Why Data Is Gold for Retailers Looking to Grow From choosing a location to understanding your customer base, market insights from data analysis are key to your success.
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Most retailers dream of expanding their company, yet they don't know where to begin. Growing up in a small family business, I remember driving around with my father looking at potential sites for our next deli location. Relying solely on intuition to make this big decision, we ended up choosing wrong. Our new site didn't fit our consumer base.
This method wasn't far off from the expansion strategy used by Ray Kroc, founder of the iconic, international empire that is McDonald's. Kroc flew over the suburbs of America, identifying anchors such as church steeples and grocery stores around which base his next location. Why did this strategy work for him and not for my family?
In the 1950s and 1960s, Kroc could use town landmarks as an effective indicator of a store's potential market. Fast forward to today, and the idea of spotting consumers by where they live, walk and worship no longer is as effective. Today, most consumers have a dedicated vehicle in their households, and they shop wherever they want -- not only where they live. The formula for finding the best location to grow a business is a bit more complicated.
Understand where your customers really come from.
Our family business still is operating, but I can't help but wonder what could have happened if we'd selected a different location from the beginning. At the time, we looked merely for sites that met our very specific criteria: the best price, little competition and close proximity not only to our family's home but also close to where we believed our customers came from. In hindsight, multiple factors affected the store over time -- location, commercialization and increased competition, to name a few. Applying the type of market insights available today, I can help my family understand where our customer base actually is coming from.
Technology with advanced market insights hasn't always been available to the small- to medium-sized business owner. In fact, most businesses historically have approached site selection much like my own family did. While some, such as Kroc, experienced resounding success, the majority did not. Retailers of all sizes today have access to valuable market insights. We can compare foot traffic across multiple locations or see available commercial real estate and their price points. Based on this information, we even can project how property developments or new store openings will influence various neighborhoods.
Explore the competitive advantages that data brings.
Still, retailers often fail to realize market insights' power to create a new competitive advantage. We can capture real-time information, snapshot the current state of business and facilitate more accurate predictions for future endeavors. Data exposes shortfalls and also highlights areas of success, providing more transparency to support your every move. Streamlining the process of growth and expansion allows you to outperform your peers and take over new markets.
So, how can business owners harness the market insights available to locate an optimal market for expansion?
To start, stores must capture information to supplement their areas' demographic statistics. It might be a small piece of hardware on the door to count customer entrances and exits or a database of emails and addresses obtained from customer loyalty programs. This useful information better describes your demographic segments and can help you create detailed maps of consumer behavior. Coupled with competitor information and traffic patterns, this provides a unique set of market insights that can empower you to make decisions backed by analytics and not just intuition.
Data collection often gets a bad reputation for being impersonal and pushy. Retailers need to understand that the more you know about your customer, the better you can serve him or her. There are endless ways to collect information, and not all of them are intrusive. Receipt surveys are voluntary and easy, often offering an incentive for participation. Companies also can collect information behind the scenes without disrupting the customer experience. Monitoring traffic to the store's phone number is one example of this strategy. Find the multi-channel approach that works best for your company, and you'll start seeing results.
It's no longer enough to believe that "If you build it, they will come." Instead, ask yourself, "Who is coming? From where, and why?" Before building out the next store, retailers need to deeply understand consumers' complex transit and buying patterns. Levering market insights will do much to help you answer those key questions, generate revenue and validate your best location for continued growth.