This is part 2 of our series: Top 5 Questions Convenience Retailers have About Retail Network Planning.
Retail network growth depends on high quality research, driven by a clear understanding of your return on investment. But you cannot fully comprehend and set expectations for that return without precise intel and insightful predictive analysis.
Successful retail store location and site selection requires multidimensional information. In other words, no single data point will adequately predict your return on investment for building or expanding a site. Instead, you need various data points and the right methodology for evaluating the ideal locations on which to build — those that will produce the greatest return. Which data points are those? And which methodology? First, begin with understanding your market boundaries — in terms of geography, that is.
To perform location planning at the level necessary for determining the best sites on which to build, access to information about the overall geographic spread is critical. You can gain some of this data from tools like Google Earth or from purchased reports, which might allow you to see how many locations of a given type exist within a certain radius. In this scenario, you may consider finding general locations where there are no competing sites within a five-mile radius. Of course, this exercise alone won't guarantee a worthy investment, but it can help you narrow your search for new site locations.
You can also use traffic count data to help evaluate geography. Obviously, if you build on top of a mountain solely because you understand that there are no competing sites within a given radius, you won't see the success you're hoping for. Traffic counts act as indicators of potential volume and should be incorporated in the site selection decision but should not be the sole decision influencer.
Even with this knowledge, there is still a need to look at available properties within your market. If you have a retail development team, they should fan out through the market over time and make several visits to new dirt. But they can't do this blindly. They need a template of zoning requirements as well as an understanding of nearby competitors. They also need an understanding of which land is available. To provide it, you may need to hire a real estate development agency to provide a list of properties.
Your team will want to fully comprehend which sites align most closely with your requirements, and should possess a checklist for assessing the property. Which competitors are nearby? Which businesses are across the street? Are there any major concerns, such as poor street conditions or a strange traffic pattern, that may impact success?
Brand considerations are another major component of the checklist. If your retail brand only purchases locations of a certain square footage to maintain brand consistency in the c-store, then the development team should be aware of this fact and understand its weight with regard to your overall decision. Will you walk away from a decent location for one that better fits your brand's footprint requirements?
When you're determining the retail store location and site selection of a new build, you need to understand the details of your full convenience store offering. Will your proposed new build perform successfully in the locations you're examining? Should you choose your location based on how you hope the site will perform, or how it will actually perform? For the best return on investment, it is recommended to take a more structured approach to determining where your highest potential exists. Consider, for example, understanding what the nearby competition does not offer and that your site will be able to provide customers. The demographics are also an important consideration. Perhaps you could offer specials based on home-team wins if your location is near a sports stadium. Or you could offer extra parking spaces on crowded streets. You may also consider providing coffee discounts near colleges and office buildings, or a quick-service food offering if your site is located along a highway where other food options are scarce.
Whatever your value proposition, knowing how to best leverage it depends on how insightful your data is. Again, no single data point will accurately predict your return on investment, but understanding how the 7 Elements for Fuel and Convenience Retail Success (market, location, facilities, operations, merchandising, brand and price) combine to create profitability is a critical piece of working your way toward that accurate prediction — and better investments.
All of the above data points should be included when deciding the best locations for a new build. Yet without the right tools to provide insight behind the data, the final decision can still be a challenge. Tools come into play during all parts of the analysis process. You could use a tool prior to sending agents into the field, so that they waste no time at any given location. Projections in hand, they'll know exactly which retail store locations you want to avoid and which to analyze at a deeper level. They'll have a sense of your potential return and bring data back that enhance the analysis.
With a tool, you can understand demand and supply, identifying areas in the market that are over- or under-supplied. Impact and volume potentials based on having the demographics, traffic counts and aerial views all in one system can help you fully grasp unsatisfied demand. With this knowledge, you'll be able to choose locations with the most potential for your specific offering.
And then you'll need to find ways to maximize location potential. Again, this is a matter of forecasting.
Without a tool, this step in your location assessment won't be attainable. That's because you need an extremely clear picture of the potential prior to forecasting any changes to it. Once you have that information, though, the possibilities are many and the risks few.
Typically, even when you're armed with a list of possible locations, risk is inherent. You may select locations to analyze further based on your gut feelings or your experience — an anecdotal form of deduction that, while important, always creates risk. With a tool, projections through "what-if" scenarios help you commit to a scientific approach and begin to eliminate this risk.
"What-if" scenarios also allow you to develop your offering in response to the model, before you build. What's more, you can always return to your analysis to identify areas for efficient improvement with regard to your competitors, allowing you to maximize potential not only before you build, but throughout your site's lifetime.
Identifying the best location to build a new site requires thorough research into the geography, demographics, c-store possibilities, location potential and regional competition. Access to this information (and the right model with which to analyze it) will enable you to forecast the potential of each location you're considering — in some cases, before you even waste time considering those locations that don't make sense.
Market intelligence coupled with retail network planning models give you inside information and projection analysis capabilities, so you can be certain — and not just satisfied — that your investment is sound.
Did you miss Part 1 on utilizing a retail network planning tool? Click here to read.
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.