Retailers need to use predictive modeling and combine it with business, customer, and market data in order to forecast sales or new businesses profitability.
Predictive modeling is a highly effective way to identify a suitable area for expansion strategies, as it has become a vital tool for narrowing down hundreds of potential sites or even a single site. When a potential site is identified, it’s combined with additional layers of data to determine if it meets the model’s requirements, sales performance targets, and other critical factors for any business requirements.
What is predictive modeling?
Predictive modeling is the process of creating, testing, and validating a model to better predict the probability of an outcome these tools can handle more data, learn and adjust when they receive new inputs. AI models recognize data inputs and adjust accordingly.
How do they facilitate site selection?
These models help companies select locations and optimize brick and mortar networks. The model selects a representative intersection of an area with a high level of positive influences (such as proximity to a desired demographic, or proximity to a point of interest that benefits the business) and a minimal amount of negative ones (such as being too close to your largest competitor, or too far from any potential customer traffic).
Predictive modeling is one of the main steps in determining prime locations for any business.
How to identify the optimal site location strategy?
Once you have identified the market you want to enter, the next step in the site selection process is to identify the commercial areas that offer the best opportunities.
Once the commercial areas have been identified, an analysis is carried out to verify the market and the commercial area; qualitative factors such as foot traffic or the purchasing power of the inhabitants are particularly important at this stage. The characteristics of the premises to be taken into account are, among others, the following:
- Appropriate mix of co-inhabitants or other attraction factors in the area.
- Consistent traffic volumes and correct direction of traffic flow.
- Good visibility and ease of access.
- The type of property is appropriate if an existing building is considered, or zoning requirements allow for new construction.
- Financial aspects of the site (cost of construction, cost of leasing).
Predicting performance, not just monitoring it
One of the main advantages of using a site selection model is the ability to quickly estimate yield potential, identify sites that meet minimum criteria, and improve the efficiency of the site selection strategies.
You may be interested in: “Geospatial Data for Site Selection for New Outlets“
Finally, retailers who know how to interpret their site selection models know that the models should not only be used to know if an expansion model will be successful or not but to understand what it takes to be successful in that trade area.
At PREDIK Data-Driven we go beyond simple BI maps of sales per store, use our sophisticated analytical models to predict where the next big opportunity is for your business.