A location management solutions provider, Santa Monica, Calif.-based Accruent sells software that the company claims can handle the entire life cycle of commercial properties, from site selection to management to disposition. While the company works with all kinds of space users, its client list includes more than 220 retailers, and it has long been a member of the National Retail Tenants Association.
Retail Traffic recently spoke with Accruent CEO Mark Friedman to find out more about the services his firm provides and what sets it apart from its competitors in the facilities management space.
Retail Traffic: How did Accruent get started and how long has it been in business?
Friedman: We started in 1995. I was working for a large real estate firm and we were helping tenants negotiate leases and we saw that they didn’t have a good way to enforce their leases, so we [created] some software to address that problem.
RT: How can retailers benefit from using your software?
Friedman: For a retailer real estate is highly strategic. The locations of the stores, the costs of the stores, the operations of the stores are all fundamental to a retailer’s success. So if you look at what [our] software does, it basically manages the whole life cycle of a customer acquiring, operating and then some day maybe disposing of the store.
You start with market planning, which is figuring out where your target customers are. Once you have that, you have to do site selection and run a process that says “I have to be in these 50 markets, let’s figure out which locations are the best ones.” That may involve leasing, it may involve buying land.
Once you’ve finished with site selection, you have construction and project management. So now you have a store that maybe needs tenant improvements or maybe you want to put Wi-Fi in all the stores. It’s a small project, but if you’ve got 10,000 stores, it’s a lot of stuff to manage.
Once the project is finished, you have to do the financial management: paying the rent, paying the utilities, reporting the financials. And then the last part is maintaining the facility. If the store is snowed in, you have to figure out how to fix that. If plumbing doesn’t work, you have to fix that. Making sure the stores are in working order is critical to a retailer.
So that’s the life cycle of the store and what our software does is manage that entire life cycle for a retailer. We call it “from dirt to balloons.” It’s a much more systematic way to run through the process, so it’s a lot more efficient and there are fewer financial mistakes that occur.
RT: Can you give a real life example of what you are talking about?
Friedman: We had a customer that before we started working with them, had 52 different solutions to manage their real estate facilities. They were spending $1.5 billion a year on rent and about $800 million in capital. And they just made a $10 million mistake because the 52 systems they had were disconnected and something dropped through the cracks.
Our customers will generally save between two and five percent of what they are spending on real estate facilities by making sure nothing slips through the cracks.
RT: So do clients have to buy your entire software package for the whole life cycle of their properties or they can pick and choose between different solutions?
Friedman: Our clients purchase the parts they want when they are ready for them. They usually start with two or three pieces and then come back later and implement the other parts of the package.
RT: Have you noticed retailers gravitate more toward certain products this year that maybe were not as popular previously?
Friedman: I think we are in an interesting time. Retailers are starting to feel like they are going to survive. A lot of them were worried about just being in business and the sense I am getting is they are now feeling “We are going to be okay.” And the real estate market is still depressed and they see an opportunity to get some real estate at cheap prices and lock in opportunities for many years to come, because if you are signing a 10-year lease today, at some point you are going to be ahead. So we see them get very active in areas around market planning and site selection.
And the one other area that is going to be a gigantic change for retailers is the new accounting rules. This is one that is going to dramatically affect the way companies structure their leases, how they report their financials and their debt and asset ratios. The internal effort to change how they are doing this is going to be massive and this is probably one of the biggest areas of activity with retailers. We are starting to get into the zone where the companies have to be ready for it when the changes take effect. It would be under what folks call lease management.
RT: Do you train retailers’ personnel on how to use your software? How does the system work on a day-to-day basis?
Friedman: Once retailers buy the software we help them get it up and running. We train them how to use it. And once they are up and running, the customer has an internal team that runs the software. In essence, the people are already there doing their job. They already do market planning, site selection, facilities management. The software is just helping them do their jobs a lot more effectively.
RT: Can you talk about the pricing on your products?
Friedman: It really varies based on the company. The pricing will correlate to the number of stores and locations that are managed. So somebody with 50 or 100 stores is going to pay much less than somebody with 10,000 stores. And pricing will also vary based on whether the client is using one part of the software or two parts or three parts.
RT: There are a lot of firms out there today that focus on real estate optimization and portfolio management. In your view, what sets Accruent apart from its competitors?
Friedman: Accruent works with half of the top 100 retailers. We are very dominant in the market. There are folks who do facilities management, but in the area of retail, we’ve captured a disproportionate share of the market.