Cindy Elliott, digital transformation leader at Esri
Everyone knows the three most important words in retail have always been “location, location, location.”
For the retail sector to build momentum during the COVID-19 pandemic, it must embrace a “new normal” in which a different idea of what location means is emerging in the industry.
While many retail stores and brands may disappear, the ones that survive will operate very differently because the pandemic is accelerating our understanding of our place of business. Success in retail businesses will depend not merely on “going digital.”
It turns out you can no longer succeed at retail without location intelligence. Some form of location intelligence is necessary to get close to your customers and effectively manage operations such as online orders and curbside pickup and supply chain, manufacturing, and inventory.
Getting closer to customers
The greatest benefit location intelligence may have to offer to retailers is to help them get closer with their customers. They are building loyalty programs with a tremendous amount of granularity and hyper-local analysis, down to block level.
For example, even though apparel brand Fruit of the Loom doesn’t have stores, it must understand who its best customers are. The brand does that using smart maps and simulations. Fruit of the Loom can now analyze pricing scenarios, supply chain traceability, lead times for various products, and market potential for different locations and demographics. It does so, drawing on point-of-sale data from retailers, insights from shipping and manufacturing information, show floor metrics and external sources on demographics, markets and more. Executives can even determine how many degrees the temperature must drop before people head to stores or online searching for winter wear (and how that varies by region).
Another example is Chick-fil-A, the highest-performing convenience food franchise in the U.S., which has doubled the store-level results of its competitors through the pervasive adoption of location intelligence, overseen by its location services department. A real-time pinpoint app generates a complex, location-aware report in four clicks and five seconds. Chick-fil-A uses it to route supply trucks to individual stores, know every truck’s condition (and to direct switch-offs), and capture every item sold at every store in real time. The smart map allows everyone to see the stores spatially, with analytic tools about customers, including how far they traveled.
Starbucks, too, demonstrates how modern retailing is all about the human connection and the mobility of the customer’s experience. The company’s mobile app has more than 17 million users. The reward program has 13 million active subscribers, providing rich data about what, where and when they buy coffee and complementary products. Starbucks overlays that customer-oriented data onto other data, including weather, holidays and special promotions to personalize the Starbucks experience.
When someone visits a new Starbucks location (which itself was selected with the company’s location analytics tool, Atlas), that store’s point-of-sale system can identify the customer through their smartphone. The system gives the barista the customer’s preferred order and suggests new products and treats available from the 87,000 drink combinations available at the store (a specific selection of those chosen by the system to offer in grocery stores). From pumpkin spice café latte K-cups to iced coffee without milk or added flavors, Starbucks’ data-driven, location-focused approach to production expansion is smart business.
The new normal requires location intelligence
There are reasons for optimism. Before the pandemic, the retail and consumer goods and services sectors were increasing revenues and profits, not by replacing one shopping format (physical) with another (digital), but by unifying them; by relying not on historical experience, but real-time data; and by using advanced analytics to build a single, holistic customer view. However, to succeed in the new normal of commerce, companies must apply location intelligence to capture the potential of each place of business.
To succeed, retailers must:
- Apply sophisticated analysis of human movement data, online customer behavior and local conditions around each store, restaurant or shopping center – including the ebb and flow of Covid-19 outbreaks. For instance, people who formerly shopped at five stores to fulfill their weekly grocery needs now might visit one store to reduce exposure to the public.
- Redesign their stores, training and work routines for social distancing, testing, density analysis and frequent disinfecting. Retail architecture has always aimed to extend time-in-store and provide maximum product interaction. Now, not so much.
- Shift from just-in-time inventories to resilient supply chain planning. Reshoring and global supply volatility require geographically distributed redundancy. That said, there are essential lessons in agility that all consumer-based businesses can learn from, say, on-demand innovators like Zara.
- Shift to home delivery, buy online, pickup in store (BOPIS) or curbside. BOPIS activity was up 208% in the U.S. in early April of this year, and 56% of consumers say they plan to continue after the pandemic. Ulta Beauty made a seamless transition to online/curbside, which reportedly kept its revenue nearly flat in Q2 2020 compared to Q2 2019. The era of immersive, experiential shopping destinations is, at best, on hold.
To thrive during the uncertainty, retailers must have a clear-eyed sense of place, especially as the understanding of “place” evolves.
Esri is a data science and technology company.
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