We present an edited version of our conversation with Ethan Chernofsky, VP of Marketing at Placer.ai, from the Coresight Research webinar held on July 16, 2020. The webinar was hosted by Steven Winnick, Senior Analyst and Head of Innovators at Coresight Research. Ethan Chernofsky is the VP of Marketing at Placer.ai, and loves helping businesses unlock the power of location analytics. Prior to Placer, he was the Director of Corporate Marketing at SimilarWeb and the Vice President of Headline Media. Placer.ai Overview Placer.ai is a foot-traffic analytics platform that generates insights into a physical space, offering a deeper understanding of the factors that drive success. Placer.ai empowers professionals in retail, commercial real estate, hospitality, economic development, CPG and beyond to truly understand and maximize their offline activities. Ethan Chernofsky: Essentially, we see 30 million devices throughout the US critically. These are all anonymized aggregate data, so are GDPR and CCP compliant. That data comes into our system solely as a panel from which we can utilize artificial intelligence [AI], machine learning and the most advanced data science practices to make predictions on traffic to any location anywhere in the US. By doing that, we can then aggregate all of those locations and present this data in a wide range of reports. Our core resource is location data, but with that, you can understand the customer journey; you can understand when they are visiting; and you can understand how those trends are changing. What are the cross-shopping patterns? We love location analytics, because we think it is has some really unique advantages:

1. It is cross-functional—It is not just providing value to one element within an organization, but across an entire company.
2. It is behavioral—Very often we see that people will fill out surveys of what they think they would do, and that is not always aligned with what they actually do.
3. It is in real time—Our data is is accurate up to four days ago, so it is constantly updating and giving that real-time or near-real-time visibility.
4. It is granular—It is able to be built up into a wide range of reports.
5. It is accurate—We were chosen by M Science [a data-driven research and analytics firm] as the most highly correlated location-data provider with transaction data, which is obviously critical in the offline realm where those conversions are so much higher.

The Return of Traffic to Shopping Centers

What are the primary changes you are seeing with outdoor centers compared to indoor malls, and what are some of the longer-term ramifications when we look at these trends? The first thing we are seeing—and it is fairly expected—is that indoor centers are further away from their normal than an outdoor center, because the tenants in outdoor centers tend to orient themselves more towards essential retail, and so they are able to be open longer amid Covid-19 lockdowns. Even when they reopen, a lot of indoor malls have very strict restrictions on how long they were open and what was open within them, which can mitigate how far one is willing to travel to go to the mall. A lot of the conversation in commercial real estate at the moment is around, “If I'm an outdoor-center operator, how do I pull some of the retailers that had been indoor mall-oriented outside?” I think we are going to see brands test that out. The flip side of that is that spaces are going to open up in malls, both with store closures and because of some of this shift. That is going to give an opportunity for brands that were either not offline at all, or primarily oriented towards outdoor centers, to test out different types of formats that could potentially work within an indoor environment. Ultimately, there is a great likelihood that this diversification of what exists within a mall and what exists within an outdoor shopping center could create a better retail environment overall. Will malls recover following the pandemic? The short answer is yes. The mall sector provides something really unique. I think what we sometimes mix up with this narrative is the fact that it's going to be different, as opposed to worse or nonexistent. When you think of some of the innovative ideas taking place in malls—both repurchasing department centers to larger food and entertainment options to bringing in new types of retailers to the mall environment and even co-working within malls—B- or C-class malls are always going to struggle more to compete with that top level. How do you utilize your space in a more effective way? If I have a ongoing audience that is coming daily in terms of coming to work, then I can be the place where they eat, and I can be the place where they exercise and the place where they pick up certain types of goods. I think this shift in mentality and models is going to be hugely important. The biggest element for us is what that new modeling will look like. This idea that we can now have models with fundamentally different vibes and fundamentally different experiences and retailers within them, that is going to create a more diversified environment—making each mall exciting and targeted toward a specific audience. Our expectation is that as the pandemic comes under greater levels of control, we will see traffic to malls coming closer and closer to normal. If we lose control of the pandemic, it is going to be harder to see those footfall numbers rise back to pre-Covid levels. [caption id="attachment_113963" align="aligncenter" width="700"] Ethan Chernofsky (left); Steven Winnick (right)
Source: Coresight Research [/caption]  

Mission-Driven Shopping and Channel Innovation in Grocery

Moving on to traditional grocers, some of the top brands like Trader Joe's and Whole Foods have struggled, while Albertsons and Kroger are thriving. Is this a trend that will stick? I think the answer is yes, and I think there are a few things at play, especially when you think about the next year. When you think about what separates Albertsons or Kroger from a Whole Foods or Trader Joe’s, it is the traditional grocer that we trust: We can go in and accomplish 90% of our grocery needs within one location. The same is not true of those other brands, and they are getting hurt. We have data that shows that at Trader Joe's locations in Florida, 10% of visitors will visit a Publix on the same day—and this was the last six months of 2019. This means that consumers are visting Publix for their core purchases and then going to Trader Joe's because it has a range of items that they love there and cannot get anywhere else. That is a really valuable asset for Trader Joe's. However, in a situation like this [the Covid-10 crisis], where we are so much more mission-driven on our shopping, that is going to have an impact. Whole Foods is more expensive in a period of economic uncertainty, and it already had a much lower regularity of visits from a single visitor. When we look at customer loyalty scores, Whole Foods is almost half of what a Publix would see. So, these are the types of brands that are going to feel the impact more over the next 12 months. Even if things go very well, we are still going to be in this period of extended uncertainty and economic challenges. So, we do believe that classic grocers are going to see an ongoing boost in the coming months and year. How can the grocery sector leverage channel innovation? Curbside pickup and micro-fulfillment. We found that globally, online ordering of grocery jumped 200% in those first few weeks of the crisis, but then very quickly dropped back down to 50% growth. If we think of how small the online element was of the grocery experience, event though 200% growth is wonderful, it is still a small piece of the pie overall. I think brands need to track channel innovation, but they need to also be thinking, “How do I make the experience easy? How do I get people to products they want?” There is so much room for innovation, even while recognizing how critical the offline experience is to the overall grocery journey.

Audience Q&A: Rebound Expectations

How will a potential second wave of Covid-19 impact retail recovery? We expect The Home Depot and Lowe’s to still succeed: They are essential retail. They are not closing, and if we are in our houses for longer, all the more time for another project! We expect the Dick's Sporting Goods and the NIKEs of the world to see a surge, because consumers are prepping for being without a gym for even longer. Look at how consumers react when they are worried about being at home for a long period of time, and that will be exacerbated by the fact that we already know what it's like to be at home for a long time: Our stock-up mentality is going to be a little bit wider, and so I think we will see what we saw before, potentially, with a little extra on top. Many fast-food players were hit very hard by the pandemic. Is there a long-term concern for their overall brand health? I mean, not for me. There is nothing that we have seen that says these brands are in trouble. Looking at the time-of-visit distribution in May through early July 2019 versus the same period in 2020, it is evident is that our patterns have changed because we are not going to work as often. Starbucks and Dunkin’ have heavy presences in major cities, and they are a big part of our daily routines. When that routine gets completely upended, obviously, these retailers are going to see a decline. However, at this stage, our data shows that these retailers may return back to “normal” fairly quickly. Even as Covid has resurged again in so many states, we have seen certain players in the food space dip back down after seeing growth, but that is not the case for Dunkin’ and Starbucks. They were so thrown off their rhythm that it feels like there is very little that could stop a strong comeback at least continuing for the next few weeks. Consumers have essentially left the gym, and many have embraced digital health solutions. What is your take on the rebound of offline fitness? I still expect there to be a strong rebound. Obviously, the overall sector is down, and we are not seeing this rapid return. But I think there are a few things that are happening that are really interesting:

• The people who are returning to “normal” visits are returning with visit durations back to almost exactly what they were pre-Covid.
• The biggest thing that has shifted is where people are coming from, as they are choosing to visit different gyms closer to their homes rather than their place of work. A lot of brands missed the window to develop a relationship outside of the location. If you took advantage of this time to maintain that relationship, I feel like there is a lot of reasons for confidence that that audience is going to come back. If you didn't, I think you have taken a risk that you should not take in relying on return traffic.

Thinking about direct-to-consumer and digitally native brands, why would they come offline more coming out of the crisis if they see the power of their digital reach? Owning the relationship with the customer becomes so critically important. Looking at how successful some of these companies have been, the idea that we expect that to stop because of Covid is problematic at best. I think the higher likelihood is that we are going to see a unique environment created where real-estate costs drop, because you're going to see a lot of brands closing physical spaces. This is where vacuums are created, and there is also this loss of a lot of department-store locations. The need to have that direct relationship and the opportunity to create that direct relationship dovetail to create a powerful opportunity. How are retailers leveraging technology to understand what locations they should be prioritizing for reopening stores or opening new stores? That is the reason that so many of the retailers that work with us started  with, “How do I pick the ideal location when my location isn't working? How do I figure out where to move it? How do I understand why some locations are doing incredibly well but others are doing terribly? What am I looking for in an area that is going to support a really successful location?” It goes into beyond Covid. Last year, Walmart announced that it was closing supercenters, and I think all of us rightfully lost our minds because if Walmart is closing stores, we might as well just give up on offline retail! But when we looked at it from a data perspective, what we saw was that it wasn’t closing them because the stores were underperforming. There was just tremendous trade-area overlap: Walmart realized it could serve the same audience with fewer locations. It was an optimization play, and it was brilliant. This is something that we are going to see a lot more of with really successful brands—closing stores not because they are struggling, but because they can do the same damage with fewer locations. That is the type of approach that is going to create this space that a lot of these direct-to-consumer companies are going to come into. Diversity in retail is going to make consumers want to go to multiple places for the experience. Is there a reason for mass merchandise to be even more confident in their market positioning following the crisis? Yes. First of all, I think what Target does in terms of focusing its merchandising on a per location basis is brilliant. What Walmart is doing from an innovative perspective… Its ability to roll out so many different ideas so quickly is tremendous. Its health idea, I think, is the game changer. Forget competing with Amazon with some sort of membership service, the health play is a game changer for them. There is a lot of reason to grow our respect for brands like Walmart and Target, because you hear talk of some brands that are not as good about social distancing and others that are better. Walmart and Target self-imposed restrictions during the crisis, even though they were open and could have turned it into an even greater boon for them. I think speaks to a lot to the power of corporate social responsibility. What are your thoughts on the off-price sector showing signs of strength despite many retailers barely having e-commerce? Of course, their model works. You can get something if you go to a Burlington or a T.J.Maxx; you find something great, and it's half the price that you get it somewhere else. You’re going to go back a lot of times, because there is this experience of having the treasure hunt—seeing what you can find. I also think critically, when we talk about e-commerce for these brands, we have a tendency to say, “How dare you not have e-commerce!” whereas I think they are being really smart in saying, “We need to do e-commerce our way.” It has to represent the brand and understand the consumer. I don't think these these brands are not going to go digital. I just think they are going to go digital in a way that suits them and feels authentic to the experience that they want to provide. How can retailers optimize their operations and marketing amid the changing Covid-19 landscape? You need to understand what is happening in each locations at a wider level. It is not just about one store, because one store can always be impacted by confounding factors. You need to look at that state level or regional level, but then also looking at the competitors on those levels to understand if your brand is doing something wrong, or is it your sector or is it the types of shopping centers you are in? It is the ability to dive into something as quickly as you can and then unpack elements of that to figure out how are things moving. What are the changes that you need to make, and how much is simply weathering the storm? Do you think in-person shopping will ever be the same again? If you remember post 9/11, we said that travel is never going to be the same again—and we were right. It was never the same; security was different. But now, we have different expectations and we are willing to put up with more—we have to arrive at the airport earlier. But we still travel; we were traveling more than ever before. So, yes, things are going to be different, but are we going to return. Absolutely. I just think you might see masks become a more constant part of the equation. Deeper cleaning services will be a more distinct part of the conversation. But I think the short answer is absolutely yes.