Organic growth by a retailer is an exciting time for the company. Reinvesting earnings into the expansion of their branded stores through new construction communicates that a) business has been good; b) by growing the network of stores through brand-new locations, it helps strengthen market share; and c) it has a bright future! Exciting times for sure.
How a retailer achieves this growth is another story. Rather than use the “I saw an open bay in a strip center” approach to site selection, prudent operators visualize the end game and determine where they would best like to operate locations. Some operators use the “me too” strategy – i.e., wherever there is a Starbucks (for instance), that is where I want my store. Some operators create their own strategic plan for location selection.
If you can map out your marketplace geography in advance with an estimated amount of locations that you would like to add in the next year, three years or five years, you will be well ahead of the curve. This may seem like a basic concept, but it is amazing to me how many retailers fail to do this. They simple add a store here and a store there – often randomly – then come to discover that they have cannibalized store sales or developed a series of “B” sites.
Here is how to approach organic site development:
Create A Long Term Strategy: Rome wasn’t built in a day and neither will your market share. Be mindful that new construction will take time and capital. In most cases, it will take longer and cost more than you originally plan for. Securing sites is only the first step. Designing, permitting, building and ultimately operating your new sites require a tremendous amount of time and patience. Know this going in. It is best to establish a five-year plan and map out the plan of attack.
Determine Metrics To Support Projected Store Counts: So, how many stores will you build in your trade area? A lot will depend from which you pull your customer traffic. Operators need to develop metrics for their site selection. Are you more interested in a certain day part? Does your concept require auto accessibility, parking and minimal thresholds for traffic? Is this an urban location where foot traffic is critical? What are your standard hours of operations? All of these questions help to isolate the best possible sites for your concept.
Establish A Time Table: Once you have established a targeted number of new store openings, it is important to create a five-year strategic rollout plan for the sites. Your pipeline of stores may be contingent upon the capital of the organization so the speed of your implementation may have a governor in place. Whether its one store a year or ten, carefully mapping the ideal sequence of stores at least gives you a target to aim for. While leases and permitting may present the ultimate wildcard to your rollout, create a timeline as your foundation.
Visualize The End Game: So what does the end game look like for your company? Will adding 5, 10 or 20 locations over a five-year period position your firm with a solid level of market share to optimize the customers growing needs? Growth for the sake of store count is the wrong approach. Growth by creating greater value for your targeted customers and ultimately for your company and its stakeholders is the prudent path for success. Adding new sites to the fold should create stronger synergies for the bottom line. Ask yourself the following repeatedly, “how long and how much?”
Communicate The Brand Expansion: Creating a real estate long-term strategy is only one part of the overall process. While you may increase the store count within your targeted trade areas, it is equally important to link these stores together with a cohesive communications strategy. Don’t assume that your customers know of all the growth you have experienced in the recent years. Connect the dots for your customers and don’t be afraid to “pound your chest” a bit. Customers like to be reminded that they have made smart buying decisions by patronizing the “up-and-coming” go-getter company like yours. Everyone loves a winner.
In summary, walk before you run is the adage that comes to mind. Careful planning and forethought will ensure a more well thought path to a real estate strategy as opposed to a shotgun approach. In the long term, following a disciplined, mindful site selection process could be the key for your long-term viability.