Excerpt from webinar, Don’t Wait: Take Decisive Action to Reduce Occupancy Costs, on April 2, 2020
Evaluating Location Potential
“Evaluating potential is important because we’ve talked a lot about the financials, about the situations that locations are in, but the question that you always have to ask yourself is: is the performance that we’re getting the performance we should be getting out of those units? It could be that you have some units that could do much better if there was some situational change, and there could be some units that actually really don’t have a chance and it becomes an easier decision.
“What we at Tango have done throughout the years of working with our analytics practice and doing retail models is use the retail modeling framework as another way or another input into doing analysis of your portfolio. And it all begins with evaluating your location potential. This is the framework that we use on this slide that we use when we develop retail models. And that same framework can be used in evaluating the location potential for network planning purposes. So, what do you do to do that?
“If you start at the top and go around clockwise, you define trade areas. Understand the area and the demographics that the customers live in, in all of the stores that you serve. Profile those customers and competitors to understand which variables are important in that regard – which ones help or hurt you. Analyze site characteristics because not all sites are exactly the same. Sometimes you get the right situation where you’re out on a freestanding pad, for example, and other times you’re in the elbow of the center, which can be terrible for you. So, you have to evaluate that part of it to understand whether you’re performing to potential or not.
“With stores that are immature, you have to look at where you are in the maturity ramp. Sometimes you have stores that are way immature or sometimes you have stores that are very good out of the gate, especially in the restaurant industry, and they’re in their honeymoon period, and maybe they won’t do as well a couple years out. Then, we analyze traffic data to understand are you in the right location to be able to capture the people coming by. And finally, you can look at operational performance.
“These are the building blocks that we use to understand location potential, which can result in a sales forecast, but it can also result in a scoring mechanism that you can use to understand the quality of the real estate that you have.”
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