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GIS fuelling retail sector

Anand Kashyap
Sub-Editor, Geospatial World
[email protected]

In recent days, retail sector has witnessed a high growth rate in developed countries, and is poised for an exponential growth in the emerging economies. In the latest TechNavio market report, Geographic Information System (GIS) Market in Retail Sector 2010-2014, analysts forecasted that GIS market would touch around USD 456.5 million in the retail sector in 2014. The report, which focuses on North America, EMEA and APAC regions, further mentions that the global GIS technologies market in the retail sector would grow at CAGR of 13 per cent. As far as India is concerned, according to A. T. Kearney market report, the Indian retail market is expected to grow to USD 833 billion by 2013 and USD 1.3 trillion by 2018, at a CAGR of 10 per cent. Indeed, the market report instils a great confidence in India’s potential.

The highly promising retail environment means that retailers need to monitor their trade areas, assess the impact of competition and choose new store locations strategically. GIS with its capability to manage, display and analyse business information spatially, is emerging as a powerful location intelligence tool.

Role of GIS
Maps, an essential ingredient of GIS, possess an insightful power. It helps retail business identify trends, patterns and opportunities that may not be possible to detect in tabular data. GIS employs use of computers, software and data. It puts market data from databases and spreadsheets on map and thus enables a retailer identify factors like the demographic profile of an area (by studying the customers around a potential store location). Explaining the importance of GIS, Vidhya Srinivasan, Head Strategy and Head Finance, Hypermarkets, Aditya Birla Retail Lmt., said, “GIS technology helps retailers plot catchment potential as well as understand specifics about the catchment such as density, traffic flow etc. We use the data as one of the inputs to evaluate potential of new store locations.”

Retail corporation decision making structure
GIS – the road ahead
Retail business processes like market analysis, site selection, merchandising, distribution, delivery and facilities management – all involve geographic relationships. So, it is imperative that GIS enables retailers to understand and visualise these geographic relationships. As per an expert, “GIS enhances predictive investigations including market and customer analysis, encapsulating different forms of real-world and modelled data to understand the demographic, competitive and psychographic interaction of consumers, suppliers and the geographic space in which the data is distributed.”

USP of GIS is that it allows companies to consider multiple possibilities, understand the potential and impact of different investments in conjunction with the analysis of the changing trends in the retail landscape. Probably, no other software technology has such a far-reaching potential. Even, the latest TechNavio report indicates that the market is currently driven by the increasing use of GIS technologies to reduce long term risk. The report says that one of the key factors contributing to this market’s growth is the increasing adoption of GIS to identify the right location for stores and outlets. However, lack of communication infrastructure in developing countries could pose a challenge to the growth of this market.

Footprints of GIS in retail
In the US and Europe, retailers started using GIS in the late ‘90s. Robins (1993) revealed that early retail users of GIS have focused on marketing applications and on-site selection. Miracle Food Mart of Canada implemented a system to replace hand-drawn maps that were used to assess customer distribution and look at market share on a store-by-store basis. Dayton Hudson’s Target stores have used GIS as a strategic tool enabling it to determine which areas are not being properly served (Robins, 1993). Major national chains such as ‘Best Buy’ used GIS technology to assist their advertising, merchandising, human resources, distribution and other departments. In the US, Starbucks, Blockbuster, Sears and many other businesses used census data and GIS to help them understand the profile of people who bought their products and services and thus accordingly plan how to better market their products to these consumers (Madigan, 1997, Duffy, 1999, Taneja, 1999). McDonald’s used GIS technology to overlay demographic information on maps to help identify promising new store sites (Alan, 2004).

In fact, as part of a growing trend among hedge funds and Wall Street firms, satellite surveillance was used to gather market information. Surveillance pictures were provided by private satellite companies like Colorado-based DigitalGlobe and Virginia-based GeoEye in the US. That is, there were two links in the chain before satellite data reached Wall Street – first, a satellite firm used to take pictures and sell them to an analysis firm which studied those images and sold the aggregated data to hedge funds and Wall Street analysts. For example, UBS Investment Research issued its earnings preview for Wal-Mart in 2010, in which it publicly revealed that UBS had been using satellite services to gather information about the movement of cars in Wal-Mart stores. By counting the cars in Wal-Mart’s parking lots month in and month out, Remote Sensing Metrics analysts were able to get a picture of the company’s customer flow. They then worked up a mathematical regression to come up with a prediction of the company’s quarterly revenue each month.

In India, Hindustan Unilever (HUL), a consumer goods company, recently announced that it used GIS, besides relying on unconventional distribution channels, to up its rural reach in a cost effective manner. The company used a network of 68,000 volunteers and planned its marketing approach in rural areas through GIS. In addition, GIS also helped determine the position of the volunteers. This innovative approach tripled HUL’s outreach in 2010-11. It is not only HUL, another consumer goods company in India – ITC is also following the same path. Harminder Sahni, MD at Wazir Advisors told an Indian daily that all these initiatives were taken to make rural distribution and access, stronger. Some companies like M&M, TVS, DCM Shriram derive good volume sales through their rural initiatives.

In the ever-growing retail market, retailers are keen to utilise GIS tools to organise, visualise, analyse and leverage their business, implying greater work efficiency and improved productivity and communication in their work area. After all, in the world of business, one cannot afford to delay decisions, and GIS comes to the aid of retailers in a big way.


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