Operators seeking to optimise new openings strategies in a fiercely competitive market need a hyperlocal understanding of target consumers.
That was one of the messages from CGA’s commercial director Graeme Loudon at the Future of Finance seminar in mid-June. He said traditional site selection factors like local demographics, footfall, market mix and sales history remained crucial, but stressed that knowledge now needs to drill right down to postcode level if risk is going to be reduced in new openings.
Hyperlocal analysis is particularly important at a time when intense competition has led to saturation in some places, and to closures, CVAs and administrations from a host of high profile casual dining operators. This saturation is illustrated by CGA’s Outlet Index data showing how the ratio of people to restaurants across the top 10 urban areas outside London has tumbled—from one site per 2,600 people in 2005 to one per 1,890 now.
Competition has been further intensified by the rise of ‘third space’ concepts like street food and food halls, Loudon told Future of Finance. These have stolen share from restaurants, pubs and bars in some places, but in others they have had a ‘halo’ effect, inspiring fresh local interest in eating and drinking out, and prompting other operators to open nearby too. That has been the case in Altrincham, for example, where a food-orientated market hall has acted as an anchor site and created growth for the market as a whole.
Overlaying destinations like this with CGA’s consumer segmentation tools, which break down people by out-of-home eating and drinking habits as well as demographics, is a powerful way for operators to decide whether they are suitable for new openings. For instance, Altrincham over-indexes on CGA’s ‘Carefree Dolce Vitas’ segment—older, affluent and discerning consumers who eat and drink out regularly—which identifies it as a place with potential for premium bars and restaurants which the market hall has helped realise.
Consumer segmentation can help with ranging and pricing decisions too, since consumer segments vary widely in their levels of experimentation and sensitivity to price.
As Loudon told Future of Finance: “It’s so important now to invest in the right locations... but you need to consider the hyperlocal consumer and want they want.”