Many US companies see Australia as a logical market to move into as it has a stable economy, speaks a slightly different version of English, and consume similar products to those manufactured and marketed in the USA.
The big difference is you need to remember Australia is about 27 million people – or about the same population as Texas!
If you have made the decision to market in Australia, how do you start to build a retail network? Bringing a new retail concept to Australia involves site selection, and you are probably unfamiliar with the Australian geography.
Are you familiar with what data is available. The days of holding a “wet finger” in the air, and deciding this is the “perfect” location for a store are gone. If your concept involves Franchising, then you are also subject to the Franchise Code.
I do not intend discussing the intricacies of the Franchise Code of Conduct in this article, but would recommend a visit to The Franchise Council of Australia’s website www.fca.com.au. The Franchise Code now holds a Franchisor responsible to disclose to a Franchisee the process used in store selection. The “wet finger” approach leaves you vulnerable to court action if a franchise is to fail, as a desperate franchisee may choose to lay the responsibility for failure in the unsuitable location of the store. Insurance against this occurring is to demonstrate a reasonable process is undertaken during the site selection phase (not unlike the processes you probably use in the USA).
Whether you intend to company operate a network of stores, or move to a franchise model, the locating of stores is a very important component in the success of your business in Australia.
Information available to assist in site selection issues.
Australian National Census of Population and Housing
Australia runs a National Census every 5 years, the last being in 2021. The Census gives us data on population, age, ethnicity, language, housing descriptions, income levels and quite a few more fields. The Australian Bureau of Statistics runs a website www.abs.gov.au which can assist on what is available.
Property Council of Australia information
The Property Council of Australia compile data on shopping centres across Australia. The data provided tells us the owner and leasing contacts, what the size of the Centre is (Gross Leasable Area Retail), the MAT (Moving Annual Turnover), numbers of carparks, cinema screens, food hall details, seating numbers, and the major tenants amongst other items. This data is very good in weighing up shopping centres for consideration with your concept.
Other information
We can also obtain information on population projections for small areas out to 2032 (nationally), socio economic information on areas and a host of other information and combine this with easy to use online mapping.
How do we start looking for new stores?
The store decision has many components, but 2 simple questions are:
- Which suburb or shopping centre should I locate in?
- Where in that area or shopping centre should I set up my store?
We can’t all have the “best” store, so we need to understand the components that need to be considered. In the end we are normally weighing up the positive attributes of a specific store against the cost to be there. Some retail products can afford to pay for the “best” location in a shopping centre, and seek the busiest locations. Most are weighing up the forecast sales and revenues against the rent, and deciding on whether it is profitable, or whether they should look for a cheaper or more expensive option in the area.
The four components of success.
In a retail buying decision, we evaluate where we will make a purchase on many criteria, such as convenience, range on offer, price and reputation. The decision of where to physically make the purchase then comes down to Location, Facilities, Operation and Brand.
In our minds, we may place higher relative importance on one over the other depending, on what we are buying. For example buying milk will have us weighing up Location (if we need it at night and there is a Convenience store nearby) and Operations (what time is the store open till)? If we are buying a new car, the Location of the car yard is not as important as the Brand and the Price. Therefore a retail buying decision has four components we normally weigh up in the decision of where make a purchase.
Location
If we have the choice of 10 vacant blocks in an area, which one do we decide upon? Location takes into account residential and business demographics, generators, traffic and competition.
Facilities
Having decided on the Location, we have the decision on what do we build. We need to look at the offer we make, size and layout. Being ex Oil Industry, an example was in building a service station, how many lanes, size of C-Store, car wash and / or mechanical workshops. The decision here is matching the facilities to our perception of what the customer wants to purchase.
Operations
Location and Facilities are like hardware in a computer. You can see and touch them. Our view is Operations is like the software and includes all the feely / touchy things that make a store work. Operations include cleanliness, uniforms, trading hours, staffing levels, pricing and marketing. Operations are always the hardest to measure, as much of it is customer perception.
Brand
This is a function of reputation, product quality and awareness. An example of Brand Strength would be if 2 oil companies changed all there sites to their competitor’s brand, which would benefit, and which would lose? Brand awareness is something that is built, and separate from the other 3 issues, which relate on a site by site basis, whereas Brand is a network issue.
Site location factors.
In seeking a good site, we look at 5 areas:
Site characteristics are the physical issues relating to a site or store. These include size of land and buildings, design, internal layout, and other items normally gathered by visiting and surveying the location.
“Bring the store to the people, not the people to the store” is the motto in evaluating Generators.
The more your business relies on impulse trade, the more you will benefit from being located near quality generators.
The time of the day the generators generate is essential as well. It is no use paying a premium to be located on the externals of a shopping centre if the bulk of your business occurs at night, precisely the time the shopping centre is closed!
Demographics are normally based on Census data, and we can understand the make up of the surrounding population, and try and see that this is consistent with your target market. Census 2021 allows us to look at Age, Income, Ethnicity, Transport methods and many other factors.
Depending on the product, stores need different levels of exposure. We need to consider vehicle traffic, pedestrian traffic and visibility of signage.
Some products thrive on being in with their competitors, whilst others are better in a “stand alone” mode. In many industries we find the phenomena of “Clustering’ where it appears beneficial to be directly with the competition, as the drawing power of a group of stores outweighs the detrimental effect of competition. Examples of this we have found are homeware centres, and fast food restaurants.
Products that work together in a cluster create a “friend and foe” phenomena. In these cases it is better to be with the competitors, and the worst position is to be by yourself in the proximity (1 – 2 kms) of a strong cluster.
Once you have viewed a potential site or store in these terms, you should be able to compare to other locations on offer.
Tools available to you
First sites in a potential network
A Target Market Index (TMI) map can be made to identify the potential hot spots for your products. To build a TMI, you identify what you feel are the attributes of your customers, and these are built into an algorithm, and applied across the city.
An example is in looking where to locate a young trendy female fashion store; you may build a TMI looking at:
- % Females 15 – 29
- High income
- High business employment
Once mapped at suburb or Postcode level, we can see our areas of highest potential.
Strip Locator
Spectrum do a product called Strip Locator which allows you to evaluate shopping strips in terms of number of stores, what type of stores are present and the demographics of the area. By looking at your target market, we can evaluate which strips show the highest potential for your sales.
Medium size networks
In a medium size network (15 – 30 stores) we can use the knowledge of which stores are most successful, and look for the Drivers associated with them. Once identified, we can build a Check Chart to use this knowledge in evaluating new stores.
A Check Chart uses a combination of data sources varying from the owner’s perception of foot traffic and type of customers in the area, to some measurable items such as prime sign visibility, age and ethnicity.
Large networks.
Where a large network exists, use the knowledge gained from success (and failure) to better understand the Drivers of the brand. A Market Analysis can be performed to:
- Identify the Drivers of strong sales
- Build Prediction tools for forecasting new store’s revenues
- Identifying potential areas for expansion
- Evaluating the existing network for the future
Once a prediction tool has been built, this can be applied to new stores or sites as they arise.
The graph below is typical of the results that can be achieved, where each store is graphed with its predicted sales against actual.
The Search for the Perfect Store needs to take into account far more than a “wet finger in the air” approach. Some logic process needs to be followed to gain a good result, and to protect Franchisors into the future from litigation.
For more information on site issues in Australia, please visit our website at www.spectrumanalysis.com.au and feel free to contact us.
Peter Buckingham is the Managing Director of Spectrum Analysis Australia Pty Ltd, a Melbourne based geodemographic consultancy. Spectrum specializes in assisting clients with decisions relating to store and site location using various scientific and statistical techniques. Peter’s background was in the oil industry, with a strong focus in property issues, both nationally and internationally. To contact Peter email peterb@spectrumanalysis.com.au or call on 61 3 98300077.