Simplifying Retail Network Planning
Building a network strategy to grow a retail business is a very difficult thing to do without external professional help. There are multiple stakeholders both within the organization and external to the business and it takes a highly disciplined approach. We worked with a client recently that had been bought by a private equity group and they naturally wanted a say in the network planning process to add their insights into how they saw things unfolding. Unfortunately as so often happens when the original owners decide to part with controlling interest in the business, private equity ownership often means a trajectory of growth that may not sustainable. In this case, the client came to us seeking our insight into what the brand might look like in 2-3 years time in terms numbers of bricks & mortar stores. This isn’t a particularly unusual request, we’ve been working with high growth brands like McDonalds for years and growth is expected, because if you are not looking to grow you can sure bet your competitors are.
But growth for growth’s sake is not a sustainable way to build a business. Ultimately the market will dictate how the brand is perceived (as we all know buyers can quickly abandon a product for the shiny new toy) and the level of competition will play a part and of course finding the right sites will be instrumental in how big the brand can get. And let’s not forget the franchisee in all of this, unfortunately the recent senate inquiry highlighted many examples of poor planning and lack of proper research by some franchisors had contributed to poor store peformance and a loss of faith in the processes.
There also needs to be a clear distinction however, between considered consistant growth and growth just for the sake of it. If there’s one thing we’ve learned from working with McDonalds it’s that they trully know their target market, the metrics that make a restaurant more likely to succeed and the need to constantly challenge and validate any assumptions.No stone is left unturned with network planning……the more insight we can provide into what drives sales performance the better.
As I’ve often said before, some companies wait far too long to seek help with network planning, and the people they employ often focus more on what is being offered by the landlord or developer then what really drives sales and the characteristics (things they should be looking out for) that make the better performing stores perform better. I hear all the time of brands that react to what is being offered and not proactively seeking the best retail tenancies. In shopping centres for example, it is important to understand that men & women have different shopping habits. If you have a brand that is targetting women, then understanding that many women will make an “occasion” out of a shopping trip, often stopping at several shops, having coffee with friends, working out etc. It therefore pays dividends to locate your business where the target market is most likely to be for maximum exposure. This even applies to food, it can be more beneficial to locate in the women’s fashion precinct than in the food court or near food halls. We often hear that a brand wanted to so desperately locate within a certain shopping centre that they accepted a tenancy located near grocery & services miles away from the fashion precinct just to get in.
What I would call considered Network Planning would usually involve research & analysis of your existing network of stores. Quite simply this involves undertaking a survey of the characteristics around each of the stores in the network. This would include factors that may be obvious to most brands ie residential demographics, traffic counts, adjacencies, competition etc. however we dig even deeper than that.
The data (variables) can then be segmented into the different store formats you operate. Once this process has been explored, key sales drivers are identified and it is then easy to quantify the impact each of the variables has on site selection ie is residential demographics more important that site specific characteristics?, is competition more important than the adjacencies?- if some by how much. How much will it add to sales?
The more you know about the characteristics that make the better performing stores better, the more focussed and confident you will become with site selection. Not every brand is going to be able to grow to 1,000 stores. Not every brand wants to grow this big either. The more considered and robust the network plan is, the more targeted your property team can be when identifying new opportunities and not be so reliant on others dictating where to look.
Geotech has been helping businesses with network planning in a variety of industries for over 15 years