Retail is the fastest changing and most competitive sector of commercial real estate (CRE). To stay ahead, savvy investors tap into a variety of tools and methods, consistently adjusting their strategies to keep up with the latest shifts. One indispensable strategy? Thorough market analysis.
In this guide, we'll uncover seven compelling ways that a deep dive into retail market analysis can significantly enhance your profitability and success. You’ll learn how to use geographic information systems (GIS) technology to decode complex market dynamics and sharpen your decision making. Let’s begin.
Understanding Retail Market Analysis
A retail market analysis involves an in-depth study of the factors that drive economic fluctuations and consumer behavior.
It’s a powerful way to evaluate the opportunities and growth prospects of CRE investments, by studying the influencing factors in the local area of a property.
You might keep a close eye on market indicators such as:
- Global retail trends
- Economic factors (both macro and micro)
- Consumer buying patterns
- Competitor’s behavior and market share
- Location-based data
In essence, a market analysis sharpens decision-making. When using a GIS platform, like AlphaMap, to access market and location insights, you can use real-time data to inform your study of the market. Thus, investors making the most of GIS tools, are at a strategic advantage.
7 Ways Retail Market Analysis Can Power up your Profits
1. Identifying Emerging Trends
A retail market analysis is an excellent tool for uncovering the latest retail trends both on a global and smaller, local scale. You’ll start by studying the large-scale influencing factors such as:
- The evolution of e-commerce and the rise of on-demand delivery.
- Pop-up stores which bring an opportunity for experimental retail experiences – increasing foot traffic and shaking up the tenant mix.
- Omni-channel marketing which changes the way shoppers respond to the in-store shopping experience.
- A trend towards adaptive re-use and mixed-use developments which bring in different kinds of shoppers.
You might then use a GIS location insights platform to analyze the population demographics of one specific location which gives you insight into the consumer buying behavior trends in the area. Or examine the foot traffic of several sites, identifying which ones are the busiest and at what times of the day or week.
Spotting trends is just the start of the process, though. What really matters is how quickly and confidently you adapt to any changes, and how you apply them strategically.
2. Strategic Site Selection
Selecting the right site for a brick-and mortar retail store is a difficult yet critical decision for any investor. Prime shopping locations attract good-quality tenants and attain decent capital gains.
Important things to consider include:
- Foot traffic
- Profitability
- Accessibility
- Visibility
- Sales potential
- Demographics
- Consumer behavior
- Competition
Market demands can vary dramatically from one area to another. How do you know which one to pick? A detailed market analysis powered-up by GIS can help you pick a site strategically.
Using your insights gained above from studying the local market with GIS, you’ll quickly get a feel for which locations might perform better for your retail brand, compared to others.
3. Finding New Customers
Bringing new and existing through the doors is essential for maintaining profitability in retail. Even more so if growth and market expansion is the goal. For retailers, new customers translate to increased sales. For retail property owners, attracting new customers means satisfied retail tenants, higher occupancy rates, and solid rental rates.
Analysis of demographics and consumer behavior can highlight fresh markets and ways to connect with new audiences.
Understanding spending patterns and customizing marketing strategies takes this to the next level.
A GIS mapping tool, like AlphaMap, offers useful features to help navigate this process, including:
- Detailed demographics
- Comprehensive area reports
- Mobility insights
From identifying promising new store locations or fine-tuning ad campaigns, these features give a solid foundation for smart decision making for retailers and investors alike. Armed with these insights, you can hit your target market spot-on and uncover hidden gems.
4. Enhancing Customer Experience
Putting customer experience first is key for both retailers and retail owners. Happy customers breed loyalty and repeat business, which grows your rental demand and ultimately the property value.
Retail spaces need to serve customers and not the other way round.
Analyzing foot traffic trends and how they relate to the local market can help with optimizing store and shopping center layout, while creating an ideal tenant mix of complementary brands.
Often customers can provide the solutions when it comes to reviving a struggling shopping precinct. Study your local market and then survey the shoppers to find out what they really want. The result could be lively and relevant community hub.
When retailers and property owners invest in making customers happy, they create thriving places to shop that keep making money in the long run. A win-win for everyone.
5. Optimizing Tenant Mix
Optimizing the tenant mix in retail centers benefits both retailers and property owners.
For retailers, it means being located next to businesses that complement yours, such as a pharmacy next to a grocery store. For property owners, it’s finding the perfect blend of tenants in your shopping center that provides a convenient shopping experience for visitors.
For retail owners, a well-balanced tenant mix translates to:
- More spaces filled with tenants
- More leases getting renewed
- Greater property value
The trick is to carefully build a collection of tenants that matches the local demand. Retail investors and owners should ensure that each new business adds something positive and unique to the shopping area, instead of competing with existing businesses.
During your market study, you can use GIS to conduct a void analysis, or use AlphaMap’s TenantFinder™ feature to quickly find a list of high-quality tenants. You’ll gain valuable insights into local demand and existing tenant composition.
6. Assessing Competitors
Your competitors play a central role in shaping retail strategies and decisions. Analyzing competitors helps to benchmark your performance against theirs. You can use the results to come up with new (and better) ideas or identify areas in need of improvement.
Competitor analysis helps CRE owners understand the performance of their retail properties in the broader property market and retail landscape. Not only does this help to identify gaps in the market, but it can be used to inform leasing and property management decisions.
You can use GIS to analyze which locations are performing well and for what kind of property or business.
For example, AlphaMap’s ‘Rank’ feature allows investors to compare the performance of a property or brand against other locations within the same city, state, or across the nation. This comparative analysis enables investors to identify high-performing properties and brands, as well as potential areas for improvement or investment.
AlphaMap’s TenantFinder™ feature – basically a void analysis tool on steroids – provides insights into market share and demand in different locations.
It makes the process of decision-making extremely granular as you can access key insights that are backed up by fact not guesswork.
7. Future-Proofing Investments
Future-proofing your investments means sustaining their success and profitability into the future, even as retail changes over time. Proactively looking ahead and anticipating possible shifts or problems is one way of protecting your investments against market fluctuations.
Conducting an in-depth market analysis is an important part of this future-proofing process. You can identify emerging opportunities and possible threats in the market, while ensuring your stores and retail centers match the desire of their customers long into the future.
Some examples of trends include contactless payments, or even using virtual reality for shopping.
By forecasting and planning for changes, investors can remain agile – able to pounce upon new opportunities or navigate disruptions with ease. Ultimately, it becomes easier to make good, solid decisions.
Future-Proof Your Retail Investments with Market Analysis
As more CRE businesses adopt advanced technologies – including GIS tools – the need to dive deeper into quantitative data analytics and qualitative market insights will only grow. With the right tools, it’s also surprisingly easy to perform an in-depth retail market analysis, more detailed and insightful than you’ve ever seen before.
Our question to you is: What are you doing to adapt, innovate, and keep pace?
If you’re looking for a CRE-specific, user-friendly GIS location insights tool, book a demo with the AlphaMap team, and we’ll show you how easy it is to get started.
