Retail success still depends on location, location, location
When COVID-19 sent self-quarantined shoppers toward more ordering online, what did the largest sporting goods retailer in the United States do? It opened more stores, including its biggest yet.
DICK’S Sporting Goods, with more than 850 stores, has long embraced geographic analysis in its decision-making. Executives used location intelligence to perfect their store opening strategy pre-pandemic and optimally fulfill online orders during the pandemic—a combination that keeps the retailer more resilient.
In the first three months of 2021, 70 percent of DICK’S online orders were fulfilled at storefronts that acted like mini distribution centers. This is further evidence of evolving buying behaviors and channel mixes; it’s no longer enough to excel at either in-store experience or online—a retailer must do both.
Big-box retailers who pivoted early on in 2020, turning storefronts into distribution centers for online orders and curbside pickup, found success even as consumers took refuge at home. This was especially true for those that already had responsive operations and supply chains, a network of stores positioned close to customers, and insights driven strategies. Intentional proximity, derived from the same location intelligence that helps retailers decide where to open their next store, became even more valuable amid lockdown and the rapid growth of online shopping.
Writing for Harvard Business Review, Mauro F. Guillen of the Wharton School said there’s also opportunity for smaller, local retailers to shrink the physical distance between themselves and shoppers, particularly the last 15 miles. The challenge for companies adapting to the paradigm shift in consumer habits over the past year is to find a synthesis of physical experience and digital connections.
A New Kind of Store
For several years before the onset of COVID-19, “the traditional thinking then, mostly outside the organization, was that brick-and-mortar was going to be really hurt by e-commerce, and that we might not need as many stores,” said Bill Grassel, director of real estate market research and strategy at DICK’S Sporting Goods. “A lot of the spatial analysis that we’ve been able to do has said when we add new stores, we actually see our entire omnichannel sales go up.”
That analysis has included annual company reviews focused on location intelligence and the use of a geographic information system (GIS) to understand, model, and monitor local markets. Visualizing the data through a geographic lens helps Grassel and other executives pinpoint trends. When the pandemic struck, company leaders knew they already had stores strategically placed near customers, carrying the goods customers in the local markets really wanted. Internally, executives also closely monitored ever-changing local regulations that affected individual stores, be it shutdowns or mask guidance, and available testing sites to minimize disruptions to the business and its customers.
Four of DICK’s analysts, tasked with bolstering real estate decisions with data-driven forecasts, evaluate oversaturated markets and identify untapped opportunities. The company regularly cross-references spending demographic data for sporting goods with its own data on loyal online shoppers to pinpoint an optimal location for a new retail site.
“We’re trying to get the result right, trying to get the right site, and help people understand the data to inform very important decisions,” said Jack Holden, a GIS and market research analyst at DICK’S.
That’s why detailed market information and location intelligence played a pivotal role in the company’s decision to open its largest stores to date even during the pandemic. These 100,000-square-foot locations in New York and Tennessee feature indoor rock-climbing walls, golf simulators, a juice café, and an outdoor track. Both opened in summer 2021.
As a Harvard Business Review piece recently noted, a desire for post-pandemic in-person social experiences has the potential to drive shoppers back to stores.
Lessons Location Can Teach
In a very different scenario, a geographic analysis might have helped save Family Video, a chain of video rental stores, from going out of business. Geographers studying the chain’s demise by using location intelligence discovered lessons that may benefit other retailers.
Complementary co-tenants (think restaurants and a drug stores) make a positive difference, while vacancies and dark stores generate negative sentiment and reduced foot traffic. The study’s authors suggest that even if nearby stores are shuttered, the still-open business could shift to e-commerce, turning the space into a fulfillment center. The implication is that a shift from being an open storefront to an e-commerce hub for online orders could have helped Family Video.
As the study indicates, hidden patterns emerge when data is presented in a geographic context, explaining what is happening where and why. In Family Video’s case, the analysts observed that its stores in high-traffic, densely populated areas, were paradoxically among the poorest performers. This was due to more influential, better-known competitors that were nearby, while rural locations, which were not service by these competitors, offered more opportunity. Armed with this information, the chain might have survived by targeting moderate-demand areas with customers who had fewer choices.
Evolving for the Future
Consumer spending on ordering groceries online dropped each month between April and June, and year-over-year. Prior to the pandemic consumers spent more on food away from home than at grocery stores. Similar upticks in spending at bricks-and-mortar retailers are being seen across the industry as communities recover from the economic downturn associated with COVID-19.
Yet, even as traffic returns to stores, retailers will need to be vigilant about understanding how consumers are re-evaluating what’s important to them, where, when and how they spend their dollars. Curbside pickup has become a popular option and has evolved to include in-vehicle delivery and loading into trunks. Extended services and pick-up/delivery convenience is not going away any time soon. Ernst & Young’s EY Future Consumer Index indicates 37 percent of US consumers intend to buy online and pick up in store more often. New innovations include temperature-controlled locker technology that can be strategically located closer to where customers may work, such as transit centers and convenient roadside locations. Location intelligence is frequently used to optimize where the lockers should be placed, proximity to fulfillment centers, and delivery routes.
The pandemic wrought lasting changes to consumer habits, expectations, and attitudes. It also reinforced the need for physical spaces that can be augmented by digital engagement, convenience, and experience. The brands that have evolved and continue to do so, will reap the benefits and outperform laggards. The new era that is being ushered in, ultimately promises to be a better one for retailers and customers alike. An ecosystem of commerce less reliant on a single way of doing business and historic norms, is one in which retailers will be more resilient, innovative, experience-centric, and successful.