The Interesting World of Location Intelligence in Retailing

When thinking about the type of marketing decisions faced by retailers, it is easy to get drawn into fairly obvious decisions, such as what products need to be carried, what types of promotion are required to build customer traffic and what pricing approaches should be used that will be acceptable to the consumer market. Often overlooked, however, are important decisions related to distribution. For instance, issues related to product movement, such as how inventory is stored in the backroom or in a warehouse, or what methods are used to transport products to retail stores or to ship directly to consumers.

There is also another key distribution decision that may not readily come to mind, but that may carry as much weight as any other marketing decision, especially for retailers with physical outlets. That decision concerns where geographically to locate stores. When making location decisions many factors must be weighed, such as proximity to the target market (i.e., time it takes to travel to a store), ease of accessing a store (i.e., traffic patterns, public transportation availability, walking distance), cost of retail space (i.e., rental, construction expenses), existence of other retailers (i.e., active retail area, location of competitors) and many more.

For large retail chains with hundreds of stores, the amount of information they have available when making location decisions often dwarfs what is available to mom-and-pop stores or small chains. A good example of the information advantage held by the big players can be seen in this story from Fortune. It discusses how drugstore chain Walgreens uses “location intelligence” to help select sites for new stores. By utilizing geographic mapping, demographics data and other market variables, Walgreens can identify locations that present the best potential.

But that is not all. Walgreens geo-mapping system is also combined with other company acquired information, both from data gathered in-house and from public information, to help the retailer understand trends occurring in a geographic area. For example, using prescription information to determine where there may be a spike in flu activity, which can then be used to help store management with inventory decisions.

To see some of the other ways Walgreens employs “location intelligence” see the YouTube video included with this post.


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