Q&A: Retailers Use Location Intelligence to Learn About Consumers, Choose New Locations
Retail Leader talked with Foursquare to learn about how location intelligence helps retailers select new store locations and teaches them about their customers.
Retail Leader Staff
Location intelligence helps retailers make decisions about their businesses by teaching them about their current and prospective consumers. Retailers use the data to make choices about where to open a new store location or how to best compete with competitors.
Retail Leader chatted with Ariel Segal Eck, director of B2B marketing at Foursquare — the technology company that provides location-based data and solutions to retailers and other businesses — to chat about trends in retail foot traffic and how harnessing location data helps retailers uncover hidden insights and improve the shopper experience.
Retail Leader (RL): What is location intelligence, and how can retailers use it to their advantage as they look to open more physical storefronts?
Ariel Segal Eck: Location intelligence is all about deeply understanding places and movement — using technology to understand where things are and how people move throughout the world. The places people go are powerful reflections of who they are and what they care about.
Savvy brick-and-mortar retailers are utilizing location intelligence to make smarter decisions about where to set up shop. By incorporating robust, precise data about places and movement into trade area analyses, retailers can glean rich insights that can offer a competitive edge. For instance, location analytics can show how a store measures up to key competitors in terms of visit frequency, dwell time, distance traveled, daily and weekly foot traffic patterns and more. Retailers can use these metrics as inputs into models that identify emerging trends and forecast demand. With location intelligence, retailers are better equipped to plan commercial layouts, assess the earning potential of a property and prioritize development opportunities. In this way, by investing in location technology, retailers influence key performance indicators, such as ROI by location and internal rate of return.
RL: What can location intelligence teach retailers about what their existing and prospective consumers want?
Segal Eck: Location intelligence provides unique visibility into what is taking place outside of a retailer’s four walls, showing where customers go before and after visiting a store, where else they shop, how far they travel to reach a store and more. With these insights, retailers can identify the features of their best-performing locations, and conduct similarity analyses to identify other locations that share the same characteristics. This could be as simple as proximity to other brands or types of places.
For more advanced retailers, they can look at where visitors tend to come from. For instance, does a store tend to pull visitors from census block groups that skew toward young males or from census blocks that are more family-oriented?
Location intelligence helps retailers understand how their site is performing relative to competitors. Usually, retailers sit on rich first-party data — they know day by day or week by week what the transaction volumes are for each location. But they do not know the transaction volumes of their competitors. By building a model that correlates transaction volume or revenue to foot traffic, retailers can use traffic to estimate store performance of their competitors. This allows retailers to assess whether their store is performing particularly well, or if all stores in the same category in a specific city are also on an upswing. Ultimately, this helps to contextualize what they are noticing in their own business against a much more complete picture.
Lastly, location intelligence helps retailers find leading indicators of a changing environment. For example, they can learn whether stores in an area are pulling visitors from nearby neighborhoods or from farther afield, or how the demographics of their customer base may be changing over time. It can also reveal what types of businesses in the area are opening or closing at faster rates.
RL: What challenges has the COVID-19 pandemic posed in this area, and what are retailers doing to adapt to these problems?
Segal Eck: The COVID-19 pandemic undoubtedly changed people’s shopping behaviors, and ultimately how retailers connect with their customers in a physical environment. E-commerce was rapidly growing prior to the pandemic, and this growth was accelerated by months of quarantine. In Q3 of 2020, e-commerce comprised 14.3% of all retail sales, according to the U.S. Department of Commerce Quarterly report. In these conditions, retail locations declined in importance as an asset class.
Now, data shows that people are eager to shop in physical stores again. Shoppers are eager to hit the stores, and retailers are expected to see a notable increase in visitors this year. Foursquare data indicates that 91% of Americans visited retailers, such as department stores and clothing stores, at least once last December. Momentum is trending in a positive direction as consumers return to in-person retail shopping, while rising inflationary pressure and low-interest rates make commercial properties attractive to investors, fueling market activity. However, physical stores will have a new role to play in the months and years to come.
Forward-looking retailers are prioritizing an omnichannel approach to sales, engaging customers online, via mobile and in stores. Physical stores will act as distribution centers, pickup locations and showrooms. They will only become more sophisticated with new technological advances, like augmented reality. Brick-and-mortar locations will therefore deliver a unique experience that drives brand loyalty.
RL: What are some of the biggest challenges retailers face in predicting in-store traffic?
Segal Eck: When it comes to analyzing and forecasting in-store traffic, many retailers struggle to find accurate, trustworthy data that can be relied upon to inform timely business decisions. A recent study by 451 Research found that about 60% of commercial real estate teams are struggling to make timely decisions and keep up with shifting market trends due to their reliance on outdated or static data. Further, 70% said that easily accessing location intelligence to act on emerging opportunities and market trends is highly important to the competitive differentiation of the organization.
With these challenges and market shifts, we see investments in location technology on the rise amongst retailers, as improving their location intelligence capabilities is critical in order to maintain a competitive edge.
RL: How should retailers be thinking about location data when it comes to logistical choices, like where to open a store or how to hire the right amount of staff?
Segal Eck: Timely insights from location data can help businesses identify optimal locations to set up shop based on insights, such as which neighborhoods are surging or declining in popularity; where co-locating with other stores within a shopping center can be advantageous and where whitespace is present based on a competitors’ physical footprint. Savvy retailers are gaining a competitive edge with this data-driven approach to commercial real estate decisions.
Location intelligence is also critically important for workforce coverage optimization — determining which stores to staff in order to provide a quality consumer experience. By accurately forecasting demand, retailers can reduce wasted costs and operate more efficiently.
RL: We’re heading into an uncertain holiday shopping season with expected slower sales growth compared to last year, and we’ve seen retailers start their holiday sales earlier than ever. What are your predictions for the holiday shopping season?
Segal Eck: Location intelligence can provide leading indicators of what retailers should anticipate this holiday shopping season. For example, our data shows that rising inflation is driving shoppers to prioritize value, with discount stores and wholesale clubs seeing significant year-over-year growth in the volume of in-store shoppers. Holiday sales are indeed starting earlier — in fact, last year, many retailers saw an even bigger boost in traffic on the day before Thanksgiving than on Black Friday. However, retailers should still anticipate an influx of last-minute shoppers. Last year, retailers saw the biggest uptick in traffic on Christmas Eve with visits up 44% compared to an average day in 2021.
We’ll also be keeping a close eye on dwell time in stores this year. Last year, more than half of retail visits lasted less than 30 minutes during the Black Friday weekend, suggesting that many shoppers were browsing and buying online to pick up in-store. But only time and location intelligence will tell whether this trend continues this holiday season.