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Excerpt from webinar, Retail Location Strategy in a COVID-19 World, on May 13, 2020

Recalibrate: Sales Forecasting & Market Optimization Models

Devon Wolfe – Senior Vice President of Analytics, Tango:

“Well, I think the slides that you just showed, and think we all know it, that our entire environment changed drastically about March 15th. Those fundamental human behaviors have changed and are going to have a lasting impact. Again, it comes down to human behavior. We’ve got patterns that people have been following for years that have been completely upended and then we’re only really starting to be able to measure some of these things. I think one of the things that really came out of the slides you just showed is that this is uneven. You can’t just say, “We’re going to take 25% off the top everywhere,” because the changes are very uneven. It’s uneven in terms of the demographic effects. It’s uneven in terms of where the virus hit. It’s uneven in terms of competitive responses.

“So what all this means to us, so far as modeling and understanding the environment, is that we’ve got to try to as rapidly as possible to grab as much of that data and remeasure and re-feed it into models as quickly as we can. And so we’re working overtime at Tango to be able to harvest new data and measure the new reality in as close to real-time as we possibly can to provide that to our customers. Yes, there is certainly some validity to the pre-COVID environment, but it’s only basically as a look back. What’s going to come forward is going to be completely new patterns and we’re trying to measure those as we speak.”

David Srsic – Senior Director of Global Marketing Planning, Dunkin’:

“It’s a difficult thing. As you said, it’s that swoosh shape, so even where we are now, the data we’re grabbing now, we don’t know how that’s going to change three months, six months, nine months into the future or, to your point, years. But we can just try and see what the indicators say. We’re going to see people buying more coffee by the pound or K-Cups that they’ll use at home and maybe go out and visit the store later in the day, to your point earlier. Just like everybody else, the traffic may be down, but the size of the purchase is bigger because they’re taking home a dozen and serving everybody in the office or the firehouse or at home where everybody is with that product.

“So we’ll be looking at that and we’re going to have to, to some degree, look at each one of our trade areas to say, this store was servicing a business or an office park and that’s going to be slower to recover because everybody’s going to be working from home. And they may never come back a hundred percent, right. My brother actually works for a company and they’re looking at their corporate offices and saying, “Maybe we don’t need these corporate offices anymore because we only need a showroom and a few conference rooms. And everybody can work from home.” That’s going to change the dynamic of if there was a store right outside of an office park, what’s that office park going to look like afterward and how well are the landlords going to be in re-tenanting with different uses that you’d still need a physical brick and mortar.

“We’re going to have to look at each one and learn as much as we can as fast as we can but also know it’s going to change in the future. And not to say that we may have another significant business disruption two years from now, three years from now, and we may need to work that into either our modeling or within our pro formas when we’re considering new real estate. What if there’s a major disruption now till 10 years from now? Somewhere along that horizon where your first expiration date on the lease is before you jump into your extensions, what if I hit another 30% decrease for four months in that time period?”

Devon Wolfe – Senior Vice President of Analytics, Tango:

“If I can add to that, one of the things I think that we’ll see happening as we go forward is that as we start to understand the relationships of certain variables like traffic or whatever it may be and the change, the delta in those to sales and start to see the new relationships come out, it’s very likely we’ll be able to go in and say, “Well, if we get the best-case scenario, you might do this. If you do the worst-case scenario, it might do this. You take the middle scenario; it might do that.” That might be a large part of the decision making for the next few years, kind of a middle, best, worst, because honestly, there’s really no way to know exactly what’s going to happen.”

David Srsic – Senior Director of Global Marketing Planning, Dunkin’:

“Thinking about that, not to take it too long, but that’s also part of your real estate strategy as well. Ones that have a higher likelihood or a higher risk because of that, you have the high, middle, low, we might want to negotiate that lease a little differently where there’s a kick out at some point if this occurs. It’ll help give you guidance as to which one of those leases you’re going to fight for a little harder to get those concessions in there, right? Versus ones you can feel a little bit better about.”

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