Poor location decisions are extremely expensive and difficult or even impossible to reverse. So how can you identify new branch locations with good prospects for success? Customers, target groups, competitors, purchasing power and propensity to buy are of course far from evenly distributed throughout a given market. Learn how we helped a brand-name clothing supplier evaluate and expand its branch network.

"How can you identify a good site for a new branch location? It's essential that your branch locations be as close as possible to your customers, and, as such, better positioned than the competition." This tip comes from Oliver Giehsel, a GfK GeoMarketing project manager who has been advising retail companies for years regarding the expansion or streamlining of branch networks. "Stagnation when it comes to market development is fatal. It's therefore immensely important to continually evaluate the strengths and weaknesses of branch networks," explains Giehsel. Here it's vital to determine whether turnover potential is being fully exploited, avoid unnecessary costs, identify gaps in the branch network and more effectively reach the desired target group throughout the market.

Clothing company looking to expand
A supplier of brand-name clothing wanted to evaluate the performance of its Germany-wide branch network and assess the prospect of expanding. "As part of the expansion planning process, our client was looking for potential new locations that would facilitate his turn-over and expansion goals," explains Giehsel. "We evaluated the extent to which the existing stores were exploiting the avail-able potential and identified the most important factors for establishing successful new locations. We then gave our client recommendations for macro-locations where new stores would enjoy a high turn-over potential."

Honing in on the target group
A key factor in assessing turnover potential is determining how regularly the regions in question are frequented by the desired target group. To this end, GfK GeoMarketing calculated a specific target group index that reflected the affinity of the population for the client's products. In association with the client, a detailed target group description was created for the calculation of the index. Maps illustrating the locations of purchasing customers were also taken into account. This information was associated with relevant data on potential from GfK GeoMarketing. The company took into account information on age, gender, purchasing power, household size, living situation as well as data on lifestyle orientation and consumer behavior (GfK Roper Consumer Styles dataset). On the basis of this data, GfK GeoMarketing determined the company's target group and its region-al distribution throughout Germany. This allowed the company to quickly identify regions with high concentrations of its target group that were not currently being served by a store.

Turnover performance of existing stores
How were the already established stores and shop-in-shop formats faring with regard to the existing turnover potential? An objective evaluation of the existing locations involved comparing the turnover generated in the catchment area with the turn-over potential for clothing at the point of sale (POS). GfK GeoMarketing annually calculates these point-of-sale turnover figures, which reveal the regional distribution of retail turnover at the place of purchase, or point of sale (POS). "We can calculate an individualized regional market exploitation index by comparing the GfK POS Turnover for the Retail Trade values with the stores' target turnover," explains Giehsel. "This value reveals at a glance whether the existing potential is being adequately exploited."

"The previously calculated target group index for brand affinity, additional relevant GfK data as well as information from the client on sales area and location attributes allowed us to objectively compare the performance of the individual stores with one another," says Giehsel. "We determined that there are various factors that positively and negatively affect turnover in the stores' catchment areas." For example, a strong target group and purchasing power absorption through other customer magnets in the clothing sector are key to the success of a store. "After determining the location of the target group, we were able to see the extent to which its members were represented in the various catchment areas. This along with the other identified success factors allowed us to pinpoint regions that offer high turnover potential for new business locations."

Wanted: New, successful locations
The quality of a location is determined by a specific mix of factors, including proximity to residential areas, drawing power, geographic and strategic accessibility, competitive environment and socio-demographic customer profile. GfK GeoMarketing evaluated macro-locations across all of Germany and then performed a detailed analysis of micro-locations that took into account the specific needs of the company. "GfK GeoMarketing supports clients through all stages of an expansion. In addition to our expertise in calculating data on potential and gauging market exploitation, we're also location experts," says Giehsel. "We can can precisely evaluate whether a given location and the associated real estate - whether in a city center, shopping center or on the city outskirts – are worthwhile investments." GfK GeoMarketing location experts examine concrete objects via on-site studies. In addition to the current and prospective location- and competition-related factors, the relevant structural and performance data for the real estate objects in question play a role. "We always give our clients a precise, thoroughly researched recommendation for or against the various locations that we review."

GfK also identified potential new macro-locations for the clothing company on the basis of the previously calculated success factors and the individualized target group profile. "Our client received a detailed assessment of the turnover potential for a new store for every postcode in Germany." GfK GeoMarketing then evaluated the available space at selected locations. "Our client is now well on his way to exploiting his full turnover potential," says Giehsel. "He's already taken initial steps toward opening new branches at the sites we recommended. We're looking forward to following the company's development and assisting with the optimization of its branch network in the coming years."

Contact

Oliver Giehsel
o.giehsel(at)gfk-geomarketing.com
+49 (0)7251 9295165