Retailers: Watch Your Step When Moving to the City

Retailers: Watch Your Step When Moving to the City

Retailers, encouraged by high levels of urbanization, are fueling an increase of competition for street-retail sites.

Last year alone, urban retail deals totaled $13.1 billion, a 60.3% increase compared to 2013.

However, as retailers expand into urban markets, they need to be more cautious and aware of their real estate strategies, due to the high cost of investment.

Prime street-retail space in major metro areas like New York City can trade anywhere from $2,000 to $4,000 per square foot.

Even with the hefty price tag, some urban retailers would argue that the amount of visibility they’re getting makes up for paying the higher rents – according to the old saying: you’re paying for footfalls and eyeballs.

But on the flip side of that, retail developers and investors alike are focused more than ever on assessing the financial viability of their potential projects at an early stage in the buying process.

Because as we’ve said before, there’s not always a direct correlation between high rent and high returns – despite the amount of visibility and foot traffic to the area. So the high rent associated with that location could make it difficult, if not impossible, to maintain a reasonable profit margin.

Location strategy is critical for all businesses as the placement of stores significantly influences either the success or failure of a site.

So with millions of dollars on the line, how do you open homerun locations while avoiding opening expensive misses?

The Missing Link

Rather than relying on the allure of the most prominent high streets, retailers need to take their best customer into account when performing their due diligence on a potential site.

Retailers need to view potential locations not just by traffic flow, but also by where there are high concentrations of their customers and potential customers because the relevance of high-traffic patterns depends entirely on whether or not your target audience is heavily represented. 

The good news is that today’s analytic tools make it easier than ever to determine the correlation between a high traffic/high rent area and the amount of business generated.

Through customer analytic solutions, you can develop a highly-detailed picture of your most valuable customers that goes far beyond basic demographic data and incorporate that information into powerful strategic tools that allow you to forecast sales results for any address in the U.S.

Customer analytics essentially gives retailers the ability to “predict the future” of potential locations by predicting the future behavior of customers.

The Bottom Line

Today, site selection is not about finding the locations with the right real estate characteristics. It’s about finding customers with the right characteristics.

Customer analytics allow retailers to gain critical site selection insights that go much further than even the most thorough due diligence processes – helping them navigate the challenging urban retail environment.

Find out how using the right analytic solution can help guide the execution of successful urban  real estate strategies and avoid expensive misses.