Spatial Intelligence for Retail: Understanding (and Utilizing) Your Business Space
“Business space” is everywhere. Literally.
Every retail business, online or offline, big and small, strives to make the best possible use of space (territories, locations, etc.), and with good reason.
A couple of weeks ago, I was having a chat with one of our clients, and he asked me “So what’s the fuss behind all the business space thing? I mean, I know the location of your store is important, but what about online retailers?”
I was about to explain it all to him, and then noticed a Google delivery guy just outside our café, and just said “let me show you”.
Together, we approached the delivery guy and I asked him a few questions like “are you working with online deliveries? Is this your territory? Are you the only one in your territory? Do you have a timeline that you follow?
The delivery guy didn’t even blink and answered all the questions with the same sentence “Of course, how else would you do it?”
When it comes to online retailers, getting your business space set right can mean the difference between a couple thousands (or hundreds) of dollars per day. For example, you have to divide your trade area (which, most of the times, includes the whole area of the U.S. or the whole world if you’re Google or Amazon) in a way, which will not only be beneficial in terms of transportation costs and delivery timing, but also think about the number and vicinity of your stores (which, in this case, are just warehouses with various goods).
Let’s dive in deeper and I will show you just how important territories and locations are for retailers.
The biggest problem of online retailers
Did you know that as of January 9, 2017, shopping cart abandonment rate is around 68.8%? This technically means that every 1 out of 3 customers abandon their purchase while shopping online.
Here is a survey, which included 20.000 people, conducted by WorldPay:
Another study, conducted by North American Technographics, back in 2009:
For the past 8 years, the number one reason for abandoning a purchase across all industries worldwide was high/unexpected shipping costs. This technically means that if you are an online retailer, you’re losing 50% of potential purchases every single day.
Take a look at your monthly/annual revenue – It could have been twice as high if you could totally eliminate shipping costs. Now, obviously eliminating shipping costs altogether might be a little impossible as of today, but minimizing them as much as humanly possible will have a direct, beneficial influence on your sales.
This is where business space (territories, locations and spatial data combined) jumps in.
If you can divide your territories in a way that will minimize transportation costs for your business, while also position your warehouses in between your territories to cut those costs even further, you will be able to reduce shipping costs in your online store, which will ultimately lead to more sales, every day.
Also, let’s not forget about the importance of timely deliveries. If you go back to the charts above, you will see that 28% of respondents said that “shipping time was way too long”, and 16% said that “delivery options were unsuitable.”
While not as important as cutting shipping costs, the timeliness of your deliveries can be accelerated with the help of spatial intelligence analytics, correct area division and choosing ideal spots for your warehouses. For example, did you know that UPS delivery trucks always turn right? They have calculated that it takes more time to wait in line to turn left than make 3 right turns around the block.
In addition to correct usage of your business space, spatial intelligence software like Fract can give you actionable insights on how to increase your market share even further as time goes by, based on your spatial and sales data.
It’s like using Google Maps for your business – You drive around for a little while and their AI says “Hey, I have found this new route, you will save 5 minutes if you take it”. The more you use our spatial intelligence software, the more actionable business insights it can come up with, while on the go.
Conclusion - The more you know
Knowing and understanding your business space allows you to successfully manipulate various elements to fully unleash the potential of your business. We live in the technology age, and technology allows us to collect trillion GBs of business, customer and sales data, but to really come out ahead, you need that data to work for you.
It's not about how much data you have, it's about what you can do with it. Even a tiny bit of information - information that you have and others don’t - might be enough to do the trick, and that information is hidden inside your own business and sales records. It’s high time to start using your business data effectively, and stop following suit.
Mike is the Co-Founder and CEO at Fract. With over 20 years of retail and business location analytics experience behind his belt, Mike counsels business owners and helps them get the most out of their business and sales data. He is also a passionate art lover and enjoys a glass (or two) of good wine with friends and family on the weekends.