Breaking Down Data Driven Real Estate Decisions
Guest: Brin Snelling
Topics: Retail Union, data analytics
Transcript:
Chris Ressa 0:00
This is Retail Retold, the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa, and I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC Management.
Welcome to Retail Retold everyone. Today I’m joined by Brin Snelling. Brin is a Forbes contributor, and in Strategy Analytics for Retail Union. I’m excited for her to be here. Welcome to the show, Brin.
Brin Snelling 0:31
Thanks, really appreciate. Thanks, really appreciate the time. Glad to be here.
Ressa 0:38
So, glad to have you. So Brin, tell everyone a little bit about who you are and what you do.
Snelling 0:45
Yes, so my past work experience is always on the tenant side. So I work for Bonobos, and we, I currently work for Retail Union, which is a retail advisory firm, where we help build data driven real estate strategies for brands. And my role is really on that data side. So I take data from clients as well as third party data and build those real estate strategies. And then our team goes out and implements that strategy.
Ressa 1:12
Amazing. And is there a store that is open now that is near and dear to your heart? Because you had worked on it for so long on analytics, either at Bonobo or maybe the strategy at WeWork or something you are working on now?
Snelling 1:15
Yeah, I mean, I helped open over 4050 stores at Bonobo, so a lot of the ones that are open are ones that I was part of. And then at Retail Union, we work with clients like Rowan Purple, you know, Bose, as well interior design. So we’ve been involved in a lot of stuff.
Ressa 1:55
So when you’re looking at the, so walk everyone through, like, what is that, you know, we hear all these terms today, analytics, third party data, and using that to drive real estate insights. What does that all mean? What are you doing?
What is Brin doing?
Snelling 2:16
Yeah, I mean, we think it’s really changed, it’s become very unique. And that we have ecommerce-first brands that have a ton of customer data, so they know where their customers live. And we’re able to take that and tag it to demographic data, and actually show them where their customers are, and also where they shop. And then we also look at the shopping centers, and look at the trade area and the people that go to those shopping centers.
And we’re able to say, hey, 80% of your customers shop at this location. And so there’s really a way to connect with you that is quite impactful for building retail real estate strategies and deciding where to open locations. But there’s certainly a lot of opportunity, I think, for more brands to use it.
Ressa 3:04
And that’s super helpful. You mentioned where the customers are. One of the things I was always wondering, and some old school real estate is like, I’ll use a LinkedIn term is look at audiences, you know, a lot of DTC brands, they figure out like, alright, a lot of our customers here, this is a good market to penetrate. And here’s the suburbs in that market, or whatever it is, that we’re going to penetrate.
Do you ever do stuff like, hey, man, these two random markets, right? Our top customers are in Vancouver, and we’re gonna open up some stores there. But you know, oh, I don’t know, Charleston, South Carolina has demographics. And people are just like this. They just don’t know what’s there. So that’s a good spot to open up a store.
Snelling 4:05
Yeah, yeah, a lot of the time. And usually what we’ll do is both, usually, we’ll test out a market where we think, hey, there’s a lot of potential there, but maybe you don’t have the brand awareness, and see what happens. And we actually find some of our clients do incredibly well in those markets, just because of, to your point, we’ve identified that the customer is their customer and that there’s a lot of opportunity.
And sometimes it’s just that, you know, there’s nothing like them in the market. Maybe there’s no mattress store that exists there, that sort of thing. So certainly it happens, but obviously the safer bet is to go with your existing customers, and then I think as you get more into your expansion plan, where you’re at store 2030 etc, then you start to experiment with those smaller markets.
Ressa 4:53
So you know, I think a lot of people are always wondering, like, there’s data and science. But there’s also a human art to site selection market selection, that doesn’t show up. There’s anecdotal information. And where do you stand on the human component? Like, yeah, I know, the data says this, but it’s sort of data doesn’t get, especially in real estate. It’s such an old school sport.
Snelling 5:27
So yeah, 100%. So we start with the data. And that’s really, the idea is that that’s the, you know, block, like the building blocks of our strategy, where we present that data driven strategy, and then our team that is well versed, you know, they’ve been doing this for decades.
A group of very talented brokers, they then can go in and say, you know, we know that the center is doing incredibly well, right now, where we know, you know, there’s no vacancy in this location. So there’s no point in tackling that market at the moment. So obviously, there’s a lot of that that goes into it as well.
Ressa 6:06
Got it. Yeah. Okay. super interesting. I wonder. So tell us, you know, we’re at the holiday season here, we’re going into 23. I say retail, I say 2023. What’s the first thing that comes to mind?
Snelling 6:29
Well, one of the things I think on the big, like, it’s being talked about a lot, is the fact that brands aren’t getting, especially younger brands aren’t getting the investment or the funding necessarily as they would because of inflation.
So I think going into 2023, something that is really top of my mind is the fact that sometimes these brands might fall out and make room for, you know, other ones to come in and make rent or take space in a lot of these set top centers that have incredibly low vacancy right now, where we have a ton of brands that are on a waitlist in class A centers law, and I think that there will be more opportunity for that in that in the next year.
Ressa 7:10
Interesting. So if I understand what you’re saying, you have some brands that are on a waitlist, which is, I’ll be honest, is near and dear to my heart that there’s waitlists out there for four, four spaces. It’s it’s been such a good year that there’s waitlists, I dream about my team coming to me and saying here’s the waitlist.
I do. So that’s great. But what you’re saying is you think there’s going to be there’s a lack of funding for some of those, some brands who are occupying spaces today. And therefore they might close some stores.
Snelling 7:57
Yeah, close or even make the decision not to open when they were meant to just because of lack of capital. Unfortunately, that’s just one negative side going into 23. But I think there’s an upside to it as well, and that it’s going to right set some of it.
Ressa 8:11
It’s opportunistic, and you’re hoping for a little bit of that, I think. I think that’s interesting. Because that could be a way for you to shake some trees to get some spaces that you might not otherwise get. So sure. Yeah. What’s number? What’s number two, on your list? Retail? 23? What do you think?
Snelling 8:39
Yeah, I think the other thing is that obviously, we’ve seen a lot of retail brands, direct to consumer brands, open locations in the past year. And I think it’s incredibly, it’s become known as an incredibly valuable marketing channel. And I think that’s going to continue to be the case.
I’m sure you’ve heard, obviously, paid media has become incredibly expensive and a lot of CEOs that I talked to for Forbes articles as well as clients have said that you know, they’ve found these locations have really helped them acquire new customers. So I think that’s going to continue to be a big reason that companies open stores in the next year.
Ressa 9:18
Oh, we have a, we have a deck, DLC, I’ll send you called ‘The Stone Won’ little fun play on the, you know, ecommerce versus physical and, and one of the lines that I, you know, I’m not saying I created it, but I say it the most, is an online customer acquisition cost is the new rent. And, you know, this whole notion that online you don’t have to pay rent, but if you look, and we did a study of mature retailers.
Have you looked at their customer acquisition costs, i.e. marketing, and their occupancy cost? And the combination of the two, and you look at that, compared to a lot of, like, they were online only brands, the combination was less than just the customer acquisition cost alone of a lot of online only brands. And so, you know, when I look at it, and I go, you know, it’s so high. And I, I should grin at some times when we’re talking about this, because I think it’s just talking on the deadlift.
Some brands are talking about opening stores for marketing and or experience, even though they’re super important. I keep saying like, how about we’re opening stores, because it’s where the profit is, it’s the best place to make a profit. Because selling online, my wife orders four and returns three, you make no money, and pays no shipping. Yeah, and I, she does have to pay for returns. And she does that a lot. You make no money when my wife buys from you.
And so, you know, we keep talking about the store is like a place for paid media, a place for marketing, a place for connecting with consumers and the experience. I think those are all great. I keep waiting for the headline, I feel like one of the few were saying, How about it’s just a good place to make a profit. Why aren’t we saying this enough because of how challenging last mile reverse logistics, the customer acquisition costs, all these things to make a profit online?
Why is no one saying like, hey, the entry point for an ecommerce, like if randomly Chris opened up a t-shirt shop, the cost of entry is a lot cheaper, we’re going to open up a t-shirt shop online. But to scale, you get over $10 million in revenue. You start scaling and you’re shipping to multiple markets, like profit, it’s like, it’s not about profits. But how how do we grow market share? We’re about profit leaders. What about the store is a place for profit?
Snelling 12:03
Yeah, no, it’s true. And I think the challenge, but it’s something that we’ve been really trying to figure out is, the challenge is how do you quantify the impact of a store? Because I think a lot of the times, they’ll say, oh, on a formal basis, it’s not a low enough payback for us to justify the location.
But there’s a much larger impact that a store can have on other channels, right, on your wholesale channel or on your web channel. And I think being able to quantify that impact will actually open up that conversation more to say that we’re actually driving profitability.
Ressa 12:41
My quick response to that is, my response to that to anyone would be okay. But if you’re, because of customer acquisition costs, if you’re losing money every time you ship an item to my wife, well, then what are we talking about? Like, you don’t like the four wall return on that?
But what’s your return on my my wife buying six, returning five, paying no shipping or no return fee? That’s a loss. It’s a loss every time no matter who the retailer is. It could be a loss, you know, and that’s what, that’s what I don’t understand, I get that. But the other one could be a real big loss.
Snelling 13:21
Yeah, I think the kind of conversation about web is a little more flexible in that, yeah, they’ll see that as a loss. But there’s also this element of it building valued customers, right, I’m sure your wife has become a valued customer, because she’s been able to do that at many locations.
And so there’s this lifetime long-term value that they’ve gained from her. And I think that the conversation around physical locations is still kind of outdated where it is so traditionally looked at on an overall basis that very rarely are people opening their mind to looking at it as on a market level or on, you know, a whole omni-channel profitability.
Ressa 13:59
But the good news is, is that at the moment, anyone of scale or like, I don’t know, not even a scale of 10 million or more, there’s virtually no online-only brands that don’t think they need a store. They all believe they need stores now, and that physical retail is a piece. So that to me is a really important part. So I’m excited about that. You make a good point on that.
But like, I look at, there’s like a couple of retailers where there was one who went public, and they were online, only 65% of their revenue came from the stores. And there’s average stores like for 30% EBRO, if the entire company wasn’t profitable. And so that’s how much the drag online was. I was like, if this was operated like a small business, like back in the 60s, the simple answer would be, we’re not going to sell online anymore.
That would be the answer to that business. If it was right in like the 60s or 70s, we’re talking about making money. And it’s so interesting, we’ve gone to this other place where it’s been about valuation and growing revenue. And to your point about the funding piece, I think we’re gonna get back to some basics where profit is going to matter. And I think that’s going to be good for the store, right when, you know, capital’s more expensive than ever for a lot of these brands. So I don’t know.
Snelling 15:30
Yeah, that’s what I am predicting for 2023 is that I think brands will need to reach profitability sooner because they’re not gonna get the investment that they need. And they’re gonna have to fund, you know, store investments or whatever other commitments they have.
Ressa 15:44
So like, let me, and I’m so biased, I recognize that, but like, to me, profit matters is the easy answer. One is the store, it costs more, it costs more, I recognize the infrastructure cost, but it’s profitable. You know, it’s just proven time and time again, over the course of, since the first retail marketplace in Turkey and Istanbul, in you know, before BC, or whenever it was when the they had the traders coming from the Far East.
This is, this is a profitable endeavor, I think there’s going to be more, a lot of these brands are going to, I think they’re gonna use wholesale to get to profit. I think that’s going to be a piece. I don’t know. There’s gonna be more wholesale. You know, obviously, the Nikes, yeah, the other way there.
Snelling 16:35
But yeah, one thing I’m seeing is a lot of like pop and shops as well. So even, I was actually just talking to Ulta. I’m gonna be writing an article, but they have a rest shop within their store. So they’ve actually brought in other small brands to help sell in their store.
And, you know, you’re seeing that across the Brazilian stores right now, obviously, like Ulta, and Target and Sephora and Kohl’s. And, like, I think there’s just more and more of that, because they want to reach a larger audience and have a physical presence without the extreme capital investment of having their own location. Yeah, it’s interesting.
Ressa 17:08
I got one for you. This is like my top prediction for 23. Ready for this? Yeah, retail traffic’s going to be significantly up. So I’ll give you one in 20 at retail properties. So again, I’m biased, but here’s why. So, you know, 20, you mentioned waitlists. 2022 is a record leasing year. But because of supply chain, trouble getting building permits, labor challenges, a lot of the stores aren’t opening that signed in 22 till 23, we got a huge backlog of stores that were supposed to open in 22 that are opening and 23.
And I think people are gonna gonna want to check out the stores, see what they’re all about. And this isn’t being talked about on headline news. I mean, the weeds of it. And I’m seeing my peers in, you know, who have all these backlogs of signed leases of tenants, they’re just started construction, they’re getting close to construction, they’re going to open Q1 Q2 of 23.
I mean, we signed a lease in the beginning of this year, that’s not opening till fall of Q2. You know, we just, we just signed the lease with Nordstrom Rack, and they just announced it, we just did a rack deal in our center in Allen, Texas.
And we signed it a couple months ago, but we’re like working toward, that’s going on this like, you know, everyone’s talking about record leasing year 22. It’s not opening till fall 23. You know, so I think there’s a lot of that, which I think is gonna be a good thing for foot traffic at properties, which I’m sure you use this in analytics, in your analysis.
Snelling 18:50
Yeah, Placer, it is our best friend. Yeah.
Ressa 18:54
Are you a Pacer guru? Because you are, we’re obviously, we use Placer. But are you like a guru in the platform?
Snelling 19:04
Yeah, we use it pretty much every day.
Ressa 19:07
Interesting. So I talked to them a lot. I just had a big meeting with them. So we’re doing some projects with Pacer here. So do you use any other location analytics platforms other than Pacer?
Snelling 19:24
Yeah, we use some third party data that we put into Tableau and then we use Chain XY as well for just information on store closures.
Ressa 19:33
So one of the things I’m curious about, you’re looking at it. What metrics are like you looking at in Placer? That would be fascinating to me, that would be fascinating. Because I think everyone’s looking at different things. There’s like a million things. You can slice and dice it. What’s Brin going into Placer every day, what are you looking at?
Snelling 19:55
I mean, obviously the foot traffic of the center is a huge thing.
Ressa 19:59
So I’m curious to that. Right. But so foot traffic. Great. So I think we do all the two. When you say foot traffic, are you looking at number of visits? Is that what you’re looking at?
Snelling 20:11
Yeah, yeah.
Ressa 20:12
So this is a fascinating time. And so I first saw this, and then we’ve been a customer for a while now. And I go, Okay, this has a million visits. Great. With that, does that mean, because a million visits? It does. If you don’t do something with that data? I think it’s less actionable. So you’re like, when you think and you look at the foot traffic and the visits? How are you, how are you really diving into it for it to be actionable, or something that matters to you?
Snelling 20:49
Yeah, so I can give you an example. So a client, I just, I just built their strategy for 2023. And what I did was I took the traffic of the centers of the foot traffic, but I also took, we have attached demographic data to Placer. So we can pull household income, say age groups, spending patterns, etc, on a radius basis from the Trade Area of a senator. So we take all of that data.
And then what I’ll usually do, because each client is totally different, is do some like linear regression stuff to determine whether there’s a correlation. And we actually found that the foot traffic had a very high correlation to their sales, to their top line sales.
So we identify that as a strong metric to consider when we’re looking at locations, but that’s not the case for every client. And that’s why we really do look at different data points, depending on, you know, obviously, the demographics and the data points that matter that have a correlation.
Ressa 21:53
So you whatever. So that’s interesting. So that makes sorry, that makes sense to me. But you’ve done linear regression, where the traffic doesn’t really line up to sales.
Snelling 22:06
Not exactly, yeah, no, there’s sometimes, it’s very, very low correlation. Why might that be, but it’s not. I would say in situations where the brand maybe is not, like, has a bigger online presence, has a bigger brand awareness in the city that they’re in.
So we look at sales per household, for instance, for brand awareness. And that tells us that a lot of people in that area are already aware of the brand, etc. So maybe your traffic won’t be as important because people will be going there as a destination.
Ressa 22:44
Very interesting. That’s interesting. Okay. Yeah, we’ve done things like, where, you know, we have a database of some tenant sales, right? And then you can see the foot traffic, and you can divide that out, the foot traffic, the visits per store to get to in an average, an average ticket volume per foot traffic, right? Per customer.
And then you can just take that and when you see an average dollar amount per per person walking in, and then you can see somewhere, okay, this has that many, and this is their average dollar amount per person walking in and get to a roundabout sales. It’s a very rudimentary way we’ve done that.
But I’m curious, outside of foot traffic, what other metrics, or what other things are you like doing in that program? And obviously, it’s all based on foot traffic. But anything else in there, that was super interesting, what you just told us? Because I think there’s a lot of users of Placer or another location analytics on this listening to this now.
Snelling 24:03
Yeah, so we’ve, I think, and I wasn’t part of this because it was before I joined. But I believe that we got them to put a lot of our third party data into the Pacer system so that we can look at demographics on a trade area level of shopping centers.
So that’s been incredibly helpful, because we can say, you know, a 70% trade area around a location has household income of $100,000, or whatever it might be. And that’s definitely useful when you’re looking at certain clients. We know what their customer demographic is, and we’re able to match that up.
Ressa 24:42
Super interesting. That’d be something else. What are some stuff we can expect you to write about in the near future?
Snelling 24:48
Yeah, I’ve been doing a lot of features with specific brands. So I’m pretty excited about one coming out in January that I’ll just say is with a very proud DTC brand that was one of the first open stores. And I think that’ll be a really interesting piece with a lot of great information. And then I have a trend piece coming out in January for 2023. Probably, you know, coffee and some of what we talked about today, but that will definitely come out.
And then yeah, I’m always looking for brands to pitch me, they have interesting things that are coming out, interesting stories. I think there’s a lot of exciting stuff that’s coming out, I’ve been getting, I will say, I’ve been getting so many pitches, like I would say, tenfold from earlier in the year of young brands, opening stores, and then also experiential concepts opening up.
Ressa 25:43
That want to pitch you to write a story?
Snelling 25:47
Yeah, that’s how it works, a lot of times is they’ll send me a message asking if I’ll write about them. But I’m very selective. But it does give me good ideas.
Ressa 25:58
Got it? Well, we are. How did you become a Forbes contributor?
Snelling 26:07
I just message them. I used to write on my website. Obviously, you don’t get as many writer reviewers on there. And I had some experience when I was in university writing for Elite Daily. So they saw that and they saw my experience. And they’re like, we don’t have anyone that writes about retail real estate on the team.
So there’s just an opening for it. I think there’s a lot of people that write about retail in general, but not a lot of people that focus on the physical aspect and on the real estate aspect of it.
Ressa 26:40
So I’m, like, signed up in the Forbes member council and I, I gotta write something for 2022. And I’ve got something I might send it to you to proofread for me. Yeah, of course. Cool, well, listen, you got any good holiday plans?
Snelling 27:06
Family stuff, you know, the usual, but I have like a week off. So I’m going to actually work on some of my writing while I don’t have work to do.
Ressa 27:15
Well. I want to take us to the last part of show, we call it retail wisdom. I got three questions for you, ready? All right. Yeah. Question One. What extinct retailer do you wish would come back from the dead?
Snelling 27:30
So earlier this year, or a few months ago, I talked to Vee Boo who runs a lot of spaces, and he used to be the founder of Beta and I was really sad when I researched that article that Beta had closed. So I know that’s a very fresh one but hasn’t gone to the dead but I wish…
Ressa 27:47
They had a lot of cool products in there. Yeah. I didn’t end up buying them when I was in there, though. That was the thing. It felt a little sharp. To me.
Snelling 28:00
I think it was more of a marketing platform really, like that was a pure marketing platform because it was an experience, you go and then you might go buy something online, but you experience the product in the store in a really cool way.
Ressa 28:13
Okay, question two. What’s the last item over $20 you bought in the store?
Snelling 28:20
Ah, Christmas shopping, so a pair of sweatpants for my niece? At Roots, which is a Canadian baby store.
Ressa 28:27
Yeah, question three Brin. And I know they’re not in Canada, and for everyone who has no brands in Toronto, cool city. And I know they’re not counted anymore. But I asked everyone if you and I were shopping at Target and I lost you, where would I find you?
Snelling 28:48
I would say I’m a sucker for home good products, specifically throw pillows or blankets probably have way too many of them. I enjoy decorating my home a lot. So yeah, that’s tends to be my Target purchase. I lived in the States for a long time. So Target was a place I went quite a bit.
Ressa 29:02
Where do you live?
Snelling 29:06
San Francisco and New York.
Ressa 29:10
Two great cities. Okay. Well, Brin, this has been great. Thank you so much for the time. I really appreciate it. Hope you have a great holiday. And keep doing what you’re doing, and looking forward to reading some of your articles. And I know what got you on the spot, but I’m going to send you to proofread my article before Forbes releases.
Snelling 29:29
All right, sounds good. Thank you for having me. Really appreciate it. Enjoyed it. It was fun conversation. And yeah, happy holidays.
Ressa 29:37
Thank you for listening to Retail Retold. If you want to share a story about a retail real estate deal that you were a part of on our show, please reach out to us at retailretold@dlcmgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney Also don’t forget to subscribe to Retail Retold so you don’t miss out on next Thursday’s episode.