Creating a winning strategy using real world data, advanced analytics and simulation

The Solution

Real world insights underpinned by geospatial market simulation can empower teams to understand the challenges, opportunities and changes they may see in the market in the short, medium, and long term; which provides a greater degree of certainty for corporate decision making compared to strategy creation alone.

At Deloitte we have developed a solution called the LocationEdge Ecosystem which uses geo-spatial insight to enable better strategic decision making; using proprietary data covering geodemographics, competitor outlet locations, mobility data and real world spend data. When combined with an organisation's location, performance, customer and occasion segmentation-based data, the solution can simulate the outcomes for a huge range of scenarios. This ensures that any strategy is underpinned by a robust, objective and insight led view of the future.  

Viewing the real world

Let’s deep dive into TrueSpend, which is part of the LocationEdge Ecosystem. TrueSpend uses real world spend data, enriched through numerous datapoints, including: true expenditure by over 200 merchant categories, on and offline spend, origin to destination spend, customer loyalty and transactions, the true addressable market, all retail destinations and outlets, geodemographics, as well as a wealth of other market data. 

Figure 1: TrueSpend Catchment Interrogator for Bluewater and Lakeside

If we look at retail, leisure and consumer driven businesses, key commercial challenges they face are understanding the future role of their physical space and their channel and fulfilment strategy. We’ve seen through our analysis that total spend has dropped by 23% across the UK between pre and post COVID periods and with the uncertainty with omicron this looks set to continue. However, this impact has not been consistent across types of industry, location, consumer, geography and channel. Even through initial analysis using types of location we can see significant variation of total market expenditure:

Table 1: Total Market Expenditure using LocationEdge real world spend data

Taking just one industry example, ‘Quick Service Restaurants & Grab & Go’, has only seen a reduction of 3% in the context of this 23% drop in spend nationally. This demonstrates the resilience of some sectors in comparison to others. Fascinatingly, when we carried out a further analysis through LocationEdge TrueSpend, we saw a 15% increase in ‘Quick Service Restaurants & Grab & Go’ market spend within regional & suburban centres versus a decline of 10% in city centre markets. 

Real world insights underpinned by geospatial market simulation

Let’s look at another example of how geospatial data can be used to influence decision making. Here we have focused on the commuter hub of Paddington station as a use case. We can see the catchment illustrating where consumers are travelling from to spend in Paddington station.


Figure 2: Paddington Real World Catchment Pre-Covid

In the period within COVID, up to now, populations stopped commuting via western trainlines into Paddington. No surprises there! However, where it becomes very interesting is when we consider the spend within the market. The market’s localised affluent demographics have plugged the spending hole. As a result, Paddington has only seen a reduction in spending of approximately £20m, despite the significant reduction in catchment size. This shows that spending is coming from the more affluent who are now working from home, rather than commuters coming in from other areas.  

 Figure 3: Paddington Real World Catchment during Covid

The conclusion we can take from this is that retail, leisure operators and consumer driven businesses may need to adapt to cater to these new market characteristics to maximise the value extracted from the demands of the consumer. However, this isn’t true for all locations and inconsistent market changes across the UK has likely resulted in variations in performance across industry, channel, offer and product range.

While our Paddington example focussed on a traditional urban location and the impact of hybrid working; we have also seen a rise of ‘residentialisation’ or ‘localisation’ where local markets have become increasingly relevant and viable.

A good example of this is the Feltham market in West London, which has doubled in size between the pre-COVID and during COVID periods. This shift of consumer behaviour is also reflected in spending habits within the market’s spend categories. Feltham has observed an increase in grocery spend from 54% to 78% as the market serves more localised populations. 

Figure 4: Feltham market insights

And what does all of this insight mean? Organisations may need to adapt their strategy for markets such as Feltham to maximise the value extracted from these changing and growing opportunities. However, this investment will need to be weighed against multiple scenarios assessing the potential return to ‘normal’ consumer behaviours. Through our ability to run advanced simulations of future scenarios, we can understand where the market is heading and prepare organisations for different possibilities.

In summary, we believe that a robust and successful growth strategy can only be achieved through real world insights underpinned by advanced analytics and geospatial market simulation.
 

Author

Nielsen Harrap, LocationEdge and Geospatial Lead in AI & Data, Deloitte Consulting