Chains are growing sales by counting their traffic. Retail chains operate in a fiercely competitive market. Today, many store owners view a 0% sales increase as a victory—they didn’t lose market share. Given this situation, it seems completely unrealistic to talk about a 5%, 10% or even 20% increase in sales. Yet, that’s what some chains are achieving. How? They count their traffic.
There are two ways to grow sales: (1) increase your traffic or (2) improve your performance on traffic. If you don’t know your traffic, you can only guess at the reasons for sales performance—good or bad. Traffic counting tells you whether fluctuations in sales are due to traffic, performance on traffic or a combination of both. Better yet, it lets you act on it.
Conversion rate—the key to growing sales:
Often, when we ask retailers how much of their store traffic they sell, the figures they cite are overly optimistic. When store managers start counting their traffic, they often discover their conversion rate is somewhere between 12% and 20%—much less than the 80% some believed to be the case. A lowerthan-expected conversion rate reveals a silver lining—traffic counting uncovers tremendous growth potential.
Assume you currently sell 20% of the traffic in your stores. Discover the numbers behind your key selling periods—you’ll staff more effectively, optimize buying (compared to browsing) traffic and improve your conversion rate. Convert four more browsers out of 100, and your sales increase by 20%! And your conversion rate is still only 24%—plenty of room left for additional growth.
Attracting new customers is difficult and expensive. Improving your conversion rate is much easier and costs less. Is it any wonder more and more chains are using traffic counting to improve sales?
Traffic data—the key to understanding sales:
Imagine the following scenario: An ad is placed in the local paper to increase sales at two sites: (Store A downtown and Store B in the suburbs). Sales at Store A go up by 5%; Store B sees a 10% increase. You conclude that the ad attracted more suburban shoppers. But is that actually the case? By looking at traffic-counting data, you discover that the ad brought 20% more people into Store A and 10% more in Store B—yet Store B achieved a greater increase in sales. Why? Because it was able to convert more of those new browsers into buyers. Knowing how the store achieved the results—conversion rate, not traffic—is as important as the results themselves.
Studies support what store owners have found out: Counting traffic yields valuable information on store performance. In a 2003 study, Potomac, Md.-based Larstan Consulting surveyed 117 retail chain managers; 86% said that analyzing traffic data and POS data together provides an opportunity for better decision-making than looking at POS data alone. More than 90% said that tracking the flow of shoppers in a store provides valuable insights into sales performance.
A 2003 study by Chicago-based Dionco Inc. for Microsoft came to similar conclusions. It found that traffic counting results in:
New opportunities for improving efficiency
Better customer service
Increased operating margins through enhanced productivity
A significant competitive edge for retailers
It’s more about knowledge than technology:
There has been a significant change in the traffic-counting industry in the last five years. The focus used to be on technology—with executives wondering if they should choose beam counters or cameras as their traffic-counting solution. Experience has shown that it’s more about how you use the data and less about how you collect it. Many technologies have been shown to provide accurate data—what really counts is what you do with that data. The most powerful use of traffic-counting data is to turn it into actionable intelligence—to increase productivity and sales.