Podcasts

Mobile Analytics in CRE Decision Making with Placer.ai’s Ethan Chernofsky (Part 1)

Leading PropTech innovator Ethan Chernofsky of Placer.ai joins Terry Montesi to discuss their niche in the commercial real estate world, and how Placer.ai’s empowering analytics technology has changed the industry from underwriting to consumer marketing. He uses Placer.ai’s analytics to identify real estate trends, and suggests how more exciting approaches are coming to the world of retail data analysis. Additionally, Ethan and Terry pose the question of which will win in the long run: indoor or outdoor shopping centers?

Leaning In is published every second and fourth Wednesday of the month. Be sure to follow the show on your preferred podcast app to hear part 2 of Ethan and Terry’s discussion.

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Transcript

Terry Montesi: On today’s episode, I speak with Ethan Chernofsky, VP of Marketing at Placer.ai to learn about their unique role in the world of retail real-estate. He explains what Placer.ai does and the company’s analytics platform and how they add value to their clients. Ethan shares how brick-and-mortar retail will need to change to combat e-commerce and what his consumer behavior analytics are predicting for the future of the industry. He also shares his view on indoor malls and physical retails rebound from the pandemic.

Good morning, Ethan. You’re with Placer.ai, which provides companies location analytics to assist in their decision-making. And we’re a happy customer, by the way, I might admit. Give us a little of the backstory on Placer.ai and your involvement.

Ethan Chernofsky: I guess, for the global look, if you think that people vote with their feet, Placer is showing you how people are voting every day across the United States. And the idea was really rooted in our experiences, not coming from the world of offline retail, but coming from digital companies and technology companies. And you kind of recognize that everything you do is centered around data, and you just have tons of information that enable you to very quickly improve your decision-making process, test concepts, and make decisions not just on gut instinct but on something more tangible. And we recognized that that just wasn’t available in the world of offline data. And so, entering into that market was something we were really excited by, and I think we’ve been really lucky in that we were embraced by companies like yours really early on. And then the nature of the beast is you have to partner closely with your customers, and that enables you to learn much faster, understand challenges much faster, and hopefully kind of consistently evolve the product forward.

Montesi: Yeah. So, you’ve mentioned there’s all kinds of data available, and you mentioned offline, that is not offline. What is all this data you’re using?

Chernofsky: So, I mean, we view a panel of 30 million devices, and it’s all anonymized aggregate data. So, we are GDPR and CCPA compliant.

Montesi: So mobile devices.

Chernofsky: Exactly. And then, we take that data and we run algorithms on top of it to then make estimations on the foot traffic to any location in the country. And if you think that behavioral data like this has a tremendous amount of value and the really exciting thing is that because it’s so granular, you can really slice and dice it to show quite a bit with that single data source. So, everything from how many visits are happening to a specific retailer, when you know that on the location basis, you can aggregate it out to look at the chain, you can look at sectors, you can look at time of day of visit, where the visitors are coming from, from a true trade area perspective. And in that way, shed a lot of light on what’s actually happening in the world of offline retail to improve that decision-making process and fundamentally bring visibility.

Montesi: So, Ethan, you used the word offline, and you mean like brick-and-mortar?

Chernofsky: Yeah, absolutely.

Montesi: Us brick-and mortar-people, we call online online and brick-and-mortar brick-and-mortar. I got it. I just wanted to clarify.

Chernofsky: This is the challenge – for those of us who come from the world of digital, we view that as the starting point. It’s interesting though, you bring this up and it’s actually, it’s one of my biggest pet peeves thus far kind of working in this space with the wider retail sector is that I think it’s whatever, you call it offline or whatever you want to call it, or brick-and-mortar, but there are a lot of challenges that come from this fact that so many of us have this starting point orientation of digital. And I think in a lot of ways, we really minimize a lot of the important things that are happening in brick-and-mortar, physical retail, offline retail, whatever you want to call it. And I think it’s in many ways blinding us to a lot of the realities of the retail market.

Montesi: Got it. So, we understand where the data comes from and where Placer started. Share with our audience a little more deeply what y’all do, like who uses this, who are your clients, and how you add value to them.

Chernofsky: So, the first step is we are a SaaS company. So, we have a platform. The platform is intended to empower professionals to do a lot of the work themselves. So, to go in at any point and get the data they need. So, if you have that eureka moment at 3:00 PM on a Friday, you could dive right in. You’re not waiting weeks for a report. You’re not asking for someone to do something for you. So that’s the first piece. But when we talk about kind of our customers and our reach, I’d say we’re probably 40 to 50% commercial real estate. So, whether it’s owners of properties, asset management, brokerage, the whole range, that’s the real core. And I’d say for the first year, that was the entire business for us. That was our real focus and that was who adopted us the fastest. A growing, ever-increasing piece of the puzzle is the retailers themselves. And they’re using the product for everything from site selection, strategy, competitive intelligence, and more. We then are working with a lot of economic development business investment districts, and a lot of it is kind of what we call civic category, where it’s local governments trying to improve the retail environment or tourism environment within a specific area. And then an increasingly large number of institutional investors and even CPG companies, because I think once you kind of lift the lid off of what’s happening offline, there’s real value for any business with a stake in that kind of brick-and-mortar world. In the way that the product is being used, again, every one of those different segments is different. So, there’s a variety of different use cases depending on each individual user. And we take a lot of pride in working really hard on the customer success piece to ensure that the end users are getting up to speed as fast as possible, so that they’re getting value from the product immediately. And it’s not like this waiting period where, oh, we have this product, but nobody knows how to use it. It’s something that you’re diving into and constantly receiving more attention to ensure that you’re getting as much value as possible.

Montesi: Beautifully answered by a tech guy. I’m going to ask you to put a little more simple meat on the bone for our listeners. So, give us a couple of really interesting client case studies that you think Trademark’s listeners would find interesting, like maybe one developer and one retailer.

Chernofsky: Sure. So, if I’m a retailer and I’m looking at a region of the country, and I see that I have two stores that are doing amazing, I have two locations that are doing terribly, and I don’t understand why, why we’ve gone through this intense site selection process, we’ve worked really hard to find those right locations, and I don’t really get it. A big part of that is because the tools that were used to make those initial decisions were limited. By exposing the full kind of true trade area, which means instead of putting that 3-, 5-, 7-mile ring around a location, we’re showing you kind of the trade area and all of its amorphous weirdly shaped glory. The ability to then analyze each of those locations, whether it’s the shopping center, the mix of people who are coming to the center, the tenant mix that you’re fitting in with, to really understand what is driving for successful performances and less successful performances on a per location basis to optimize that process moving forward. If you’re thinking about the actual kind of owner of a property, let’s say you want to make an acquisition, and you see a shopping center in an area, and you want to understand which one’s the best, how am I going to make it succeed, is there a lot of potential there, that ability to look at the competitive landscape quickly, instantaneously pull up data, understand what are the strengths and weaknesses, what are the missed opportunities? And to do that within, something within minutes to pull up that data, as opposed to needing to go to each location, kind of scope it out, stake it out, spend lots and lots of time and effort, to be able to do those processes very quickly through the platform saves a lot of time and it maximizes the likelihood that every decision you make is going to succeed.

Montesi: Got it, thank you. Give us a little glimpse into Placer’s tenant void tool.

Chernofsky: So, this is something that we’re slowly rolling out now. It’s still in beta. But our void tool basically allows you to look at any location and find the optimal potential retailer for that location or tenant for that location based on a whole variety of factors that allow us to look at everything from tenant mix to the right demographics to the right kind of regional distribution of stores to ensure you’re not having cannibalization. And just to do it really quickly I think is a big part of the equation. Because we can do all that on the data side, a lot of it can be sped up to reduce the workload on the person looking to make that decision and enable them to come up with a really nice list of potential tenants very, very quickly.

Montesi: Got it. That sounds very interesting. So, we’re just coming out of a pandemic, you’ve probably noticed. Your country handled it very well. We did okay, but not quite as well. So, what are y’all seeing? I know y’all are watching things happening daily in the brick-and-mortar or physical retail industry. What are some of the things you’re seeing coming out of the pandemic that are of note and that listeners would find interesting? And are there any surprises?

Chernofsky: I think there definitely are. I mean, surprises always starts with what did you expect? And then you’ll be either surprised or not so surprised by it. But when you think about, I think the first thing is just how strong the recovery has been. And throughout the pandemic process, essentially what we’ve seen is when brick-and-mortar retail is opened up, so when regulations are lifted and those limitations are removed, people come back to brick-and-mortar retail, and they come back in a really significant way. And I think that’s a really important starting point because one of the narratives, whether we have been hearing it pre-pandemic or because of the pandemic is that, uh-oh, everything’s going to be e-commerce now, people are going to stop shopping. And the reality is that there is simply no information that shows that to be true. And on the contrary, all of the data and evidence is showing the opposite. When you think about the places that have surprised us, I think one that’s been really positive has been indoor malls. So, if you would have asked me a year ago if I thought indoor malls were going to recover, I would’ve said yes. I would not have expected it to be as strong as it is already. We have a mall index that we just released an update on, and mall visits are down 8% in June compared to 2019. 2019 was an especially strong back to school season in terms of visits.

Montesi: And you’re talking about traffic?

Chernofsky: Traffic. Actual visits is based on a hundred top tier malls throughout the country. And so obviously California is weighted and pulling things down a little bit more, and other areas like Texas and Florida are pushing ahead. But that’s a really powerful surge back when you think of the fact that you still have uncertainty, you still have case numbers that can rise and fall. We’re not all the way back yet. To see a format that in theory is still competing with outlet malls and outdoor lifestyle centers, to see that go back so strongly is a really powerful indication to that strength. And the other one I think that’s really surprised me is fitness. I mean, we had an inkling that fitness brands, like Planet Fitnesses and others were going to rebound nicely. But earlier this year, February, March, we were hearing, well, that’s it, it’s over. People are going to use their bike and they’re going to have their video screen and they’re going to have their mirror platform, and that’s the end of going to the gym. It’s just been proven to be nonsense. And seeing how strong fitness centers have recovered while embracing omni-channel I think is a real sign of where the world is moving, which is empowering the consumer to get the services they want where they want it, but it’s still being centered around brick-and-mortar.

Montesi: Do you have a stat, like malls are down 8% versus ’19? How’s fitness doing versus ’19?

Chernofsky: It depends on the brand. We have our quarterly indexes coming out shortly next week, and so, we’ll have some of that. But just to give you one example of a brand that we look at pretty closely, if you look at Planet Fitness, for example, and you look at where they were at two years ago versus where they’re at today, visits to Planet Fitness locations nationwide are up 6.3% in June 2021 compared to June 2019. They were up 6%. That’s a staggering number. Now to be fair, this is an incredible brand, but there’s others that are seeing similar processes and paths back. And it’s been incredibly impressive to watch.

Montesi: Well, it’s no surprise that a better brand would be back more than some others, but just that pure stat of 6% versus June ’19 when you look at the pandemic effects, that’s amazing. You mentioned the mall index. I’ll give you a little something. We operate the Galleria Dallas and sales were up around 40% May ’21 versus May ’19. Traffic was down a little still, probably something similar, if I remember correctly, to the index, but sales were way up. So, the people are coming back. And those that are coming back, they’re not the mall walkers, they’re actually there to shop and do some business.

Chernofsky: Yeah. You also think about what we’re still missing. We’re still missing full domestic travel. We’re still missing business travel, which is going to affect major cities significantly. We’re still missing a lot. And the fact that we’re back to these levels is a really powerful indication of where things are going. And I think consumers are showing with their actions that they missed brick-and-mortar retail. I think my favorite example comes with grocery because when you talk to people, they’re like, oh, we hate grocery shopping. As soon as you give us delivery, we’re going to start doing that. And the reality is it’s nonsense. The second things open up, people go back to the grocery store. And as much as we say we don’t like shopping, apparently, we do. Because as soon as we’re given the opportunity to go back, we go back, and we make more purchases than we made before. So, I think what you’re seeing is aligned with what top tier malls are producing.

Montesi: And you’d know, you’ve been following, and you watch it, folks like Target that have gotten really proficient at omni-channel, their e-commerce sales are enormous, but I read a stat recently, I think it was – was it 95%? And like a vast majority of them, the brick-and-mortar or physical store was involved either in pickup or it was delivered from there or return. So, omni-channel is obviously where it’s at. It’s not just offline or online.

Chernofsky: The problem with the way we view omni-channel, and this is hearkening back to kind of the comment I made earlier, is we don’t give brick-and-mortar the credit it’s due. So, we were talking to one company, and they were saying that buy online, pickup in stores is digital sale. Returns that go to a location are taken off of the sales per square foot of the location. I mean, this is nonsense.

Montesi: Which in Southern colloquial terms, ain’t right. That ain’t right.

Chernofsky: No, it’s not right. And it’s actually silly. And when you think about the fact that if I make a return in the location versus online, it’s cheaper, I have a high likelihood of buying something else while I’m in there, that the byline pickup in store being digital only, it requires the location for me to come pick it up. Not to mention, we don’t think enough about the marketing value, about the eyeballs it grabs, and what it does to constantly see those locations. So, I’m a big Target shopper; I love Target very much. There are lots of products that I’ve bought online, many of them have been products I’ve gone into a store, they didn’t have exactly what I wanted, or it was my second time purchasing it, but because of the positive experience I’d had in the location before. So, I think that the mentality has to shift, and if it doesn’t, we’re going to miss out on opportunities. So, a brand that I think about this a lot is UNTUCKit. UNTUCKit is a brand that creates a lot of men’s wear, and it’s like shirts that are meant to be worn not tucked in. Great brand. I love them very much. I don’t need to go into an UNTUCKit six times to buy six shirts. I need to go in once, make sure I find the right size, and I’m going to order online a bunch of other times because I just need to get different colors. UNTUCKit it doesn’t need to have all of their store focused on selling the product. It to be focused on making sure I find the right fit, it should be focused on distribution, it should be focused on taking in my returns and doing that efficiently. And that rethinking about what a physical store can do is going to enable us to maximize the retail format to its greatest extent.

Montesi: Well, to follow up on that, regarding physical retail and what y’all have been watching, do you have some things you think need to change or some things that you’ve learned about certain types of brick-and-mortar or physical retail versus others, and you think some may go away and some may rise in the future? Y’all seeing any trends in and around physical retail?

Chernofsky: Yeah, I think a lot of it centers around breaking down traditional concepts. So, you think about a mall is a great example. I have a mini obsession with the idea of industrious and like these coworking spaces in malls. And what they do in terms of enabling more creativity, in terms of tenant mix, providing values that other players don’t provide, taking up space that might not be desirable for a classic retailer. I think a lot of it is about just thinking differently about what belongs where and when. And so, I was in the Aventura Mall before the pandemic, and there’s a Tesla store in the Aventura right next to a parking lot that has a walking bridge. So not a place that I can drive a car out of, not a place I’m expecting to see a car dealership, yet there it is. And it fits, it makes sense. And so, I think the more we stop being close-minded about what belongs where, the more interesting ideas we’re going to come up with. Even the mix of residential and office with retail, the pandemic and the shifts it’s made in terms of where we live and where we work. I think the long-term ramifications, less so for that top tier of malls but for that layer underneath, is going to be let’s think differently about this whole thing. Let’s ask ourselves what could go into a mall that we didn’t expect to go in the past, and that’s going to be something really exciting.

Montesi: Yeah, I’ve heard you talk about how indoor malls and outdoor were impacted differently during the pandemic. Share with us what you learned about that during the pandemic.

Chernofsky: So, during the pandemic, the recovery was much faster for outdoor malls. And I think part of it was, even in places that were fully open, the idea that in an outdoor mall, I’m a little bit less worried because it’s outside. I pop in and out of a store. Very often those outdoor malls were outlet centers which was really well aligned with some of the wider economic uncertainty. And I think this is a big piece because we talk a lot about people having more money in the bank, etc. But I think we’re underplaying the fact that the uncertainty around the economic future has a really big role to play. So even if you have people who have a lot of money to spend, you have a big layer of people who they might have more in the bank, but they’re not as confident in what the next six months hold as they were in 2018 or 2019. I think that’s something we really have to consider a lot. And I think it’s going to drive a lot of the shifts in consumer behavior over the next year or so. But outlet centers had a really interesting moment in time. And the big question is going to be do they sustain the strength as indoor malls increasingly recover?

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