“Coming soon to a location near you!”
Setting aside any arguments for brick & mortar expansion vs. online/mobile growth – I think we’ll all agree that it’s an exciting time when your business is ready to expand. Whether you’re looking to expand to a nearby location in a market you know well, or are rapidly expanding into new markets with which you are less familiar, the question remains:
How will you decide exactly where to open your next location(s)?
If you’re Amazon and want to find the best fit for a second HQ, you create a public campaign that brings gobs of free analysis from experts and handsome bids from cities across the country to entice you to build in their city (example). However, if you’re like most other businesses, the research will be left to you, and your team, to decipher where the most potential lies.
Chances are, you’re already feeling stressed about the cost of a building, and operating, a new location. Why (how?!) would you spend more on research, when you can select a location on your own?
From our experience, here are some common site location strategies:
1. Scour free data websites
Do it yourself. Thankfully, there are many wonderful mapping and data sites available online for free or reduced costs. From these resources, you can piece together an analysis. This can be a time-consuming process, as many free sites will show you just enough to peak your curiosity, and not quite enough to get the job done efficiently or thoroughly.
The other concern is the ability to customize the data for the geographies you are considering. While county or zip code level data is helpful in narrowing a search between different markets, it is less helpful in pinpointing areas of growth or targeting demographics a market. The maps of Charlotte, NC below illustrate how a map showing the median income for a zip code (left) washes out the variation within the market, which is evident when you assess the market at the block group level (right), data that is rarely available from free websites. Missing these variations may lead to misplacing a location.
2. Listen to your customers
“Our customers have been asking for a location in Springfield.” Listening to customers is incredibly important, and it’s one piece of the puzzle. Another piece of the puzzle is assessing the potential of the recommended area. Are there sufficient households to support a location? What level of growth is projected in the area? How would this location work in conjunction with your current location (s) or future growth plans?
3. Follow the leader
For example: "Panera has done great research, we shall place each of our new locations next to a Panera.” Watching what competitors and other retail traffic generators are doing in the market is a very useful piece of information in your analysis. And, you’re not Panera (unless you are, in which case I say, thanks for letting us use you as an example!). You have a unique set of customers with their own behaviors and needs. Assess retail activity in the area and analyze your existing customer patterns and existing markets to cull out what has led to past success for your organization.
4. Follow your gut
“I’ve lived here my whole life, I know the area.” Your knowledge of the area is very valuable and so is that of local experts when you’re entering new markets. The key is to back up your knowledge with data to support that what appears to be the case is truly the case. An objective analysis of market demographics and the competitive environment will reassure you, and your organization, that the underlying market/trade area drivers are as you perceive.
Building a new location is one of the most expensive decisions a business faces and making a mistake can be costly – not only in real estate and construction costs, but also to your brand, if you enter a market in a less-than-ideal location or end up exiting the market when results are not as you desired. In addition to the strategies above, we propose one more strategy for expansion and site selection:
5. Ask for help.
There is a whole field of experts trained to assess markets and trade areas to select and prioritize sites that are most likely to bring bottom-line growth. They have geographic tools and data resources that enable them to tailor the analysis to the factors that drive your business. The best partners will take the time to learn about your existing customer base and apply those learnings to the expansion analysis. A little investment up front will payoff greatly after your doors open at the new location.
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