By Janet Tooke and Nancy Wheeler, Senior Client Services Managers
This is part 1 of our series: Top 5 Questions Convenience Retailers Have About Retail Network Planning
Retail network planning tools enable companies to make tough, high-stake decisions regarding the optimal way to invest capital in their service station networks. Getting the most from the tool requires an understanding of the different ways in which it can provide insight into various projected site and market endeavors.
Here are some best-practice uses to get the most from a retail network planning tool.
Companies see the tactical value in their network planning tool when they are confronted with a new site opportunity. In this scenario, a network planning tool enables companies to run a simulation to test whether a given opportunity is capable of achieving the volume and value it is being presented as having the potential to do. These are often referred to as "what if" tactical simulations. When using a retail network planning tool in this way, it is possible to test the potential outcomes of hypothetical investments.
Likewise, when companies are considering rebuilding or upgrading a site, a network planning tool is able to measure site performance improvement and estimate whether that rebuild or upgrade is worth the spend. Simulating capital intervention and predicting revenue outcome is invaluable research when deciding on high-stake investments. For these tactical questions, a retail network planning tool allows deeper insight, peace of mind and confidence in business decisions.
While retail network planning tools are key in supporting short-term tactical decision making, their value expands even further. The best practices we suggest include widening the scope of view for more strategic planning and forecasting using the tool.
Utilizing a retail network planning tool strategically is recommended for the early stages of longer term retail market planning. This is achieved by taking a proactive approach and searching for new market opportunities or sites that would be profitable in an existing market. In addition, a network planning tool can help project the potential for success that sites outside of an existing network might offer.
Using the tool, companies can undertake a performance analysis of their existing network of sites (also known as a Quadrant Analysis). This analysis provides an overall profile of the existing retail network, highlighting areas where sites have room to improve, where there may be threats to success, and the strengths and weaknesses on which to improve and capitalize. A scoring mechanism provides insight into the sites that are under performing in a network. The ability to drill down within that quadrant of under-performing sites to assess what is causing them to fall short of their potential offers insight into what specifically can be improved to further increase profitability. This proactive analytical approach provides guidance to companies so that they focus their attention on the most critical areas of their network first. A network planning tool will help enhance a company's knowledge and ability to successfully plan and monitor their network of sites.
Using the network planning tool hot spot analysis allows companies to take a step back to examine their strategy from a regional perspective. Identifying areas in potential or existing markets where there is unsatisfied demand allows a rare view into areas that can be invested in for organic growth or where sites may be upgraded to match the needs of an area of unsatisfied demand. In some cases, for example in the convenience store market, a site might not be performing well and might not have room to grow, but a potential site down the road could very well offer what is needed to increase volume. The hot spot analysis highlights how a company would benefit if they chose to rebuild, close or migrate a site to somewhere else in the market. Having a tool that allows visibility to see each possibility will provide the clarity needed to make the right strategic investment for the business.
Utilizing the Full Scope of Your Tool
The scope of the retail network planning tool is wider than often first perceived. The overarching benefit that comes from using a retail network planning tool, whether for tactical or for strategic planning purposes, is the knowledge gained of where to focus attention first — both during planning and during action.
Network planning tools offer freedom and insight into strategic market planning that cannot be otherwise achieved. Planning teams without a network planning tool have limited access to the type of information and the analytical power which these tools provide. The years of market experience and technology that underpin retail network planning tools offer an edge that cannot be easily matched.
Best practice of using a retail network planning tool means comprehensive application of the tool across an entire network, resulting in well-constructed strategic plans and robust investment decisions.
Check out part 2 of our series: Top 5 Questions Convenience Retailers Have About Retail Network Planning
Learn more about what it takes to run the most successful fuel and convenience retail sites in your market by tapping into the seven elements.