How data is reshaping real estate

Jordan Fisher was confused. Each variety of Red Bull energy drink comes in a similar metal can, and his company’s camera system, which tracks which products customers buy in stores, struggled to tell them apart.

This hurdle was one of many his company, Standard AI, faced when upgrading a Circle K convenience store in Tempe, Ariz., With computer vision software, which tracks every item customers pick up. so they can simply scan their compatible phone with the app to pay as they go, eliminating the cash line. A network of more than 100 cameras can identify any of the thousands of candy bars or similar-sized drinks entered by customers, including Red Bull cans, now identifiable through a combination of geometric projections and remote cameras. higher resolution.

This tracking of consumer activity in the store – where shoppers watch and linger, with cameras capturing their interactions and near misses – is part of a growing effort to use data collection to make the more efficient commercial real estate.

“Checkout is kind of the killer app, but that’s just the tip of the iceberg,” said Mr. Fisher, managing director of Standard AI, which fine-tunes camera accuracy in harsh environments. high volume and high density. “You have a system that knows where people are in real time, down to the centimeter. It’s all about the use of real estate.

From the invasion of big box stores to the boom in e-commerce and, more recently, pandemic lockdowns, physical retail can seem stuck in a perpetual crisis. But in-person purchases are still very popular and the object of significant investments. (Retail technology investment hit a record high of $ 31.5 billion in the second quarter of this year.) Amazon has spent generously on physical retail, including $ 13.4 billion on the acquisition of Whole Foods and the development of its system Just Walk Out, which started a cashier-less payment race. among grocery stores and retailers.

Technological layers added in stores and entertainment venues (crowd-tracking cameras, information gleaned from smartphones, neighborhood pedestrian traffic count, and sophisticated demographics) aim to replicate the measurement and analysis of data from the online experience.

But privacy advocates are sounding the alarm bells about the technology as Big Tech comes under increased scrutiny. Congressional testimony from Facebook whistleblower Frances Haugen in October intensified calls for new regulations to curb the giants of Silicon Valley.

Lack of regulatory clarity complicates efforts to address privacy concerns. Without a comprehensive federal privacy law or even a shared definition of personal data, retailers must sort through layers of state and municipal rules, such as California’s Consumer Privacy Act, said Gary Kibel, a partner at the firm. Davis + Gilbert attorneys specializing in retail sales. privacy.

Tech companies thwart pushback by noting that their systems are designed to limit what they collect and anonymize the rest. For example, Standard AI’s system does not capture faces, so they cannot be analyzed with facial recognition technology.

The growing volume of data on consumer and crowd behavior has important implications for real estate design. It even makes the physical space more interactive for marketers.

WaitTime, an artificial intelligence crowd counting startup backed by Cisco Systems, is used by sites such as Dodger Stadium and Melbourne Cricket Ground in Australia. At the FTX Arena, home of the Miami Heat, digital messaging on the lobby entrances powered by WaitTime tells fans not only where to find food and drink, but also the length of the lines.

In today’s market, “data eliminates risk,” said Ken Martin, executive director of global sales at Cisco, adding that crowd tracking technology could deliver high ROI.

The increased use of crowd counting technology is part of a wave of changes that industry experts say sports and other entertainment venues will use to improve safety and crowd flow and enable mobile orders. and contactless.

“The pandemic has taken people who don’t use this technology to extremes,” said Sanford D. Sigal, managing director of NewMark Merrill, which owns more than 80 malls, and chairman of BrightStreet Ventures, a company that develops retail sales. Technology. “Is this technology the aspirin, which you take when you feel bad, or the penicillin, where it saves your life?” Today it is definitely penicillin.

Many industry observers suggest that these methods can improve performance, but there are skeptics.

“I’m a fan of fact-based decision making, but there are a lot of charlatans who promise things that aren’t reasonable in terms of results,” said Mark A. Cohen, director of sales research at detail at Columbia Business School.

But proponents argue that data can make a difference in decision-making by streamlining renting and finding new locations. Detailed information on how customers use the parking lot or specific stores helps owners and owners better organize their malls and shopping centers.

“It’s not that data is so far removed from intuition. It’s that data is real and gives brands the extra boost they need to open a store, ”said Adam Henick, founder of Current Real Estate Advisors, which focuses on social media and business analytics. data.

He compared the data adoption in real estate to Major League Baseball’s recent adoption of more aggressive defensive lineups, using statistical analysis to move outfielders for every hitter. It’s the same game, but played with a lot more strategy and certainty.

Brokers can more easily select potential locations to a handful of points based on local demographics and the mix of nearby stores, said Ethan Chernofsky, vice president of marketing at Placer.ai, which provides location information and from demographics to retailers.

“Now you really understand the demographics that show up at a location, the actual foot traffic, the value of roommates and their traffic, a much richer understanding of a location,” said Kevin Campos, who runs the fund. of business retail technology. the Fifth Wall capital company. “It’s a more informed conversation between a landlord and a potential tenant.

Placer has approximately 800 clients in commercial real estate and retail, including top brokers and developers such as Tishman Speyer and Marcus & Millichap. Placer data has been a go-to tool for measuring loyal shoppers this year, providing week-old information where earlier methods lagged by three or four months, said James Cook, director of retail research. for the Americas at JLL, a commercial real estate agency. brokerage.

The growth of data mining has attracted more and more entrepreneurs keen to create a more data-driven experience for retail brands.

Leap, a New York-based start-up, operates stores in multiple states for small, often digital-native brands, direct to consumers, looking after their real estate, design work and even analytics. data, said Amish Tolia, co-chief executive. by Bond. For example, Goodlife Clothing, an online retailer, hired Leap to operate its two Manhattan locations.

“I look at this business in a digital way, and they see it the same way,” said Andrew Codispoti, co-founder and co-CEO of Goodlife. “They’re becoming experts in more and more places across the country, where to grow, based on your data as a brand.”

The option to open a turnkey location is a big selling point, but Leap also merges buying models, including local ecommerce sales, foot traffic, and neighborhood demographics, across all of its locations. . This allows him to choose the ideal tenants and even point them to the most profitable merchandise to display.

“Leap is actually going to have a nationwide dataset that is really meaningful to retailers and real estate owners,” said Mr. Henick of Current Advisors, who helped Leap find Manhattan locations for retailers. “It can reassure brands about their success rate in a given location. “

Data mining and analysis are becoming key tools to help retail and entertainment recover from the pandemic-induced slowdown, he added. “If you’re spending dollars, don’t you want to spend them as accurately as possible? ” he said. “I think that’s the advantage of the data.


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