Retail 2.0: Brick vs. Click

Published on April 1, 2010 in Eric Steckling. 0 Comments Tags: , , , , , , , , , .

Eric Steckling, Pitney Bowes Business Insight

CompUSA is attempting to neutralize the Internet’s one big advantage: Information. In an effort to improve the retail shopping experience, CompUSA has upgraded 23 of its 32 stores to the “Retail 2.0” version. Chief executive of parent Systemax Technology Products Group Gilbert Fiorentino has designed new product displays that include touch screen computers which provide specifications, pictures, customer reviews, competitor’s prices and other information about the products on display. The idea was to change the passive approach to retail and engage the customer. CompUSA has found that information empowers the customer and allows them to make more informed decisions, which Fiorentio says is translating to loyalty and increased traffic.

So what’s next for “Retail 2.0”? Amazon.com often gets me to buy items by simply suggesting them to me based on items I have in the cart, have already bought or even looked at. These (usually on target) suggestions are generated from a vast database of the browsing and purchasing records of myself and the other 76 million unique visitors last month.   The difference is data. Online retailers have an easier time collecting and storing customer data. Most brick and mortar retailers have been slow to collect or utilize transactional data, which is instrumental in improving stores’ customer experience.

It is evident that technology will play a key roll in helping retailers “engage” their customers. RFID controlled inventory and smart shopping carts could perform the same suggestive functions by identifying items in your cart and making suggestions based on prior customers’ cartloads. To fully leverage transactional information retailers must also know who you are, another task Internet retailers have no trouble with. Once the customer is identified, Retail 2.0 should include social media interaction as well as purchase driven targeted emails. Only time will tell what other innovations brick and mortar retailers will create to slow the market share loss to online vendors.

In the Press: Schoolcraft College Taking Strategic Approach to Targeting Potential Students

Published on March 29, 2010 in Leslie Nogue. 0 Comments Tags: , , , , , , , .

Leslie Nogue, Pitney Bowes Business Insight

In the Spring 2010 edition of Community College Technology Update, Marty Heador of Schoolcraft College discusses the value of integrating consumer segmentation data and analyses into direct mail programs.   Schoolcraft College, a continuing education college in Livonia, MI, reached out to the predictive analytic consultants at Pitney Bowes Business Insight for help in maximizing the value of their direct mail campaigns. 

Through effective customer profiling, PBBI consultants were able to identify the affect that distance has on Schoolcraft’s student response rates.  They also determined the student count was dropping and the course load was decreasing per student faster than the number of students enrolled.  By uncovering the most “in-profile” students and the “out-of-profile” students, Schoolcraft’s marketing department is now able to re-direct their direct mail towards the carrier routes within the 10 miles of the college with the highest concentrations of potential students.  This effort has allowed Schoolcraft to “gain a deeper understanding” of their target student, but has also helped focus their marketing funds on those areas with the highest ROI. Read full article…

Real Estate Spotlight on Manhattan: Taking Advantage in a Down Economy

Published on March 18, 2010 in Kyle Bingham. 0 Comments Tags: , , , , , , , , .

Kyle Bingham, Pitney Bowes Business Insight

When describing New York, Frank Sinatra famously said, “If I can make it there, I can make it anywhere.” Simply called “The City” by locals, Manhattan has always been a place that’s been tough to break into for many national retailers, but as rents continue to drop and independent retailers abandon their unprofitable storefronts, now is the time for these national retailers to seize an opportunity. According to various reports, Manhattan’s commercial-lease rates are expected to bottom out in the early part of this year; they are expected to begin rising by late summer.

New Yorkers have unique shopping habits and transportation methods, so a national retailer’s traditional formats may not always work in Manhattan. Success stories are a result of concept flexibility. The drugstore chain Duane Reade famously conquered the landscape with creative store configurations and by giving New Yorkers the products they need, convenient locations, and fast service. Walgreens was so enamored by Duane Reade and their presence in Manhattan that they agreed to buy the chain last month for $1.1 billion. Restaurant chains like Chipotle (19 Manhattan units) have also made a push into Manhattan, with some success. Other major national brands, like The Home Depot and, more recently, Costco, have opened locations in Manhattan to more modest success. Both companies had to drastically change their concept to fit the typical New Yorker: families in SUVs weren’t going to be dropping by to buy a new lawn mower or to fill up their minivans with seven cases of peanut butter; entire departments had to be revamped to add more items that could be carried onto the subway or down the block. Those retailers with smaller footprints, like Starbucks, can be more nimble in the city, filling the spaces that others cannot. Starbucks now has more than 170 units in Manhattan, some famously across the street or around the corner from… another Starbucks. Whether for a public-relations play or for a full-blown strategy, one must enter Manhattan armed with research.

In Manhattan, location is truly king, but simply being in Times Square does not guarantee success. Other factors come into play – factors like street-front access, proximity to a subway access point (stairwell), and corner (as opposed to midblock) location. Even being on an avenue instead of a street can have a huge impact on potential revenues. Daytime population also plays a huge role in a site’s potential; in fact, the highest density of daytime employees in the United States is proximate to the 42nd Street/Madison Avenue intersection, near Grand Central Station. Using our extensive database of employee and daytime population in Manhattan and augmenting it with field research, Pitney Bowes Business Insight is able to effectively serve our New York-bound clients. Techniques used to forecast sales for suburban locations don’t necessarily work in Manhattan: drive-time analysis, for example, gets thrown out the window. When analyzing Manhattan, pedestrian counts and proximity to daytime population become paramount. Operations of the business also can also play more of a role in Manhattan than in other, less dense areas. Specifically, adjusting staffing levels to the time of day and the district is important; after all, the staff necessary for a store in the Financial District may be drastically different from one in the Upper West side.

Over the years, I have learned that successfully analyzing Manhattan requires quality data sources for daytime and employee population, a good understanding of pedestrian patterns, and strong fieldwork – not to mention a little bit of intuition. A good pair of walking shoes helps, too.

Spotlight on the Customer: Schoolcraft College

Published on March 17, 2010 in Leslie Nogue. 0 Comments Tags: , , , , , , , .

Leslie Nogue, Pitney Bowes Business Insight

The Challenge
Schoolcraft College, a comprehensive, open door, community-based College in Livonia, Michigan was seeking to target their mass mailings to neighborhoods with the highest concentrations of potential students.

The Solution
Through in-depth analysis of customer, geographic, and demographic factors, analysts at Pitney Bowes Business Insight were able to weed out under-producing carrier routes, allowing Schoolcraft College to focus their energies on the neighborhoods most likely to produce students. As a result of the segmentation analysis, Schoolcraft College gained a deeper understanding of its target student, enabling them to communicate with with prospects more effectively.  Using Pitney Bowes Business Insight’s comprehensive customer segmentation analysis, Schoolcraft College was able to identify concentrations of in-profile students, ultimately boosting enrollment and reclaiming valuable marketing dollars through targeted mailings.

To find out how Schoolcraft was able to quantify and utlimately increase their ROI, download the case study.

Mobile Food: A New Take on Cheap Eats

Published on March 12, 2010 in Brian Hill. 0 Comments Tags: , , , , .

by Brian Hill, Pitney Bowes Business Insight

There’s been some buzz in the news recently about traditional bricks-and-mortar food chains joining the ranks of the taco truck. Last summer, Portland, Oregon’s Burgerville debuted their “Nomad” mobile food truck at the popular Waterfront Park surely raising the eyebrows of the other traditional food cart vendors there.

In February of this year, The New York Times ran an article about San Francisco’s efforts to manage the burgeoning mobile restaurant scene as new players—licensed and unlicensed—have started to spring up. The allure of fewer employees, no rent, and little overhead seems to be feeding this growing trend. But when these mobile units deploy in traditional commercial and dining areas, nearby established traditional restaurants aren’t very happy. In the NY Time article, one restaurant operator says, “All of our permits and fees have gone up. We pay high rents, we pay high minimum wages. So anybody that parks a food van across the street from you and is competing with you has almost an unfair advantage.” But then, how likely is it that three business people will meet at a mobile restaurant to share lunch and review a contract? It will be interesting to see if more established fast food chains jump in the game to broaden their presence, rather than for the purely promotional efforts seen to date.

Along this thought, an unexpected tragedy spawned a new trend in New Orleans. After losing many of its restaurants to Hurricane Katrina, Domino’s Pizza’s largest franchisee, started opening up mobile pizza units at gas stations and parking lots throughout the city. This program helped foster the creation of a new, small 700 sq. ft. carry-out only store that is now being built in small towns throughout Louisiana and Mississippi–towns that traditionally were viewed as too small to support a standard delivery and carry-out Dominos store. But, no matter whether it’s in a van or in a building, the food’s got be good, or customers won’t come back<!–more–>

Trickle-up Economics

Published on March 8, 2010 in Devon Wolfe. 0 Comments Tags: , , , , .

by Devon Wolfe, Pitney Bowes Business Insight

Though the rising Dow Jones average indicates a recovery of sorts, we still are seeing tepid results at the local level. What’s the disconnect?

As one who studies consumer behavior, my biggest concern in this Great Recession has been the collapse in demand. As long as individuals and businesses believe that they can live without spending (or worse yet, as long as they don’t have money to spend), demand is going to be weak. And of course, demand is trickle-up! If the bottom isn’t buying, it creates a ripple effect throughout the supply chain. This is why inventories are so low right now.

Many have lamented about the plight of the small business in the recovery, claiming that lack of credit and uncertainty about health care and taxation are causing small business to sit on the sidelines. But recently, I ran across an article in the Washington Post that seems to confirm what I’ve suspected all along. Citing a survey by the National Federation of Independent Businesses (NFIB), “51 percent of small-business owners reported a lack of sales as their greatest challenge. Only 8 percent cited a lack of loans.”

In other words, capital is part of the problem—but coming up with something people want to buy is a much bigger problem. Now apply this to commercial real estate. Ancillary tenants—the little guys—are the tenants that are the most profitable to shopping center owners, making up for the low-rent deals that the anchor tenants pay. If they can’t lease up (as we’re seeing), real estate cash flow and profitability will continue to be challenged. Given the debt burden—well, you get the picture.

In the end, until we get the consumer confident and spending—that means employment and an end to the fear of job loss—demand will continue to be weak.

Keeping Predictive Models Current: Dealing with Continuous Change…Continuously

Published on March 4, 2010 in Nat Evans. 0 Comments Tags: , , , , , , , .

by Nat Evans, Pitney Bowes Business Insight

Most contemporary predictive models, which forecast performance such as sales, customer visits, membership levels, etc., are based on historical data that create “snapshots in time,” using whatever relevant sources were current at the time of analysis. Examples include POS distributions, store and competitive locations, store sales performance and demographic data. But we know operations and the environment changes as soon as a model is completed and put into use. As a result, model accuracy erodes with each passing day as the data inputs into the model or the benchmarks upon which expected performance are based become stale. To be sure, most site selection professionals and researchers attempt to make sure models are as fresh as possible, updating these data elements on a regular and recurring basis. During recent engagements with several long time clients, we have been asked if there was a way to take into consideration dynamic time series data elements to help with forecasting and minimizing risks.

What do we mean by dynamic data?

Many factors may play pivotal roles in retail forecasting and market prioritization. Depending on the level of aggregation, the obvious thought is that a researcher may be able to affect a change in market conditions or individual sales estimates, depending on the application. Indeed, they can significantly sway analyses enough to change even the simplest of decisions, either minimizing risks (if used appropriately) or increasing a company’s vulnerabilities, especially given the current macro-economic climate.
A couple of sources of dynamic data within the context of a static model may include:

• Macro-economic data such as housing starts, CPI (consumer price indices), funds rates, and unemployment percentages either nationally or at varying levels of macro geography – state, county, or CBSA. Such measures provide a look into the health of consumers’ collective behavior, and depending on how the analysis is structured, whether these factors will be leading or lagging indicators of retail growth and consumer spending (PBBI has created an approach-MarketPulse-that incorporates these factors into predictive models).

• Gas prices. Gas price fluctuations on a regional or even local level can create a similar effect that macro-economic variables may produce in models. Obviously, the higher gas prices rise, the less disposable income consumers will have to purchase goods and services, potentially depressing actual local store performance. Distance may become a stronger deterrent to patronage as a result.

If a retailer’s or restaurant’s sales forecast model was created in better times, it may produce a “false positive,” inappropriately triggering a go/no-go decision and costing company valuable resources and capital from other locations that may be more profitable. Just as importantly, if a company is judging a general or district manager on existing location(s) sales performance based on a projection created earlier in the fiscal year, the company may be unduly influencing that leader’s performance rating on factors outside of his or her control.

How can we create more flexible models using dynamic data?

There exists a myriad of ways we can leverage dynamic data through any forecasting or analytical process, more generally. The important point with any data source is to leverage any and all relationships that may prove fruitful through the forecasting process. But, it must be relevant to your research design, have purpose, and be significant enough to warrant using in modeling and analytical review.

In the future, the ability to collect and cleanse data continuously not only from existing, well-documented sources, but also new sources, such as e-commerce and online social/behavioral data, will become more available and increasingly important across any organization. Additionally, whether on-premise or in the “Cloud”, the technology that facilitates a seamless data flow into predictive applications should enable decision-making with the most up-to-date analysis possible.

Lender Research: Show Me the Money

Published on February 24, 2010 in Eric Steckling. 1 Comment Tags: , , , , , , .

by Eric J. Steckling, Pitney Bowes Business Insight

Pitney Bowes Business Insight has seen a recent increase in interest by lenders to perform analytical research on real estate for which they are considering lending money. This analysis typically involves a determination of the concept’s fit with the surrounding customers, site characteristics, competition, and market strength. The increased emphasis on research reflects a riskier market for retailers/restaurants and associated need for prudence on behalf of lenders, many of whom have seen substantially elevated levels of defaults in the past several years.

Historically, the lending community has focused on past success of the borrower in determining whether to lend. Current market conditions dictate the need for greater diligence to understand not just the concept’s attractiveness or the borrower’s creditworthiness, but the viability of the specific proposed site to successfully support the concept. That is, the ability of a retailer or restaurant owner to repay a commercial loan is directly tied to the quality of the real estate, considering how location impacts sales performance. The most critical assumption a lender will make is the gross sales for the proposed location.

Varying degrees of sophistication exist in forecasting sales for proposed sites, often they are dependent on the availability of comparative data. The more robust the data, the higher the confidence can be. Generally, the research and associated data should address key questions, such as:

1. Is the site located near its core customers?
2. How competitive is the market?
3. What is the strength of the concept-is it well understood by market consumers?
4. How favorable are the characteristics of the specific site?
5. How far will consumers drive to reach the site/concept?
6. What is the market size?
7. What factors drive sales for the concept?
8. Are there negative external factors that will limit sales?
9. Are there nearby retailer/restaurants that will create synergy?
10. How will traffic patterns affect patronage?

Ideally, a proposed retail or restaurant operator will have current sales evidence from proximate sister stores which provide a basis for new sales forecasts. Macroscopic analysis can be used to compare the site to a “chain average” metric, which can give a general feeling if the site is above or below the benchmarks set by existing units. When existing unit performance is not available, in-depth market and site specific research is required to develop an understanding of the site’s potential – and potential pitfalls.

While lenders have always examined the character of the borrower and the soundness of the business model, they are now adding scrutiny to the location of the business. After all, it is the revenue generated by the business, not the integrity of the borrower that will repay the loan.

Outlook 2010: Chain Store Age Interviews Pitney Bowes Business Insight Experts

Published on February 19, 2010 in Al Beery, Deb Purcell and Gary Faitler. 1 Comment Tags: , , , , .

Katherine Field from Chain Store Age recently interviewed experts from Pitney Bowes Business Insight.

With expansion slowing, the buzz word for 2010 is “optimization.”

In the February issue (“Focus on Site Selection Trends,”), I talked with a panel of retail real-estate experts to explore just what to expect in a year that has all the markings of a transition period of economic ups and downs.

My panel of experts all predicted that site optimization — making the most of existing real estate — rather than new store growth would be the retail game plan for 2010.

Recently, I also talked with a trio of executives from Troy, N.Y.-based Pitney Bowes Business Insight about the state of retail real estate in 2010. This is what they had to say: <!–more–>

Spotlight on New Orleans: The Crescent City, Five Years Later

Published on February 16, 2010 in Kyle Bingham. 6 Comments Tags: , , , , , , , .

Kyle Bingham, Pitney Bowes Business Insight

This month, I was in New Orleans, analyzing several sites for a large retail client. The last time I was in the Crescent City was five years ago – just a mere four months after Hurricane Katrina hit. I was both excited and anxious to see how the city had changed. I had many questions on my mind as I left Louis Armstrong International Airport in my rental car: at what level were the most impacted neighborhoods coming back? What shape was the infrastructure in? What retail was operating in these areas?

My fieldwork took me to many of the neighborhoods that, five years ago, were completely under water. West of City Park, neighborhoods like Lakeview and Lakeshore showed positive signs of recovery; however, the rebuilding efforts were sporadic and entire blocks remained unoccupied. It was strange to see homes with fresh paint and new roofs next to boarded up homes that still bore the spray-paint markings of post-Katrina rescue teams. The current state of the roads in these neighborhoods was also unexpected. The hurricane and subsequent years of neglect had taken their toll. I was constantly on the lookout for potholes and saw large depressions in the road that were the size of Volkswagen Beetles. While it was clear that, with the help of U.S. federal stimulus dollars, a concerted effort was being made to improve the major thoroughfares, both my rental car and I agree there is still a lot of road work that needs to be done.

The retail landscape was also a mix of redevelopment and vacancy. The retail sector in which I saw the most redevelopment was pharmacies/convenience stores. Walgreens dominated the landscape, with newer/redeveloped units in Lakeview, Mid-City, and Gentilly Terrace. Though not a new development, local and quick-service restaurants also seemed to be making a comeback. Clearly, the winners in the post-Katrina rebuilding efforts are the home-improvement centers. The Home Depot, for example, still operates two smaller, non-prototype units that were opened as a result of the hurricane. In both Chalmette and East New Orleans, Lowe’s and The Home Depot have units within a half mile of one another – in Chalmette, they even have adjacent parking lots. It was in Chalmette – in St. Bernard Parish, that the recovery has been the slowest, evident from the empty parking lots and the lack of other national chains. The return of retail to these areas has been clearly affected by the economy and by the uncertainty of the population return. The latest estimates show that the return of residents is slowing down, with population levels still below pre-Katrina numbers in many neighborhoods.

As I drove through the Lower 9th Ward, I noticed a sign installed by the city that stated the recovery efforts were underway in that area; underneath, in spray paint, someone had scrawled “Five years later!” Its clear things aren’t happening as fast as many had hoped they would, but as those who have visited know, the city’s residents are very proud of their culture, extremely resilient, and determined to rebuild. My trip was right before the Super Bowl, a mayoral race, and Mardi Gras, all three of which dominated the conversations I heard from the French Market to the Garden District. Now that the Saints have won and Fat Tuesday is upon us, there is a lot to celebrate, but a lot of work to still be done.