Consultancy: Science in stores ousts guesswork: A Leeds-based company has brought an academic approach to business outlets

W H SMITH was considering opening a branch in Farnborough, Hampshire. The town looked an ideal candidate with the size of its population and the right demographic pattern. But the company was unsure about the potential impact on its stores in surrounding towns.

To measure that, it went to GMap, a geographic analysis and predictive modelling company based in Leeds.

Set up three years ago by a group of former academics from Leeds University, GMap claims to have a unique mathematical model that can predict sales in a given area. Running the Farnborough data through its model, GMap discovered that a W H Smith store in Farnborough, while successful in isolation, would take 40 per cent of its sales from existing Smith stores in nearby towns such as Godalming and Aldershot. The store opening was shelved.

'The risk of opening a new store or supermarket can mean an investment of several millions,' says Martin Clarke, GMap's managing director. 'What we do is improve the quality of that investment decision.'

Predictive sales forecasting is far from new. An American company, CACI, opened in Britain in the late 1970s and has a UK turnover of pounds 9m. Others in the sector include the Nottingham-based CCN and Pinpoint of London.

GMap's is different in its academic background and the sophistication of its mathematical model. The company was formed in 1990 after the two founders, Dr Clarke, a geographer, and Professor Alan Wilson, a mathematician, had spent 20 years researching mathematical models that explain how markets work. Their model uses census information about population but also takes into account the reasons people in a particular area decide to visit a certain store and the interaction between demand and supply.

The result, according to GMap, is greater accuracy in the sales forecasts. Dr Clarke expects to be able to forecast likely revenues for a new store, or for a branch of a bank or building society, to an accuracy level of plus or minus 10 per cent.

GMap (the name stands for Geographical Modelling and Planning) now has a turnover of pounds 2.5m and recently sold the US rights for its model for dollars 6m. The American buyer, R L Polk of Detroit, bought the rights after witnessing a system, developed by GMap for Ford in Britain, that can tell car manufacturers where to locate their dealerships so that they can maximise their market share and cause as much damage as possible to their competitors.

For larger companies such forecasts are becoming increasingly important. Small companies with 10 or 20 outlets could almost decide a store opening on the basis of an entrepreneurial hunch and a few calculations on the back of an envelope. But for major retailers such as Sainsbury, with over 300 stores, or W H Smith, which has 500 Smith stores plus the Our Price Records and Waterstone's book chains, location planning becomes a complex science.

As John Barrett, head of W H Smith's site development division comments: 'We used to look at the catchment population and its demographic profile but it wasn't as sophisticated as it might be. It relied very heavily on judgement and we didn't think that was adequate.'

The results using the model can be surprising. In Wimbledon, south-west London, W H Smith was able to open a branch of Waterstone's next door to a branch of Smith's which had opened only two months earlier. The two were found to be complementary.

The recession has sharpened minds too. As Dr Clarke says:'During the 1980s retailers could open virtually anywhere, now they can't'

Indeed, the recession has seen companies such as GMap and CACI spend more time helping companies to decide which stores they should close than where they might open. 'People are looking much more closely at their network,' says Mike Jennings, GMap's marketing director.

'They are not just looking at the sales figures and saying 'Right, that store is under-performing; let's close it'. They want to understand why some stores are doing better than others.'

Phil Durban, head of CACI's retail division agrees. 'Most companies are looking to cut costs but they want to make sure they cut them in the right way. They are asking whether it is the management of a store that is wrong, or whether it is the product on offer.'

But CACI sees better news on the economic horizon. While the rationalisation work continues, the number of inquiries about store opening programmes is increasing. 'We're beginning to see the turn,' Mr Durban says.

(Photograph omitted)

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine