Location analytics can help retailers seek and destroy “zombie” emporiums, unprofitable retail outlets.
Posted taken from Jeff Bertolucci InformationWeek
May 15, 2013 10:51 AM
Not all business locations are ideal, of course, and it’s not uncommon for retail chains to open, and later close, unprofitable stores. For instance, a company, intent on growing as quickly as possible, may expand into areas that aren’t a good fit. Alternatively, a chain’s merchandise may be behind the times or simply unappealing to shoppers.
Location analytics software can help retailers can make smarter store-selection decisions, said Simon Thompson, director of commercial solutions for Esri, a Redlands, Calif.-based developer of location analytics and map-based visualization software.
Poor site selection is an ongoing problem for retailers. Rapid expansion was an ambitious, if sometimes misguided, strategy for many retail chains prior to the global recession of 2009. The end result was often “zombie” stores that were either unprofitable or underperforming.
“When retail was growing by 6% to 8% per year, (retailers) believed that if you just plopped down a store, somehow it would be successful,” said Thompson in a phone interview withInformationWeek.
“They were going for growth and scale,” he noted. “One of the things that occurred is that many of those stores never had the sales or market potential to make them successful.”
[ Want to know how data analysis helps banks rile fewer customers while trying to stop credit card fraud? Did You Really Buy A Snowmobile? Big Data Knows. ]
According to Thompson, there are essentially two types of zombie stores: “The zombie stores which are essentially dead, like many of the malls in America. They’re in the wrong place, they’ve got the wrong tenants and they’re not relevant to the consumers’ expectations of today,” he said. “And then there are stores which are … on profit life support. They’re not doing anywhere near as well as they could.”
In business since 1969, Esri originally targeted mostly government, public utility and military sectors. It expanded its reach in the 1990s, however, adding commercial enterprises such as oil and gas production, banking, real estate and retail to the mix.
Location analytics may not be new, but it has the potential to offer businesses what Ventana Research CEO and chief analyst Mark Smith calls “location intelligence,” a combination of geographic context and maps with business intelligence applications.
“Information about location or geography can improve the quality of actions, decisions and responses to opportunities, and enable organizations to understand more about their customers,” Smith wrote in a March 2013 article for Directions Magazine, which covers geospatial technology.
According to an Esri white paper on location analytics, the fusion of business intelligence (BI) and geographic information system (GIS) technology can help organizations visualize and analyze key information through “smart” maps. The goal is to discover patterns and trends that the organizations might have missed via conventional BI tables and charts.
In addition to providing what Directions Media (publisher of Directions Magazine) editor-in-chief and vice publisher Joe Francica calls “an alternative method” to synthesize data, location analytics offers the potential to incorporate unstructured data types with geospatial information, such as social media streams and sensor readings, into business analysis.
OK, but how does all of this relate to the problem of zombie stores? Well, Esri says its location analytic tools can help retailers avoid a formulaic approach to site selection, and other pitfalls.
“It’s geo-enrichment, having more information on top of the information that you have, using geography to connect that together,” said Thompson. “Companies are trying to integrate bricks and clicks, sales data, social media, searches — all of these components. That’s really driving interest in (Esri) as a platform.”
Bar Rescue, a reality show on Spike TV, uses Esri’s location analytics software to help bar owners save their failing businesses.
It’s important to note that not all underperforming stores need to be shuttered. “Sometimes it’s not necessarily moving your location,” Thompson noted. “It’s changing your focus in your location because you understand it better.”