Podcasts

Cellular Analytics in CRE Decision Making with Placer.ai’s Ethan Chernofsky (Part 2)

Terry Montesi is joined by Ethan Chernofsky, a leading innovator at Placer.ai, for the second half of their discussion on how mobile analytics technology and consumer marketing is shaping the future of commercial real estate. They chat about shopping centers’ evolution and what developing technologies are doing to advance the industry. Ethan explains the relationship between the omnichannel and consumer behavior, as well as his expectations for the future of brick-and-mortar real estate.

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 our next episode with Chain Store Age’s Real Estate Editor, Al Urbanski.

____

TRANSCRIPT

Terry Montesi: Welcome back to Trademark Property Company’s podcast Leaning In. This is the second part of an episode, and you can find part one on the podcast page. Thank you for tuning in.

On today’s episode, I’m back to finish up with Ethan Chernofsky, VP of Marketing at Placer.ai. We finish our conversation on Placer’s work and how it influences brick-and-mortar retail. He shares how current shopping centers should evolve and Placer’s technological advancements that could better track cross shopping habits. We also discussed what Ethan expects to see in the future of real estate technology and data and its impact on brick-and-mortar retail.

So, do you think we need to rethink how shopping centers are created? Have y’all learned anything about different outdoor formats, how people respond to different ones? Have you learned anything about certain types of retailers that have really responded to the e-commerce environment better than others? So, as you look forward and think about new shopping centers or as we evolve and reinvent shopping places, give us some thoughts about that.

Ethan Chernofsky: So, I think there’s a few things that are really interesting. The first is I like brands that have a clear sense of who they are, even when that sense doesn’t align with the wider narratives. So as an example, we talk a lot about kind of the death of the middle in retail. So, value is great and luxury is great, and nothing in the middle exists. And I think when you look at brands like Target or Kohl’s, or even Best Buy, these are not value players. And I think calling them value players is overly simplistic. And they’re certainly not luxury. They’re the middle. And they do incredibly well because they focus a lot on how to nail it for that audience. So, you think no value retailer is having Apple in their stores. That doesn’t make sense; that’s not a value play. No value player is having Disney locations or Casper locations within their store. Those aren’t value plays. Those are brands that you’re willing to spend more for because you love them. And I think what Target does so well is they really understand their customer. They understand what they’re willing to pay a little bit more for, what they want to save a little bit more on, and they’re able to provide that mix incredibly well. And it’s because they know where they want to be. So, when you’re looking at brands that really get what they’re providing to their audience and really understand who their audience are, those are the ones that succeed. Take off-price retail – we were destroying off-price retail a year and a half ago when Burlington announced that they were going to shut down their e-commerce site. People laughed, they were like, ah, this is the end of Burlington; how are they ever going to succeed now that they don’t have e-commerce in this pandemic? And they’re one of the brands showing the strongest rates of growth in terms of their visits of any retailer in the country. And it’s because they know who they are, and when they do e-commerce, they’re going to do e-commerce in the Burlington way, not in the way copy and paste of what everyone else is doing. And I hope more retailers recognize that if you want to succeed, you need to do it in a way that’s authentic to you because an Apple store shouldn’t look like a Microsoft store when those come back, or a Google store, it should feel like Apple. Whatever you’re trying to accomplish, and whether if it’s as a retailer, or it’s also as a mall or a shopping center, it’s understanding what’s the right mix for your audience, how do you strengthen that, how do you evolve it and build upon it. But just because something’s working for a competitor or a different location, doesn’t mean that’s what you should be copying. It means you need to think much more deeply about what does my audience want and what can I do to help provide that? And I think that’s where we see a lot of the future of retail going, just a much more customer obsessed shopping center and retailer.

Montesi: That’s a great way to think about it. I’ll switch to Placer for a second. How did the global pandemic affect y’all’s business?

Chernofsky: So, I mean, to be totally transparent, when it started, we were petrified.

Montesi: Join the club, for sure.

Chernofsky: We sat and we said, oh no, like what’s going to happen for us? And we froze hiring and we made our plans for what happens if this happens for quite a while and how do we handle it? What surprised us, and in a very positive way, was it actually created interest from a wider group of people than we had been dealing with before. So, we made our focus very intense on, okay, now what do we do for the community? Because we had been embraced by companies like yours really early on before we had a big customer base and we felt like, all right, what can we do? So, we launched a lot of free tools. So, we had our best year ever. And a lot of it was the fact that more companies appreciated how significant data was to making improved decisions, to understanding what was happening as the retail world was recovering. And for us, it was a really amazing opportunity to kind of prove the partnership to our customers. So how can we work closely with you in a difficult environment? In many ways, I think it’s very easy when things are going amazing for everyone, but to make sure you’re there – look, we’re here, we’re going to be here for you through a difficult period – is a much more interesting and foundational way to build a long-term relationship.

Montesi: So, during the pandemic, as a number of companies were scared, y’all didn’t have a big number of drop-offs where people say, hey, we’re dropping this, it’s a luxury so we’re going to drop Placer? That didn’t happen much?

Chernofsky: No, we got pretty lucky in that. Obviously, there’s some cases of companies that got hammered pretty hard, and they said, hey, what can you do to help? And we always try to find that way to help. But overall, that wasn’t the story.

Montesi: Your service is pretty inexpensive. It’s not going to make a big- compared to like people cost or occupancy cost, it’s pretty minimal.

Chernofsky: I think you’re right. But also, it’s the question are you proving the value? And I think most- we have the benefit of most of our customers really get where the sector’s going. If they didn’t, they wouldn’t be using it. You said nice to have, I think it’s such an interesting terminology because if it was need to have – I don’t know what need to have and nice to have is anymore – but if it’s need to have, and you don’t have it, you’re out of the game. The world exists in the nice to have. So, are you the company that’s thinking about micro fulfillment before everyone else? Are you thinking about BOPUS and omnichannel before everyone else? Because if you were, you had a huge advantage in the pandemic, and look at Target and Walmart as examples. Whereas the folks who were saying, oh, this is a nice to have, they’re the ones who are still closing locations.

Montesi: Yeah so, you just gave me an interesting question. So, what do you think the next nice to haves are? What are you seeing, hearing, or imagining?

Chernofsky: I think there’s a few. One, I think more data, just there will be an endless amount of data that’s comes in and how people consider it, the way they look at it, I think that’s a really important piece of the puzzle. I think a big nice to have is a focus on testing. And I know this seems almost difficult to say because there are so many costs associated with brick-and-mortar retail and having a test, so to speak. But are you taking a tenant that you’re not a hundred percent on, but you think might have a lot of upside? It shouldn’t be your entire mix, but it should be part of the equation to make sure you’re understanding where the space is going. I think technologies like micro fulfillment are really important. If you think of, there was all this talk of Amazon fulfillment centers taking up massive spaces in malls. I mean, that’s silly; it’s unnecessary. But micro fulfillment makes a ton of sense because if I say I have a space, and we were talking about UNTUCKit before, and I don’t need all of it to sell product, why am I not using part of it for micro fulfillment and to better distribute and better improve my logistical reach?

Montesi: Last mile, I mean, that’s essentially the same thing.

Chernofsky: A hundred percent.

Montesi: So, co-tenancy is an old concept in the retail business we wish would just go away. That being said, are y’all working on technology that can track cross shopping between stores and somehow extrapolate the profile of the customer so a retailer could know which co-tenants are actually working for them and not just surmise that, hey, they have a similar customer so I should want to be by them?

Chernofsky: So, a hundred percent; it’s a big part of our business. And it’s one we do a lot of already. It’s a big piece of the void analysis tool that we’re going to be launching. It’s a lot of- Our use cases actually have been what’s the right fit for my shopping center? And one of the key elements to look at is cross shopping. If I’m going to get a boost from the people, the folks who are already there, if I’m going to get a boost from the shopping center that’s across the street, how do I leverage each new tenant to support the tenants that I already have and increase the overall pie for my center?

Montesi: That’s exciting. And that is certainly a value add to folks that do what we do. From your perspective, when you think about omnichannel and how it’s already influenced customer behavior, how do you see that evolving over the next, say, five years?

Chernofsky: I think you’re going to see two things. You’re going to see copy and paste, and that’s going to lead to some big epic failures. And I think you’re going to see interesting, targeted omnichannel that’s going to be the future. So, you look at brands like Target and Walmart and what they’re doing with omnichannel, it’s centered around this idea that I have a massive reach, I have a massive location, I have a huge amount of product across a wide spectrum of kind of sub sectors. And it works really well for them and they’re going to do it very, very effectively. But what I want to see is more brands view omnichannel through the lens of their own brand. Off-price is a perfect example. I don’t know that off-price and omnichannel needs to look like off-price at Target. In fact, omnichannel in off-price might just be a kiosk where if they didn’t have the size or product that I wanted, I can go to a kiosk and figure out which other location has it and maybe have that sent to my home. And when we look at QSRs as another great example or restaurants, we see, oh, they’re going to do this new drive-through format that there won’t even be a location, there’re just going to be 800 drive-through lanes, and obviously I’m exaggerating. But is that really the way forward? It might work for some brands. And by the way, it might work for some brands in certain locations and not in others – take Starbucks. If I’m Starbucks right now, and I’m looking at how the world is evolving, I want my city-based locations to be about convenience, but my locations in the suburbs, considering the shift to work from home, I want to make sure they’re well suited for someone who wants to get out of their house for a few hours and work from my location with a potentially much larger transaction size then they would have had if they’re just coming in to pick up an item on their way to work. And so, a lot of omnichannel starts with you understand who you are as a company and what your audience wants from you. 

Montesi: Great insight. So, as you look at the next five to ten years and you think about technology and analytics PropTech in real estate, give us some of the trends that you see and maybe some wilder ideas of things you think are likely to happen.

Chernofsky: So, I think it’s, one, there’s going to be a proliferation of more types of data, and that we’re already seeing. So different types of data sets that can be used to influence decision-making.

Montesi: What are some of the other types of data?

Chernofsky: Weather data, online shopping data, data that tells you- talks about sentiment based on social media. So, in certain areas, what are topics or concepts or ideas that really resonate? And then accessibility of data. So, one of the things that we believe we’ve done, we kind of do pat ourselves on the back, one of the areas we’re proud of is the accessibility of our product, how easy it is to use and to gain value from. And that’s a really important piece because opening up data to more people is really important. It’s not taking away the work for the data scientists. It’s just enabling them to have that conversation more readily with more people and to enable those people to do more on their own. So, they don’t need to rely on the data scientists for everything, but when you kind of leave that, those more difficult projects. And when you think about what those two things mean combined, it’s going to be kind of the aggregation of multiple data sets into a single place. And it’s something we’re trying to do with our marketplace, where you’re bringing in advanced demographics data, social demographics, and a whole bunch more. But imagine if I could bring all of these data sets into one place. I can start using, adding my own data to that single place. That’s where we think the sector is going from a data perspective of how do we bring as many possible perspectives into a single place that is easy to use and easy to gain value from.

Montesi: That makes a ton of sense. Decision making should just get a lot smarter if you’re willing to invest a little bit in data going forward.

Chernofsky: The big thing is also, it’s like one of the things that really surprised me when I got into the kind of- this is my first time in the CRE world, was I think people were almost, at my first recon, it was just talking to everyone about, oh yeah, the commercial real estate world is really backwards when it comes to data, we’re so outdated. And then you actually talk to the people in it, and they’re not. They’re incredibly smart. They’re incredibly cognizant of the fact that they need to implement more and more into the mix. They move really quickly to do so. And they move quickly, not only to get new data sources, but to make sure they’re actually using it effectively. They’re incredibly aggressive about evolving forward. And I think that’s a really big reason why the retail real estate segment is I think moving so quickly in such a positive path.

Montesi: To follow up on that, as you look forward regarding analytics, data, and PropTech, how do you see it affecting the future of brick-and-mortar retail?

Chernofsky: I think it’s going to enable real omnichannel, which is making sure that there’s this seamless integration from online to offline. But I think in the short term, it’s going to allow brick-and-mortar retail to get the credit it deserves. So, before you were saying, hey, this is how many people walk by my store, or you were saying a location in a great mall has a lot of value because it brings a lot of eyeballs, but you didn’t know how many eyeballs. I know how many eyeballs my social media post gets, and I know how many eyeballs my website gets, but I didn’t have that number for how many eyeballs the location gets because it’s situated in a top tier mall as opposed to another one across town. And I think just that can help us understand how much value the brick-and-mortar location is bringing and by doing so unlock this idea that, hey, we should be investing more in this not less.

Montesi: Yeah, and who those eyeballs are, where do they go before and after they come to this store, what other stores do they go to? And those are the things, as we’ve plugged in with you guys over the last few years, that have really been interesting. And now when we underwrite a shopping center, you can get sales reports, but every retailer won’t share with you readily and easily how that store ranks in the region, how that store ranks in that city, how that store ranks in the state, how that store ranks nationally. We can make a good estimate by using traffic data. It doesn’t translate exactly to sales, but across most of the cities in this country, it is pretty dang analogous, sales and traffic are. When we underwrite now, we say this is the third best store in the region, this is a top 25% store in the country. And it’s just something that we wish we’d had over the years, but that it just makes things so much, it makes it our judgments just feel less risky and much more confident.

Chernofsky: You know what, you say it’s the more confidence, it’s you think about how much knowledge you’ve accrued over your career, how many things, and we talk about hunches. Sometimes we almost undermine them, but the reality is a hunch for someone like yourself is many years of experience triggering something that you see that other people don’t see. I think in a lot of cases, what our data is doing is just giving voice to-

Montesi: Validation.

Chernofsky: Exactly. To the things you already know and enabling you to say to someone more junior this is what I’m saying, this, this is it. And to improve that curve of understanding for a more junior employee.

Montesi: Well, hey, peace to you. Good hanging out with you here for a few minutes. Thanks for your time.

Chernofsky: Thanks so much. It was great speaking with you. Talk to you soon.

Montesi: You too. Cheers.

For media inquiries, please contact our press office:

Allison Klingsick
469.547.0211 Contact via e-mail