dividends.

The Problem – Estimating and Managing Sales Cannibalisation Impacts as a network grows.

While a number of QSR brands have undertaken research to gain a handle on which site characteristics drive sales, fewer have a handle on the issue of sales cannibalisation / impact . Sales cannibalisation / impact tends to be a problem that creeps up on emerging brands. While a relatively new brand can ignore the issue by keeping significant distance between sites, before long the issue grows out of nowhere, often exponentially. Failure to take into account the impact a proposed new store has on existing stores can mean that the net return from introducing a new site can be zero, or even negative. Furthermore, lack of management of this issue can lead (in a franchise environment) to significant anxiety amongst franchisees. Often franchisees will overestimate the impact a new store will have on their business, and without any form of estimating impacts impartially, it becomes ‘our word against theirs’.

The Solution – By developing the means of tracking impacts, and analysing the issues underpinning impact, Geotech has given numerous QSR businesses the tools and understanding to manage their impact / cannibalisation. This allows optimum growth of a brand, by a) ensuring we are not being too conservative for overstated fear of cannibalisation, or b) by being too gung ho and suffering unsustainable levels of cannibalisation / impact and the franchisee issues that come along with that.

The Problem – Understanding the Performance of Smaller / More Boutique retail precincts with no published performance data

Historically, the availability of precinct transaction or pedestrian data was considered patchy at best and completely unreliable at worst. The reliance on self-reporting by shopping centres has called into question published data regarding shopping centre performance. Outside of the larger malls the situation is even more dire. In these precincts, there is little to no intelligence to assist in understanding trading performance. The decision to establish a new outlet (and the associated huge dollar commitment that goes along with that) consequently comes down to educated guesswork.

The Solution - Geotech has established a cutting edge mapping product that allows users to drill down into any of the almost 5,000 retail precincts throughout Australia. Powered by card transaction data, included is information on Transactional Volume, Average Spend per Transaction, Total Sales and Sales Change (compared to 12 months prior).

Precinct Scout visually displays the strength of the precinct across each of these measures. Clicking into a precinct displays all of the transactional and centre data relevant to that precinct, along with information on how that precinct ranks against others in the state. This mapping data has allowed Geotech customers to accurately analyse and compare the trading performance within a diverse range of retail precincts across Australia, completely revolutionising the hunt for high potential sites.

For more information, contact Jeff Vassel at jeffv@geotechinfo.com.au / 0421 684 444; or Bruce Waddington at brucew@geotechinfo.com.au / 0411 604 922.

Photo credit: Wikimedia Commons

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