What do your competitors know that you don’t?
Some retailers are needlessly missing out on sales and paying additional costs because they don’t use the most basic of sales information tools: customer traffic or to put it another way opportunity. Yes, they have POS data, but that is what went (past tense) through the cash register, not what they could have.
It’s no secret that many retailers are struggling to keep their heads above water.
The margins between costs and revenue have been shrinking for some time.
This means every decision the retailer makes has to be a strategic one.
If you are a retailer having to keep a tight rein on costs, then counting people might not sound like a first priority.
However, understanding your opportunity may well be the best decision you can make; after all, you can’t fix a problem if you don’t know it exists:
By adding Customer Counting to your business intelligence, it delivers at least three decisive factors:
1. The proportion of customers that buy “Conversion over Opportunity”.
2. The real impact of any sales or marketing campaign.
3. The most cost-effective way to deploy staff.
Recent research indicates that only 14% of national retail stores are equipped with and using customer counting systems, and the adoption rate for regional or local stores is even lower.
Research also indicates that those who have embraced customer counting, and use it to define (KPI’s) and refine areas within the business are the more successful amongst their peers.
If I had to ask a single question, it would possibly be: why doesn't every retailer count traffic?
We know how important it is. After all, you have told us time and time again.
Maybe the short answer is that sales figures drive the industry, and many have become blinkered to activities that don't merely record sales.
To understand the extent of what retailers are missing, why it happens, and how to respond, we need to explore three key benefits of people counting more closely.
1. Conversion rates:
Sales conversion rate is total sales divided by total traffic, generally expressed as a percentage. You cannot generate a conversion rate without customer counting.
Recently we installed a customer counting system at a client’s flagship store in Oxford. Up until that point, the company believed its conversion rate was around 30%, and any efforts to improve on that was futile. One week later we broke the bad news to them, or should I say the good news. Their conversion rate was 16%, high for a specialty clothing store but almost half of what they thought they were getting. In an email from the retail director, one week later, the comment was “the only way is up”, and now we know there is room to grow.”
Based on earlier evidence, this means that they are not alone. In fact, greater than 80% of retailers do not know their sales conversion rates or, more importantly, their opportunities.
2. Knowing when promotions and marketing campaigns work “or don’t”
Retailers are continually being sold new ways to market their products and services.
This can lead to many retailers launching into sales campaigns, without clearly defined objectives.
Common misconceptions include; you can’t practically measure advertising, or that sales are the only true measure. Too often, if sales exceed expectations, retailers will happily declare a campaign successful.
But advertising does not directly influence sales. The accurate way to measure the effectiveness of a campaign is in terms of the customer traffic it generates and, in turn, the conversion rate.
It’s possible, for example, that a marketing campaign will be highly successful in driving traffic to a store, but appear to have failed in terms of increased sales if the conversion rate is low. So again, the missing link is traffic data. Advertising is seen as the main instrument for driving retail traffic to stores, so retailers that pay to advertise but fail to measure traffic are making expensive strategic decisions without being able to evaluate them fully.
3. How to better distribute your labor to meet demand:
For the majority of retailers, labor is the largest single expense. It’s also a cost that is set to get higher. We have observed closely, that faced with these rising costs, first to arms tends to be cutting back on labor costs, the removal of front of house staff, and reduction in localized management. Cutting back at every opportunity becomes the norm in order to keep costs from intruding further on profit margins.
Making staff cuts can be counter-productive in defending profit margins. After all, it is the one critical relationship that increases sales performance, conversion, and higher basket size.
To deploy staff effectively, retailers need to understand the relationship between staff levels and sales conversion. What times of day, what days of the week do we need to increase staffing levels or indeed decrease them.
Traffic data doesn't just reveal the ideal quantity of staff. It also provides a definitive way to measure, incentivize, and reward staff performance.
Sharing knowledge on traffic and sales conversion performance can motivate staff to take the initiative in interacting with customers more effectively.