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Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location Research

Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location Research Most Location Studies Contain Significant Errors Some of the Errors Were Analyst Errors Some of the Biggest Errors Were Corporate Errors Many Real Estate Meetings Get Stuck on the Wrong IssuesErrors at any level contribute to the destruction of fiscal health.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchWhat We Will Examine: Site Analyst Errors (some) Corporate Errors (some)Not Report Errors

.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-1: Poorly Defined Trade Areas

Too small Too circular 80% rule (2 + miles)PWTA of 80:Predicted Sales80%Guessed Sales 20% Go big, then reduce if necessary. Too weirdPresented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-1: Poorly Defined Trade Areas

Too small Too circular 80% rule (2 + miles)PWTA of 60:Predicted Sales60%Guessed Sales 40% ! Go big, then reduce if necessary. Too weirdPresented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-1: Poorly Defined Trade AreasIf PTA forecasting is 90% accurate, and STA is 50% accurate:RangeSales RangePWTA 8072-88$216,000-$264,000STA 2010-30$30,000-$90,000Total82-118$246,000-$354,000PWTA 6054-66$162,000-$198,000STA 4020-60$60,000-$180,000Total74-126$222,000-$378,000(Based on true sales of $300,000).Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-2: Too Little Time at the Site What is the traffic doing around the site? Sit & Watch! What things surround the site? Specifically! Who are you seeing? What kind of vehicles? Where will the front of the store be? Is it visible? Which side of the road is it on? People coming home? Traffic influences? (Bus route, roundabout, one-ways, overpasses, etc.)Notes, notes, notes!.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-3: Not Enough Driving Around Discover unanticipated stores! Discover traffic patterns / problems, especially at 8:30 and 4:30. Under Construction and Coming Soon signs. How does traffic flow around the site?

.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingCustomer Spotting: The collection of data that show the distribution of customers OR sales around the existing store.Definition:The data are used to help set and validate the power, PWTA, and curve of the same store in the balanced model.Purpose:Approach:Look for differences in distance-decay functions, not sector-by-sector differences..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingDistanceAttractivenessBalanced ModelSpottingPower or PWTA Problem ?Looking for Trends!.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingDistanceAttractivenessBalanced ModelCurve Problem ?SpottingLooking for Trends!Inflection point.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingCollection Errors!Loyalty Card Data:How old are the data points (esp. address)? What percentage of customers are using?Intercept Data:Well-trained collectors? Over age 14?Must use well-planned randomizing method.How many intercepts were gathered?What days/times were used to gather data?You need to know this stuff!How old is the spotting?.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingAutocorrelation With DistanceSpotting data far from the store artificially inflates correlation, but you dont even care that much about the distant sectors.Example:Large model with 50 stores and 200 sectors.Market Share correlation through 3 miles: .4881Market Share correlation through 6 miles: .7351Market Share correlation through 10 miles: .8322Bad Curve!Looks good here, though!.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingAutocorrelation With Sector SizeGravity models are disaggregate predictors of MS, not sales.Market SharesSectorPopSpot.Model110005.005.00220006.005.00330007.005.00440008.005.00550009.005.006600010.005.00Correlations:0.0000.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingAutocorrelation With Sector SizeGravity models are disaggregate predictors of MS, not sales.Market SharesSalesSectorPopSpot.ModelSpot.Model110005.005.005050220006.005.00120100330007.005.00210150440008.005.00320200550009.005.004502506600010.005.00600300Correlations:0.0000.9913.Correlate by Market Share, not by Sales!Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingSpotting is Only Helpful For One StoreWrong!Example: If your trade area has 30% leakage, then your balancing must model 70% of the sales potential.Accurate spotting can greatly reduce the amount modeled because of the large amount observed (spottings) data..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchAnalyst Error-4: Misuse of SpottingPrinciples of Best Use:1. Know the date, collection method, and potential error level of any spotting you will use.2. Only use data within the primary trade area (3-4 miles).3. Watch market share correlation, not sales correlation.4. Collect customer sales, not dots.Do not force a correlation by using manual powers and curves.If you cant explain why, then dont use!6. Look for data TRENDS within primary trade area to help with curve..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchMismatch Between PCW and Store SalesSector PCW figures should only consider the same merchandise as your store sales casings for all stores.Consider:PharmacyGeneral MerchandiseRestaurantCateringLarge Floral / CardNon-supermarket MerchandiseBusiness Sales.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchMismatch Between PCW and Store Sales.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchRelying on Canned Store DataAdvantages:Cheaper than travel costsFaster to acquire dataDisadvantages:Where do the sales figures come from?BrokersWholesalersStore Operators????What do the sales figures include?Very unreliable accuracy!Baltimore AreaCanned SalesCased SalesTarget-1700,000100,000Target-21,275,00090,000Target-3725,00080,000.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchRelying on Canned Store DataAdvantages:Cheaper than travel costsFaster to acquire dataDisadvantages:Where do the sales figures come from?BrokersWholesalersStore Operators????What do the sales figures include?Very unreliable accuracy!Baltimore AreaCanned SalesCased SalesWalmart SC-1725,00090,000Walmart SC-21,075,000965,000Walmart SC-3925,0001,110,000.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchRelying on Canned Store DataVERY Informal Observation of Accuracy:50% Reasonably Accurate30% Unacceptable20% Nonsense.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchInvalid Discrimination Analysis Believing in store/customer relationships that dont exist. Believing that no store/customer relationships exist, when they do. Not bothering to do the research, letting it get outdated, or not using it. .Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchInvalid Discrimination Analysis Believing in store/customer relationships that dont exist. Example: Our store customers are 25% black, but the community is only 12% black. Therefore, we really appeal to the black consumer.May not be true! What if:Population within first 2 miles is 50% black.The data were gathered by customer intercept, and the interviewers were all black..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchInvalid Discrimination Analysis Believing that no store/customer relationships exist, when they do. Example: We examined our sector market shares for signs of a relationship with percent Hispanic, and got the following table:Sector%HispanicOur M.S.1562107320542565407No apparent relationship..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchInvalid Discrimination Analysis Believing that no store/customer relationships exist, when they do. Example: We examined our sector market shares for signs of a relationship with percent Hispanic, and got the following table:Sector%HispanicOur M.S.Distance1561.021072.032052.542563.054073.5Maybe there is a relationship after all!.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchInvalid Discrimination Analysis Believing that no store/customer relationships exist, when they do. Proper way to examine discrimination of Relationships:Sector%HispanicExpected M.S.*Our M.S.Difference15126-621087-132055042536+354027+5* As predicted by a gravity model, not considering demographics..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchInvalid Discrimination Analysis Not bothering to do the research, letting it get outdated, or not using it. Aldi first opened in the US in 1976. Their research indicated that lower-income families would be its primary target. Those findings drove its location program.US economy took a downturn in 2008-2009.Aldi now serves all income ranges nearly equally. Their location program has changed accordingly..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchCorporate Errors: ArroganceThe best leaders lead by example. If that doesnt work, pure intimidation works pretty well, too.Everybody loves us!Walmart, circa 1998.Everybody shops the way we do.Fresh & Easy, 2007.Build it, and they will come.Costner, 1989..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchCorporate Errors: ArroganceThe best leaders lead by example. If that doesnt work, pure intimidation works pretty well, too.Everybody loves us!Walmart, circa 1998.Everybody shops the way we do.Fresh & Easy, 2007.Build it, and they will come.Costner, 1989.and A & P, last 20 years..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchCorporate Errors: ArroganceThe best leaders lead by example. If that doesnt work, pure intimidation works pretty well, too.

.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchCorporate Errors: ArroganceThe best leaders lead by example. If that doesnt work, pure intimidation works pretty well, too.Everybody loves us!Walmart, circa 1998.Everybody shops the way we do.Fresh & Easy, 2007.Build it, and they will come.Costner, 1989.Testing? We dont need no stinkin testing!Blazing Saddles, 1974.and Target, 2010.and A & P, last 20 years..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchCorporate Errors: IgnoranceTrue value of research.Pressure to do deals. Bonus-based decisions.Low budgets that encourage errors.Not knowing the right questions to ask:Who are we? Who is our targeted customer?What does this neighborhood need?This site may be a go, but is it the best place to spend our expansion money?What is our deployment strategy? (Do we have one?)What departments would this store need?.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchWhat Roles Can We Play? Do each site study right!Establish (and keep) credibility.Keep good records for each project.Leave a good paper trail of suggestions / recommendations.Resist pressure to alter projections its a career buster..Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchWhat Roles Can We Play? Work With the Research TeamReview and establish best practices.Do not assume precedent means success.Perform detailed post mortems.Encourage an inflow of ideas.(Conferences, contacts, professional groups, etc.).Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location ResearchWhat Roles Can We Play? Communicate With Leadership!Dont fight (you cant win).Explain the risks carefully. Scaring is ok.Let leadership know what you can do beyond sales forecasting.Dont be afraid to declare your successes (gently).Remember how much you know about location research(and how much they dont). Be patient.Know your history, corporate and industry!.Presented at the 2015 Gravitec Store Location Conference by James PufferThe Biggest Errors in Location Research