Catalogers seeking a site for a new store have an advantage over marketers without direct mail divisions: They can apply their customer data to help them determine which locations are more likely to be profitable ones.
Indeed, The Talbots relies primarily on catalog data when determining whether and where to open a store, says Margery Myers, a spokesperson for the Hingham, MA-based apparel cataloger/retailer. “We have a proven formula in which we take our catalog data to tell where our customers are and what they’re buying,” Myers explains. “Hypothetically, if we did $150,000 in catalog sales in a particular area last year, we know we can put a store there and do $1 million-$1.5 million in retail sales.” The multichannel marketer, which specializes in classic women’s apparel, operates nearly 1,000 stores nationwide.
Using catalog sales data has enabled the $1.62 billion Talbots to open successful stores in locales that other retailers overlook. For instance, although Fishkill, NY — some 75 miles north of New York City — has a population of fewer than 20,000 people, it is the site of a profitable Talbots store. “Some of our best-performing stores are in areas like these,” Myers says. “We’re often a destination location, and we know we have established a catalog customer base in these towns.”
With 28 stores so far — and another three expected to open before the end of the year — The Orvis Co. has a much smaller retail presence than Talbots. But the Manchester, VT-based cataloger/retailer of outdoor sporting gear and apparel selects its store sites in much the same way.
“We first use our catalog customer database to do some primary targeting,” says George Haskins, Orvis’s director of retail. “I take our catalog database and overlay it on a zip code basis and create a major market prioritization, looking at densities of our customers by zip code in various markets.”
After coming up with a list of markets worth exploring, Orvis uses software from geodemographics provider MapInfo to analyze the demographics of the areas and compare them to those of its customers. Ideally, Orvis’s stores — such as the one it opened in Arlington, VA, this past November — are in areas that not only house a number of catalog customers but are also home to potential shoppers with similar demographics.
Comparing the demographics of your prospective store site with those of your customers is key, says John Williams, account executive for Empower Geographics, a Des Plaines, IL-based site consulting firm. A number of data providers offer demographic and geodemographic tools to provide such information.
First, though, Williams recommends that you determine who your retail customers are — or who you want them to be — and what the target market of your store will be. “If you don’t know that, it doesn’t matter where they are,” he says. “Whether there’s a lot of money in that area or not, if that site has different demographics, you won’t do well.”
In addition to geodemographic mapping programs that provide details about specific regions of the country, scores of suppliers offer site-selection software (see “Map Quest,” page 56). Prices range from $995 to $1 million, depending on features and complexity.
Such software uses a statistical formula to determine what might constitute a good site for a particular company based on sales, demand, demographics, square footage, rent, and other factors.
“Some customers come to us and tell us they have 100 stores and have always relied on real estate agents but have no idea what their average trade area looks like based on customer demographics,” says Williams of Empower Geographics. “Using software tools, they may want to create an index base for all their stores, showing that an average store in an area draws customers with XYZ average demographic.” The idea is to come up with a baseline for comparison, to help simplify and sharpen the site selection process for future stores.
Site-selection software should also take into account the miscellaneous factors that vary among marketers, says Olivia Duane-Adams, executive vice president of marketing for SRC, an Orange, CA-based site selection software provider. “Some things are common across all retailers, some are completely unique,” she says.
For instance, if you want a second store in a given market, you need to determine how far apart you want the two stores to be. You also need to assess your trade area — how far consumers will travel to get to your store. “For example,” Duane-Adams says, “for a Starbucks, people will travel only a very short distance because by the time you get the product home, the coffee will be cold.”
On the other hand, big-box retailers such as Home Depot and Wal-Mart, as well as “experiential” marketers with plenty of hands-on, value-added attractions such as Cabela’s, have larger trade areas. As a result, these retailers tend to locate stores in suburban and rural locations. Generally speaking, smaller specialty retailers should opt for urban settings or suburban malls where they can be assured of foot traffic or spillover traffic from neighboring stores.
But while site-selection software may help catalogers choose their locations, it’s no replacement for their own customer database. “The bank robber Willie Sutton once said that he robbed where the money was,” says Phil Iosca, president/CEO of children’s apparel marketer Hanna Andersson. “We look at where our customers are and have clusters of [mail order] business, and do an assessment of these markets. That’s our first step.”
Hanna Andersson operates six full-price and six outlet stores. Iosca says the company’s goal is to be operating 100-150 stores, but he has no time frame in mind.
After examining its database, Portland, OR-based Hanna Andersson sends out an e-mail survey to its catalog/Internet customers in the areas under consideration, “saying ‘we may be coming to your market,’” Iosca says, “and we ask them where they shop when they’re not shopping with us, what mall they shop in, what they buy when they buy from us. Our customers are typically happy to help us, and we’re able to get a sense of their shopping patterns, which is very helpful.”
Cataloger/retailers looking for technical solutions to finding useful retail locations may choose to incorporate mapping software and other tools for site selection. Below are just a few software providers:
Ft. Worth, TX, 817-332-3681, www.buxtonco.com
San Diego, 800-866-6520, www.claritas.com
Austin, TX, 512-334-2330, www.conclusivestrategies.com
Redlands, CA, 909-793-2853, www.esri.com
Boston, 617-451-2520, www.geovue.com
Tulsa, OK, 800-727-6774, www.mpsisys.com
Troy, NY, 949-885-4920, www.mapinfo.com
Los Angeles, 310-820-1581, www.scanus.com
SITE ANALYTICS CO.
New York, 212-860-9500, www.siteanalytics.com
Orange, CA, 714-516-2400, www.extendthereach.com
TETRAD COMPUTER APPLICATIONS
Bellingham, WA, 360-734-3318, www.tetrad.com