Retail site selection has always been an important element of a brand’s strategy. Great locations position retailers for success, while poor locations yield disappointing results.
For decades, retail real estate professionals have defined site selection criteria to identify the elements that separate great retail sites from the rest. These criteria are critical because they shape the brand’s real estate strategy.
However, the depth of market research invested in defining a site selection strategy can vary dramatically. Sometimes the process is based on simple demographic counts and mileage rings, and sometimes it’s based on more nuanced factors identified through a site selection model.
If your brand is still basing your retail site selection decisions on demographic criteria and gut feeling, here are three reasons why you need to give your site selection strategy an upgrade:
1. Competitive Pressure is Intense
Many experts believe that the U.S. is “over-stored.” While there are still growth opportunities for brands with unique value propositions and in some previously untapped markets, the days of easy real estate wins are over. Retailers are also facing competitive pressure from online retailers such as Amazon, which can reduce top line revenue and squeeze margins. In an intense competitive environment, having a carefully researched site selection strategy is critical for success.
2. Brands Are Making Fewer Investment Decisions
In response to the competitive environment, brands are making fewer real estate investments. Retailers could afford to have a more loosely defined strategy when they were rapidly opening stores, since a few poor performers could be offset by the positive performance of other locations. But today’s slower growth rate and tighter access to capital means that every decision counts. There is no margin for error.
3. The Site Selection Process Influences More Than Brick-and-Mortar Sales
Many retailers now operate multiple sales channels, from brick-and-mortar, to online shops, to catalogs, and even to wholesale channels. Brands need to understand how their real estate decisions affect other channels and integrate those insights into their decision-making processes.
Your brand may not be opening as many stores today as you did in the past, but your site selection strategy is more critical than ever. Before you open another store, make sure your strategy is based on sound analysis and insights to maximize performance.