To better grasp the essential elements of a retail location selection, three key steps are involved:

1. Know your market position

The first step in arriving at a decision making process is to identify the markets attractive to a retailer. This is important as the retailer needs to understand the market well, especially in a country like China, where consumer behavior varies city by city. A market analysis will include a careful evaluation of your:

• Industry and product: The industry aspect of your market analysis will show your specific types of business and the number of existing similar businesses. In addition, you will also need to know how long your type of business has been around; and whether your business type is a variation of an old concept or a niche in a general concept.
• Know your customers: Use the demographics to identify the needs of your products and services. Age group, gender, ethnic background, martial status, household type and income level can be used to justify the market potential and determine the appropriate products and services offering.
• Get to know your competitors: Discover the existing sales/market captured by your competitors to determine if there is an excess demands. Also survey your competitors’ location in realtd to regional exposure, visibility excellence, and accessibility.

VIDEO :: Learn about Trade Zones, what they are and why they matter.

2. Evaluate the market potential

In order to determine the market potential, the retailer needs to take  into considerations of various elements.

• Demographic features of the population: understanding the features of the population is integral to develop a retail marketing strategy. The retailer also needs to understand the level of literacy and the level of education in the population.
• The characteristics of the households in the areas: Retailers need to have a clear understanding of the average household income and the distribution of this income in the area. This is very essential as the level of income largely determines the kind of retail facilities required.
• Competitor impacts: While determining the market potential, it is necessary to check the compatibility of the retailer store with the other competitors in the area. It is necessary to try and evaluate their strengths and weakness, to know the size of store and the sales productivity.
• Laws and regulations: Before opening a retail store in a region, it’s essential to have a good understanding of the laws and regulation for opening a retail shop in the area. Various permission which are needed, the hours for which the store can operated, the minimum wages to be offered to the persons working, the holiday required, etc. can affect the profitability of the store.
• Trade area analysis: An integral part of determine the market potential is the analysis of the trade areas.

Learn how our Kiwi app can help you locate market potential on a map.

3. Identify alternative sites and finalize decision making

After having determined the market potential and taking a decision on the store, a retailer has to select the site to locate the store. There are various factors to consider when making decision.

• Traffic flow: Traffic refers to both pedestrian and vehicular traffic. The traffic that passes the potential site is an important determinant of the potential sales that can be generated from that store
• Accessibility and visibility: Accessibility of the market is define in terms of availability of public transportation and parking space to the potential store. When considering visibility, look at the location from the customer’s view point. Can the store be seen from the main flow of traffic? Will your sign be easily seen? In many cases, the better visibility your retail store has, the less advertising needed.
• To buy or lease: An important factor to be considered before taking decision on the site is to buy or lease it. If the store is to be leased, then the terms of the lease will have to be studied carefully.

Finding new locations that are a good fit for your brand can be challenging, but with the right steps you can ensure a higher success rate. The larger your network, the more challenging this can be, which means what you might actually need to be concentrating on is network optimization, but in the short term following these steps will help you make big improvements to your store location decision process.

Despite this less than exciting news, many observers think that consumer spending in the coming year will continue to be robust, considering macro drivers such as government spending on infrastructure and recent rises in home values and relative strong stock market performance.

One thing is clear – 2013 will be a pivotal year for many retailers in the China market. Putting aside any macroeconomic shocks, there are several changes afoot in China’s retail sector that will test the management mettle of major retailers. Some of these are the result of a maturing market in general while others may be due to shifts in consumer interests and buying habits.

1 – Old Distribution Models Yielding Lower Returns

The model of working with local distribution partners that was widely adopted by international brands coming into China is less likely to continue providing a platform for growth. The path of reconsidering relationships with distribution partners that began in recent years with buybacks by Esprit and Burberry is continuing with many apparel and sportswear brands reconsidering their relationships. A major factor driving this trend is the realization that rapid new store growth is no longer the main engine for overall sales growth. It is imperative for retailers to focus on productivity and same-store sales growth especially in key urban markets. This requires close, quality-focused management which in most cases is better done in-house, not outsourced to a distribution partner.

Learn how getchee uses data to optimize retail networks.

2 – Online Shopping

As probably the largest structural changes to impact the retail industry, this year will certainly see further challenges and require retailers to entice consumers into their physical stores. Online shopping still represents only about 5% of all retail sales in China (compared to 10% in the U.S.), but it’s growing quickly. This along with the “mobile revolution” trend puts further pressure on traditional brick-and-mortar retailers to improve in-store operations and to bolster the shopping experience itself. 

Even for popular consumer product brands that also operate their own retail stores (how much does Levi’s care if a pair of jeans is sold through a brick-and-mortar store vs. an online store), there’s the concern that online channels are acting as virtual factory outlet stores with wholesale partners using non-sanctioned online channels for inventory depressurization.

3 – Overseas Shopping

This is certainly not a new phenomenon – brands operating in Guangzhou and Shenzhen have known for years that their products can be purchased more cheaply in Hong Kong – but as newly affluent consumer travel further from the middle kingdom, they’re returning with suitcases packed with high-end consumer goods. Take the case of UGG boots. The cold-weather women’s footwear brand that has been recently expanding in China sees their highest sales among Chinese consumers not in Beijing but in Honolulu, Hawaii. Shoppers are happy to enjoy prices significantly less than those found in China.

Apparently this has become a big enough issue for the government to step in with state run media criticizing consumers for just trying to find a better deal. A February Wall Street Journal article cited CCTV as stating that Chinese people bought 25% of the world’s luxury goods in 2012, spending a total of RMB$306 billion (USD$49 billion), with 60% spent abroad. Xinhua appealed to patriotism by suggesting that consumers should spend this money at home. However, the best way for the government to keep luxury good consumption at home would be to lower tariffs which result in many goods being 50% more expensive in China than abroad.

Learn how getchee supports the merchandise and apparel industry.

4 – Consumption Becoming Less Conspicuous

There’s another recent change for at least some consumers that should be noted. The central government has been expanding efforts to discourage gifting and conspicuous consumption by bureaucrats and party officials. Mainly driven by Xin Jinping’s rise to the Premiership. The new leadership wants to project a cleaner, more austere image.  

These developments are dampening lavish spending. One recent report showed the catering business in China to hit double digit year-on-year contraction in January as officials pared back on lavish parties and events.  This effort may also be spilling over into other types of retailing. “Junkets” and store vouchers for brand name goods are being restricted with a possible impact on retail sales performance.  Whether things will return to the old-normal and conspicuous consumption by party officials will pick up again over time remains to be seen.

The large picture, however, is still overall positive. Income growth is not showing signs of slowing and urbanizing is continuing apace, bringing more consumers into areas with organized retail environments. Also, recent consumer confidence surveys are still in positive territory. The challenges retailers face today are probably more about the changing structure of the industry rather than macro-economic trends. Retailing in China is becoming more multi-channel and more dependent on the discretionary choices of consumers. More than anything, these are signs of a maturing environment. Retailers that can maintain strong growth through a challenging year like 2013 will be well positioned for success over the long-term.

The truth is we live in an imperfect world, which is reflected in the data around us. Getting a perfect dataset might be the goal of many people, but in reality it’s like an impossible mission. Data can be refined and refined, but what about all that refuse? What experience is beginning to showing us is that, if we use imperfect datasets correctly, that so-called “garbage” might in reality be a gift gone unnoticed.

Learn about spacial databases for business use in Asia.

If you’ve done a data collection job, you’ll often find many deficiencies, even if the data was collected directly from the field by experienced data collectors. The problem can be that the data isn’t “neat” enough (not all in the same format or digitized yet); sometimes it’s not even complete in every attribute or the sample just isn’t big enough. When were lucky and the data appears to be good in every sense, you may still end up screaming, “Oh, no! It’s 3-years old already!” So ultimately we have to face the fact that no matter how good the data is when we have big chucks on hand, it’s usually history already or fast becoming. The clock never stops ticking.

Good data is important, that’s a given. But we also need to learn how to leverage all the imperfect data that surrounds us as well because it represents the vast majority of data and always will. The key is to focus on the problems that we like to solve instead of trying to get precise figures. For example…if we can still manage to pull out a big trend or key conclusion from a dataset, then we should probably accept the result and make some decisions based on it. The other trick is finding some possible distinguishing characteristics in the data instead of trying to identify all the factors with significant statistical proof. There are many new ideas being put forth these days that are leading to interesting applications of data that was once thought to be fairly useless. Once we find unique characteristics, we should be able to test them. After all, timing is usually more important in business decisions in today’s fast fact-changing world.

Sometimes when no direct data is available, we can use surrogate data. Surrogate data is simply a set of indirect data that can be used in helping us to at least find some clues, which might help us find the right direction for answering a question. For example, here in Asia, direct income data is not as prevalent or granular in most countries, so we usually use real estate property data or even electricity consumption figures to indicate which area is wealthier. Or we use office building, financial companies, and/or bank branch density data to identify where key commercial areas and dense working population clusters are. This kind of surrogate data is easier to get and maintain; however, it takes a little bit effort to make it useful for making decisions.

See how getchee uses data to conduct greenfield market studies in Asia.

Good data takes time and effort to accumulate. The first steps are usually not easy because the immediate results or benefits from them are hard to initially see. You may need to make a lot of investments in hardware, software, and human resources and even consider adjusting your working habits and processes. At getchee, we often encourage our clients to start collecting their data where the consumer lives and spends most of their time. We believe it’s an investment that slowly matures over a few years, becoming valuable both in itself and the experience.

Imperfect data, or “garbage” data forces us think harder and become more skilled at making intelligent predictions. Reliable or “good” data will then lead us to a better decisions and results. There will always be data headaches in emerging markets to deal with, but the truth is, without any data at all, you’ll always make blind guesses. So before you consider throwing out that “garbage”, think again. There might be more gold in it than you think.

Choosing the best possible locations within a city is challenging, particularly in China’s 2nd, 3rd, and 4th tier cities. But thanks to improving data availability and advances in spatial and other analytical tools, investors now have the means for better, more accurate and cost-effective analysis of potential sites.

These one-day workshops bring together research experts, consultants, and technology providers to show how investors, developers, and retailers can make better-informed decisions faster backed by research and data.

Attendees Include…

Panelists: Voodoo Associates, McDonald’s, CBRE, getchee and others.

Speakers: Huatong Institute, ACMR, Demographic Consulting Inc., IBM, and Tango.

Sign up through the following ICSC websites.

April 23, 2013 – Beijing, China
April 25, 2013 – Shanghai, China

Download the event brochure.

The driver behind this is the race for the Asian consumer, which has meant more competition and higher expectations on the Asian consumer side. Asian consumers aren’t just satisfied with a quality product anymore and they are becoming more and more receptive to high quality Asian brands, but they also want things that are made with their specific needs in mind as well. Here at getchee we’ve worked with a number of clients who have embraced these trends.

Here are three trends you can expect to see more of in Asian markets this year as localization drivers.

1. Maturing Emerging Markets

The affluent Asian consumer continues to grow rapidly, which means competition is intensifying for their Yuan, Won, Baht, and Rupees like
never before. Big brands from around the globe recognize this and are adapting their strategies to remain in the game.

2. Local Flavor

As the affluent consumer grew in Asia, so did their desire to show it off. Which meant that luxury brands from Europe and the US saw an explosion of growth as the newly weathly rushed to buy up western goods. Now many of these consumers are are looking local again, and desire to see the success of homegrown brands. This means Asian brands that weren’t true players just a few years ago are getting the spotlight, and seeing themselves competing with, if not exceeding some of the biggest brands in the global market. For example, read about how Xstep, a growing Chinese sportswear brand, is expanding in China. The fact is that Asian consumers have their arms wide open to Asian brands in a way they never did before.

How does getchee support the apparel industry?

3. Hometown Advantage

While multi-national brands have taken great steps to localize their products and develop smarter expansion strategies in Asian emerging markets, many Asian brands and businesses just “get” Asian consumers. They understand what Asian consumers want and need in a way that  loads of competitors are fighting to match.

As Asian brands and Asian brand awareness continues to be pushed forward by market trends, companies competing in these markets should be closely watching and adjusting their strategies to remain competitive.

The Thai Retails Association reported there were 12,246 convenience stores nationwide as of the end of last year.

Surachet Kongcheep, senior manager at Colliers International Thailand, said 7-Eleven commands the lion’s share in the convenience-store market, with around 69%, or nearly 7,000 branches, followed by Tesco Lotus Express, with more than 850 branches or a 8.6% market share.

But that does not stop the two giants from gaining more ground. The operators of 7-Eleven and Tesco Lotus Express plan to increase their branches by around 500 and 200 per year, respectively.

Market Share of Convenience Stores & Minimarts (2012)

According to plans, there will be 10,000 7-Eleven stores by 2018, 3,000 FamilyMart outlets by 2017 and 850 Mini Big C stores by 2016.

This year, 7-Eleven plans to open 550 outlets across the country while FamilyMart, Mini Big C and Tops Daily aim to open 200, 150 and 50 stores, respectively.

But the relentless expansion of the existing players does not stop new local and foreign chains from eyeing a piece of the lucrative market. Their focus, however, will be on health and beauty products.

A market analyst projected the number of convenience stores in Thailand would reach 30,000 in the next 5-10 years.

Steady economic growth, higher consumer purchasing power and the proliferation of high-rise buildings and condominiums along the mass transit routes have created more opportunities to develop small retail stores.

Our Thoughts

The younger generation of consumers have had the largest influence in this rapid rise of convenience stores across the country. Their acceptance and embrace of modern retail has provided ample demand for small format retailers to capitalize on.

Like many countries in Asia, it’s the shift in behavior of the younger generation that has caused a massive change and opportunity for local and international brand operators alike.

Ultimately, Thai consumers will benefit from the increased competition, as it will force convenience store operators to improve store formats, decoration, and general merchandising to a more international standard and quality.

Thai consumers are sophisticated and have money, and they’re looking for ways to save time doing their weekly shopping so they can spend more time and money on other activities.

The Bangkok retail market has been stable with an average occupancy rate above 90% and retail supply has grown steadily at 5% per year over the last 10 years. In the next five years, retail space is expected to grow by a further 15% to 20%.

This year alone, 23 new retail developments are expected to be completed in Bangkok with a total of 441,000 square meters.

There have been many key drivers in this rapid expansion of Thailand’s retail market, both from the demand and supply side.

The first and most obvious supply driver is the expansion of residential domiciles to new and emerging areas, which creates retail opportunities in new locations. Retail trends tend to mirror residential trends in terms of development areas. This has created demand for both large-scale malls and community malls in emerging residential areas.

Demand for large-scale retail is no longer confined to the inner city, as consumers living on the city fringes want the same retail facilities without the need to commute. This has led to the opening of major retail centers such as Mega Bangna. The growth of community malls has also been in part driven by the convenience factor.

Our Thoughts

Thailand is seeing the benefit from the entry of so many new multinational brands with large space requirements, as well as local retailers looking for a more modern backdrop to set their brand against. Developers seem to have keyed in on these growth prospects and are quick to launch new developments across the market.

Thailand is a market where most of the younger generation lives in condominium style living with relatively small spaces. This has caused many of them to spend more time outside of their homes in shopping malls, restaurants, and entertainment spots, ultimately contributing to higher retail spending.

Despite the rapid growth, one of the challenges getchee encountered during the project was the general paucity or lack of data.

What are the 5 most common data headaches in emerging markets?

Available financial, geospatial, and socio-demographic data is commonly outdated or limited in most emerging markets like Nigeria. To overcome this challenge, getchee started by procuring geospatial base layers and POI from a local vendor known as Spatial Technologies Ltd., “Nigeria’s foremost mapping and GIS solution provider”. We then improved the POI quality and usefulness by incorporating proprietary analytics and other getchee-obtained datasets. With these optimized datasets, getchee identified and described important and granular characteristics of Lagos that our clients in Nigeria could then use to improve sales performance throughout their networks.

Learn how getchee creates market data for use in emerging markets.

Even though the total vendor-supplied data was a bit less dense than the datasets we typically work with in Asia, by using new data refining techniques, getchee-delivered outputs proved to be both meaningful and insightful. The refined output allowed the client to optimize their channels and substantively improve overall channel performance by developing objective, data-based business processes both on their own and with the active assistance of getchee. Although the paucity of data throughout emerging markets like Africa can appear to be a major barrier to conducting successful data driven projects for business in those regions, several innovative data polishing techniques developed by companies like getchee can still be used to leverage available data for improving both business performance and predictive analytics. getchee will continue to work with creative local partners to ensure our analytics and solutions are vibrant and effective.

In a new series of Visual Trends infographics called City Snapshots, getchee presents a set of city-specific market data in order to give viewers a birds-eye overview of that city’s market position and retail capabilities.