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Winning the Real Estate Game

Go hyper-local with cloud-based tactics

There's a lot of new development going on that's really more of a holistic city center, where you're living inside that mixed-use environment.

Not every piece of real estate can hope to hold the same value for retailers. And many companies are justified in offloading large portions of their brick-and-mortar presence. With urbanization and gentrification continually on the rise, real estate is effectively a moving target. But it continues to hold deep potential for retailers—a potential that grows when you have a down-to-the-minute understanding of location.

The data landscape is moving just as rapidly as the physical landscape, if not faster. How can retailers use this data to evolve existing brick-and-mortar, acquire new real estate in ideal locations, or choose to get rid of poorly utilized stores?

Use data to stay thousands of steps ahead of your footprint.

With cloud-based solutions that leverage hyper-local data, the ability to forecast success by location is getting stronger every day. Using a variety of internal and third-party data, retailers can make highly informed decisions about where to open and close stores.

This data also gives retailers the power to:

  • Predict local demand and assortment (huge factors in a store’s eventual success)
  • Measure each store’s performance against others in your chain
  • Understand success based on external forces (e.g. market regional downturn) vs. issues specific to each store

In a push that’s atypical for big box retailers, At Home Group is using deep location analytics to drastically expand their footprint. With new prototypes that reduce average store size, their expansion involves a mix of second-generation stores and brand new construction.

Keep in lockstep with the locals.

Social media has already emerged as a huge indicator of neighborhood evolution and attractiveness for retailers—a source of true “location intelligence.” When you can monitor real-time social sentiment across store locations, you can act early to identify trends and make supply chain adjustments. In short, understand the talk to walk the walk.

It’s not just assortment that plays into a hyper-local approach, it’s also the shape and layout of each store. As a newcomer to brick-and-mortar, linens company Parachute first experimented with a six-week pop-up store and later moved into a space in Venice that replaced checkout counters with comfy seating for personalized interaction between customers and store associates.  

Is the ideal store a physical-digital hybrid?

Both existing real estate developments and new construction are becoming heavily focused on mixed use, with a heavily curated mix of tenants to draw an equally diverse range of customers.

Dick Lew, Brand Practice Leader at Gensler, sees this pattern in new developments throughout Houston and Dallas:

“You'll see a mix of office, a mix of retail, a mix of restaurants. It's more planned districts that are getting reinvigorated. In New York there’s more adaptive re-use of existing areas. But in Houston, Dallas, there's a lot of new development going on that's really more of a holistic city center, where you're living inside that mixed-use environment.”

Individual stores are also experimenting with mixed use. Nordstrom Local (a telling name) has opened a new West Hollywood location that minimizes onsite inventory, instead featuring things like personal tailors and even a bar.

Similarly, in Nike’s new concept store, inventory is a hybrid of physical and digital. It allows them to use the space as a digital showroom, possibly even featuring trends from around the world.

So, while the overall space occupied by retailers may be contracting, the number of locations isn’t dropping across the board. It’s just a matter of optimizing the spaces they do acquire or reinvent.

Mixed use, local use...global use?   

Mixed use is clearly en vogue right now, but another trending approach is “local use.” That is, architecture and store layout that’s unique to the local community (and possibly a very specific demographic within that community). In effect, every new and existing location is a microclimate that reflects the people who shop there.

In the future, could more stores be used to reflect hyper-local data from around the world? Could a store in the Koreatown neighborhood of Los Angeles feature a section curated by the habits and preferences in Seoul neighborhoods like Hongdae or Seongsu-dong, for example?  

What questions should retailers be asking themselves?

Here’s a start:  

  • Does your store have a hyper-local vision before it’s constructed?
  • Is it modular in such a way that different elements can be tested and changed based on customer response?
  • Are there opportunities to partner with other services/companies and share some of the upfront cost?
  • Is it worth dedicating the space entirely to inventory, or can some of it be digitized?

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Updated Jan 10, 2019 | Originally published August 2018

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