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Retailers Find ArcGIS Business Analyst Is a Critical Component for Business Success
Finding Success in a Soft Economy
Retail marketers are struggling to accurately predict the drop in consumer spending for 2008 and 2009 and offset the effects of a struggling economy. Along with the ever-changing spending patterns of consumers and the rise and fall of the competition, the market is in a constant state of flux. Even the 80/20 rule, stating that if a majority of the stores are successful, then the chain will be successful, is no longer applicable.
Used for many years by retail organizations for location analysis and determining correct expansion strategies, ArcGIS Business Analyst will continue to be a tool for successful organizations who are intent on keeping their businesses healthy and experiencing optimal growth. As the weak economic climate continues to push retailers to understand every nuance of their market, using ArcGIS Business Analyst for such microanalytics will become even more critical for delving deep into the geographic and demographic shifts in the environment.
The Geography of Retail Is Changing
Savvy retailers continually assess their sales per square foot, real estate portfolio, management, staffing mix, and competitive pressure of individual stores. Consequently, strategic marketing has realigned itself from looking at the marketing landscape at a national level to drilling down to the regional, and sometimes household, level. Many are now trying to understand the retail landscape at the individual store level. This move allows these astute retailers to address up-and-coming niche markets and satisfy customers being abandoned by other disappearing retailers.
Retailers are finding they can no longer rely on stable seasonal sales cycles as a compass for driving promotions. Instead, competitive and market pressures are now driving both operational and promotional strategies throughout the year. For example, when a local competitor shutters its doors, ArcGIS Business Analyst can be used by another retailer to evaluate the new landscape of the surrounding marketplace. Using trade area models in ArcGIS Business Analyst, the retailer can reassess its market area in light of the revised competitive landscape. This can answer many questions: Can the retailer save money but maintain market share if it decreases the number of stores in the area? Can stores be consolidated and moved to a more lucrative site now that the competitive landscape has changed? Should the retailer consider moving to accommodate other factors, such as proximity to new customers or employees?
The economic changes many neighborhoods are facing have clear geographic implications: stores are closing and malls are left vacant, and retailers are moving to accommodate shifting consumer appetites. The analytic, modeling, and visualization tools provided by ArcGIS Business Analystsuch as gravity modeling and data-driven ring analysisalong with its mapping and reporting capabilities help guide a retailer's decision-making process. The software can assist in determining such issues as what mix of products would best suit the customer base abandoned by a previous competitor or how much merchandise should be delivered without having too much. Through careful analysis, adjustments to product mixes and promotional merchandizing can be made accordingly, not only nationally but also at the individual store level. All of these factors have clear marketing implicationsstronger analytic tools like those found in ArcGIS Business Analyst are needed to strategically and successfully drive sales or determine potential store consolidations on a microgeographic level.
A second key driver in retail marketing strategy is the changing face of the consumers themselves. Unanticipated retail leaders have emerged. Brands like H&M, Urban Outfitters, and American Apparel have managed to maintain moderate stability and growth as their core customer constituency of renters, students, and young adults has sustained its buying power through much of the downturn. This is due in part because this population is not as affected by the real estate, retirement, and investment markets. Those who are affectedhomeowners, those near retirement, or others who rely on stock portfolioswill suffer more acutely. Larger retailers with a diverse base of customers are also being forced to reevaluate their buying groups to determine where segments of profitability exist. A retailer's best response to this shifting marketplace is to rapidly adjust merchandising and promotions to the segment's needs.
As the market continues to create ripple effects into various consumer segments, it will become increasingly critical for strategic marketers to listen to, anticipate, and understand their customer base. Here again, ArcGIS Business Analyst and an optional extension, the Segmentation Module, provide crucial marketing information to assist retailers in their efforts. Assessing existing records within a customer mailing list, the loyalty program, or point-of-sale data can readily be enriched by categorizing the data into the 65 unique, fully documented consumer market segments based on Tapestry Segmentation data included in the Segmentation Module. Features such as property ownership, purchasing habits, savings and investment patterns, hobbies, preferred media, and socioeconomic status will emerge that reveal the changing story of consumer and lifestyle behavior. Analyzing customer retention programssuch as loyalty, layaway, and warranty programs and professional servicesthat are on the rise because of changing customer attitudes and feedback will also be enhanced by using the Segmentation Module. Visibility into these rapid purchasing and promotional pattern shifts, the long-term viability of a customer segment's purchasing power, and the accuracy of analysis produced by customer and point-of-sale data will be instrumental to the survival of both large and small retailers. Marketers who continually profile their customer base on a store-by-store level with ArcGIS Business Analyst and ArcGIS Business Analyst Segmentation Module will discover purchasing patterns that will drive the correct merchandise mix, promotions, and retention campaigns to keep those stores healthy.
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