Crunching the numbers

Following Catherine Erdly’s article on the subject in a previous issue, Steve Richardson emphasizes the importance of traffic data in building gross margin.

Steve Richardson is UK & MEA General Manager for ShopperTrak

Traditional retailers are under intense pressure to deliver something special in their stores. Rather than lose sales to the web, they need to ensure memorable experiences and fantastic service levels are guaranteed on the store floor.

It helps to fully understand the target audience, and be able to react with lightning speed to meet shopper needs. Insights into how consumer behaviour is affected by weather, holidays, seasonal events, economic changes, tourism, consumer trends and internal operational and marketing activities, will help retailers plan and succeed over time. Only the smartest, fittest and most agile will survive.

A key question is where are you looking for growth: tools to assist in-store sales teams, richer training, sharper marketing, a broader or more curated product offering?

What if we told you: “Your existing retail traffic data has many of the answers. Focus simply on the fundamentals of this data to find them”?

And where this matters most is by focusing on the customer first. Deliver great service when they are ready, have available what they want, and guide them as needed. In other words, take care of your customers, and use traffic data to do this well.

Footfall data

People counting and footfall technology provides retailers of all sizes with the tools to accurately count visitor numbers. With cameras installed in store entrances, the hardware can deliver a highly detailed picture of shopper numbers and entrance times, movements and dwell times, enabling the retailer to assess customer behaviour with clarity.

Data sets can then be combined with other kinds of business information — demographic data, sales data, weather data, customer profiles — to produce a greater understanding of shopper behaviour, seasonal traffic trends and patterns of store use from which to build practical ways to improve efficiency and profitability.

Conversion

The conversion rate is the number of shoppers who make a purchase. Using traffic and sales data it is possible to know whether your conversion rate (transactions ÷ shopper traffic) is on target, or off the mark, and in need of intervention for improvement. By making improvements across an entire store estate in line with these findings, retailers can see their margins improve significantly, while they deliver a greater level of customer service on the shop floor.

Remember to consider your traffic volume in relation to conversions, too. Conversion is not the single best indicator of store performance in and of itself. Rather, it’s a measure of how much revenue you captured (sales) from the opportunity you had (traffic). A store may have lower than desired conversions, but as a portion of store traffic it could be quite high. This is why the two work in concert.

Average transaction size

This metric refers to the average monetary amount that is spent per converting visitor, in a given period. Average Transaction Size (ATS) acts as a control for the conversion metric, while providing instant insight into the amount of money that buyers spend.

This will give you the Sales per Shopper (SPS) figure, a measure of how much money was spent by all your shoppers (including even those who did not make a purchase). It’s a measure of how effective you are at selling, too.

To determine your SPS, multiply the percentage of purchasers (conversion) by the average transaction size (ATS). A higher SPS is always good because it means you are selling more effectively to the opportunities you have in your store.

Shopper-to-associate ratio (STAR)

The shopper-to-associate ratio method allows you to identify the right number of staffing for each day, and day part by store according to traffic patterns. It is a measure of how many store associates you have available at a given time to serve people visiting your store. It’s a measure of the level of service provided to your shoppers.

Here’s how you calculate your STAR:

How many shoppers visited your store that day (what’s your traffic number)?
How many associates did you have available to serve these shoppers?

These numbers create a ratio of Traffic to Associates. When you have a lower STAR (for example, 4:1 vs. 12:1), your service level is very high. The higher the first number, the lower your service level.

Now that you have these metrics, what do you do with them? Here are six ways to use people-counting data:

1 Improve the shopper experience

Traffic and conversion data helps retailers understand when the peaks and valleys in shopper demand will come throughout the day, week and year. This will allow store teams to be fully prepared for the peak rush to solve problems like regular bottlenecks at the checkout, and to be operationally streamlined to meet shopper needs.

2 Drive store productivity

Shoppers enjoying a better service in-store usually translates to higher conversions – making the store space more productive. SPS and ATS can be driven up with prior knowledge of retail traffic trends, because the store is ready for action when sales opportunities arise – particularly ‘power hours’ when traffic numbers peak. Understanding the nature of customers, for instance whether they are loyal or casual, and the different aspects of their journey, helps increase basket size, and loyalty over time.

3 Improve labour scheduling/store productivity

Labour can be optimised to ensure the best sales people are on the shop floor exactly when the biggest sales opportunities are expected. This is when STAR comes into play, ensuring you have the resourcing to exactly match the traffic opportunity. Break times for the top sales people need to be scheduled so that they never clash with power hours. When the quiet hours come, the schedule will ensure back room tasks are being carried out in readiness for busy times of the day. Traffic data as a key performance indicator keeps store teams engaged with strategic projects and personal goals.

4 Drive basket growth through a consultative sales approach

With the right training completed, and with labour scheduling optimised, store teams are in a great position to ramp up their selling expertise and grow the ATS. Stores with clear instructions of when to expect changes in traffic trends will be primed to activate selling initiatives at the right time. By benchmarking across a store estate, it becomes clear what commercial benefits can be expected from investment in training, or special sales activities.

5 Optimise existing store footprint

Store layouts can be designed to maximize traffic hotspots and traffic flow, ensuring the use of space is as profitable as possible. New concept stores can be tested and benchmarked over time to ensure the best ideas are rolled out. And retailers can make property portfolio decisions based on traffic and demographic data analysed over a set period of time.

6 Align marketing initiatives with operations

Retailers can be fully prepared for known calendar peaks, and able to focus on boosting conversions and ATV on key dates, in line with planned marketing activities. At key points of the year, return on investment in marketing campaigns is more likely if traffic data is factored into the planning and merchandising schedule. With social marketing becoming increasingly important, flash sales and promoted products can be measured in terms of the traffic into stores achieved. The simple measurement of traffic uplift as a result of a marketing campaign can help retailers improve campaigns over time, and make them as cost-effective as possible.

Summary

This data shows you when to allocate more staff for the peaks and taper off as you enter the valleys. If you align schedules with demand, sales will go up. With enough historical data, you can predict traffic patterns and create schedules further in advance, too. This foresight engenders a sense of stability in stores, where staff can see that resourcing is planned to help them cope with busy times in store which can be stressful.

ShopperTrak, a retail intelligence specialist, has created an e-book on the subject of incorporating retail traffic into a strategy for growth. Download it free at uk.shoppertrak.com/article/ebty-incorporate-retail-traffic-rg