Tools and Trends
Talk to the major providers of retail real estate technology and solutions, and all will tell you that never before has technology been more important. And that’s not self-serving chatter.
When stores are closing, when retailers are slowing the pace of expansion, and when bankruptcies make the daily news is not the time to open a bad location. Or close one with potential.
In this annual Real Estate Technology & Solutions supplement to Chain Store Age, we talk with four top real estate solution providers about the trends they’re seeing, and the tools they’re answering with.
Back to basics: Tuning in to current customers is a trend cited time and again by real estate technology leaders. “What we’re hearing over and over from retailers is ‘we need to understand who our customer is and to be aware of what tools are available to accomplish that,’” said Terry Munoz, VP of the real estate group for San Diego-based Nielsen Claritas. “It’s a back-to-basics approach, involving a complete understanding of the customer—what they read, listen to and watch, as well as how to identify them, quantify them and, of course, reach them effectively.”
The Nielsen Claritas tool designed to handle that hefty assignment is Prizm, a consumer-segmentation system that yields the comprehensive insights combining demographic, consumer behavior and geographic data to help marketers identify, understand and target their customers and prospects.
In combination with customer profiling is the site-selection, analytics and evaluation piece, said Munoz, which has also gone back to basics. “Although they are opening fewer stores, retailers want to know how to open those fewer stores so that they will perform financially more quickly.” Nielsen Claritas builds analytic tools that allow retailers to optimize the existing footprint, determine holding capacity in a particular market, and build sales forecasting and screening tools.
“It’s no longer a ‘real estate gut feel’ anymore,” said Munoz. Nielsen Claritas’ Prime Location product delivers the sales-forecasting tools and the market-screening tools that are married to the retailer’s own data to present a custom model that avoids the ‘gut feel’ hazard.
Eye on the customer: Rich Hollander, president, CustomerID division of Fort Worth, Texas-based Buxton, has also witnessed a keener eye on the customer as a major trend in retail real estate. “We are seeing more retailers adopt CRM (customer relationship management) methodologies and technologies to help drive their businesses,” Hollander said. “These retailers have the core understanding that the best customer is the one you already have. And they’re using CRM to do two things—help identify and maintain those best customers and, like the canary in the coal mine, see trends within your own company that you might not have otherwise seen.”
As an example, Hollander cited a retailer that might celebrate increased sales by opening another store, yet if that retailer utilized CRM technology, it would have seen a lower conversion percentage—customers may be spending more per visit but fewer are coming back. Or there are fewer customers but they’re spending more money. “Or it might tell me that one part of my business is slowing down,” he explained. “Many retailers go to market three ways—through bricks and mortar, via Web or via catalog. And CRM technology allows us to see if shifts are going on in the industry rather than just looking at a sales report.”
Buxton’s Customer ID product is a predictive sales model that combines retailer data with Buxton’s vast in-house data. “When we marry the two sources of information, we can use that combined data to, first, understand who the customer is and, second, to tell a retailer the specific value of that customer with regard to distance from the store,” said Hollander. “The closer you are to the store, the more valuable a customer you are to the store. We’re able to quantify that information so that we can empirically tell a retailer the value of any location with regard to the customers in that trade area.”
Web-based tools: According to Devon Wolfe, managing director, Americas strategy and analytics for Troy, N.Y.-based Pitney Bowes Mapinfo (PBMI), two distinct trends have emerged. “The first is that real estate technology is becoming far more mainstream as more and more companies realize the competitive necessity of research and the value of a more disciplined development,” Wolfe said. “This is even more critical in a downturn environment.”
The second trend, continued Wolfe, is one that shows an enhanced interest in the Web. “There is an increasing interest and demand in Web-based solutions, either hosted by the vendor or installed behind the company’s firewall,” said Wolfe. These solutions, he added, allow for a lighter infrastructure investment and they allow the retailer to extend intelligence to a larger user base.
“They also carry efficiency benefits such as synchronous updates, and a perceived greater ease of use,” Wolfe said.
In answer, PBMI is developing a suite of Web-based capabilities that allow for applications that are customized using the client’s own customer and real estate data, as well as generic applications that don’t require customization.
“One very interesting solution that we’re developing is a predictive Analytics Portal that can be deployed on the Web and can be reconfigured for specific business needs,” said Wolfe. “Right now we are doing a franchise optimization application, a sales force allocation application, and our more traditional site selection applications using this portal.”
Collaborating toward success: Atlanta-based Virtual Premise has a clear strategy for providing retailers with the tools needed to find success: focus on collaboration and integration.
“We are seeing an increase in technology being used for collaboration,” said Andy Thomas, president and COO. “Collaboration is the sharing of information related to the various work groups within the management of retail real estate—it’s between the lease-administration staff, the store planning and construction staff, and the facilities-management staff,” Thomas explained. “These staffs have always worked together in one way or another, but the trend is toward an increased use of technology to share information.”
For a major communications company with a large number of retail outlets, Virtual Premise created a solution that allowed the company to integrate transaction management with its lease administration, accounting and budgeting systems.
Increased integration of full real estate systems to improve the management and reporting of the multiple departments within retail real estate is an important trend today, said Thomas.
The driving quest to integrate systems is answered by a Virtual Premise product called the VP Retail Edition. “We have always provided lease-administration and deal-management capabilities, but what we’ve done [through VP Retail Edition] is to accelerate our work on percentage rent management functionality,” said Thomas. Increased flexibility to manage a myriad of percentage rent calculations has been a significant differentiator for this product.
“The percentage rent calculation function is provided online through the software and service model, and it’s easy to use,” said Thomas. Just as important, it is integrated with a retailer’s other systems.
“It is integrated not only to the lease administration system, but also to the sales information system and the accounting system of the enterprise,” he said. Store-level sales are pulled into the systems, percentage rent calculations are performed and accruals are applied.
“It is so important to find the right technology that is affordable, easy to implement and easy to manage on an ongoing basis,” said Thomas.
End game: At the end of the day, the advice these technology pros offer retailers is simple: keep your priorities straight.
“Think in terms of the customer first, and the store second,” advised PBMI’s Wolfe. “Good retailers find customers and then locate stores to serve them, rather than building stores and then finding customers to shop them.”