Part 4: What is the Volume Potential of My Existing Network?

31 May, 2018

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So far in our series on the Top 5 Questions Convenience Retailers have about Retail Network Planning, we've covered the best practices for implementing a network planning tool and how you can pinpoint the best locations for new builds, as well as how you can identify target sites or networks for acquisition. Now, we'll dig into part 4 and learn about your current retail network's volume potential.

Identifying Volume Potential to Make Better Investments

In the typical process of identifying volume potential, retailers might observe current and historical volume performance and apply a growth factor to reveal goals for an upcoming time period. That view is typically more concentrated on historical and current data, which can be problematic for an exercise so focused on the future. True potential calculation is more nuanced.

To identify volume potential, observe where you are today as well as projections of future performance in each of the Seven Elements for Fuel and Convenience Retail Success: market, location, facilities, operations, merchandising, brand, and price. Volume performance is about so much more than any one of these single elements alone; it's an amalgamation of all of them.

A meaningful calculation of volume potential incorporates each contributing factor, taking into account the demographic makeup of customers around a particular location, the competitors nearby, the site's pricing philosophy, the brand's health, the facility's success, and more. Examining how each of these contribute to volume performance can help you tweak possible forecasts accordingly. For example, if you were performing at an optimal level for all seven elements and you stopped investing in maintaining successful operations, what would occur? If you knew you had a healthy set of volume magnets, but suddenly a competitor moved in next door, how might that impact your volume in the future? Answering these types of questions is the key to unlocking your volume potential.

It's also the key to making better investments in future locations or in your current locations. Markets and competitors don't sit still. Even in the most stable markets, there occur brand changes, site closings, site openings, hyper market emergences, etc. These changes have reverberating effects, and in order to really understand their impact on your volume, you'll need to continuously monitor not only what occurs in your markets at each location, but also what happens to your volume as a result.

When you understand the effect each of the elements has on your potential, you can better understand where investment is required — and where impact will be too negligible to justify the spend.

The Impact of Price

While each of the seven elements is equally valuable as a way to gauge performance, and the seven combined are valuable as a strategic mindset, there is one element that is in a different category, of sorts: price. The other six elements are known as the volume magnets; if you are succeeding in all six of the volume magnets, you will draw volume, and have the power to price to match this draw. But it's important that in your calculation of volume potential, you recognize said pricing power and respect it. Following your pricing strategy, relative to your competition, will net you greater profit and keep your potential calculations on track. (Read our own Ian Thompson's article on Pricing Power in CSP for more.)

Moving Forward

Today, you can begin to assess volume potential by gaining specific traffic information, awareness of the competition and demographics around your location, and knowledge of where you fit in the overall market. But the only way to achieve this manually is through purchasing third-party data and attempting to create a strong assessment of each data point's relationship to your volumetric success.

However, this level of granularity and the potential that it may assist you in forecasting is not enough for you to make stronger, more informed decisions about where to best invest your dollars to achieve volume success. That success requires deep analysis of all seven elements and an accurate projection — the type that can be a produced only via clean, accurate input and intricate machine learning models.

Achieving a real understanding of the seven elements and their impact on your volume is a near insurmountable challenge without a predictive model to back your analysis. To learn more about how you can begin to predict retail network success and capitalize on opportunities, talk with a Kalibrate Retail Location Strategist.

Talk with a Location Solutions Expert

And don't miss our final post in this series, coming soon: What Value Does Your Brand Bring to Your Retail Network?

If you missed the previous parts to our series, check them out below:

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