Is AI the key to finding the right location, location, location?
The conventional wisdom is that being in the right location is critical to success in retail. As one Japanese convenience store pursues an expansion, it may be getting some non-human help to decide where its stores should go.
Convenience store chain Lawson is considering using artificial intelligence (AI) to determine where to place its new store locations, according to the Japan Times. The chain plans to use AI to collect marketing data, such as household distribution patterns and traffic volume, to determine a given store’s chances of success in an area. Generally, the chain makes such decisions based on information gathering and analysis of an area carried out by staff. The chain is the third largest convenience store chain in Japan with 13,000 locations; 7-Eleven is first with more than 20,000 stores.
Using AI to crunch the numbers on demographics or habits could lead to some interesting and unforeseen strategic maneuvers, depending on what data points the chain folds into the calculation. But passing on locations that the AI doesn’t recognize as being profitable may have pitfalls, potentially ruling out otherwise good locations with extenuating factors that a human would recognize but an AI would overlook.
And there is also the question of the cost attached to such predictive AI technology. If an AI solution were to only pick locations that a human would select anyway, it might not be worth the investment.
Meanwhile in North America, convenience stores have been expanding, not through finding new places to build, but by acquiring existing locations.
Early this year, 7-Eleven acquired the 1,030 convenience stores owned by gas station chain Sunoco, bringing its total store count up to around 9,700 in the U.S. and Canada.
EG Group, out of the U.K., made a move into the U.S. convenience store market through the purchase of Kroger’s entire multi-banner convenience store operation. The company purchased the 762 stores for $2.15 billion, beating out a high-profile bid from U.S. convenience store Casey’s General Stores.
- Lawson taps AI for help deciding where to open new stores – Japan Times
- U.K. group has big plans for U.S. after buying Kroger’s c-stores – RetailWire
- What will 7-Eleven do with all its new stores? – RetailWire
DISCUSSION QUESTIONS: Is using AI to sift through data like household distribution patterns and traffic volume becoming necessary for determining the best store locations? What risks do you see in using AI to replace the traditional location evaluations done by humans?