Posted Date: 1/12/2013

Traffic Intelligence: The Science of Shopper Conversion

By Nancy Chisholm, Vice President & General Manager, Tyco Retail Solutions
Few retailers actually measure how many people are in their stores. Without direct knowledge of store traffic, advertising and promotion performance, weather and seasonality effects, and conversion of shoppers to buyers is guesswork at best. Retailers rely instead on informal or intermittent measures and attempts at analysis often end in argument.

The good news is that there are a variety of traffic intelligence solutions available, for retailers of all sizes, to capture this invaluable data and use to refine their advertising, merchandising and operations to compete more effectively with both physical and online competitors — based on facts, not opinions.

Traffic, conversion and sales
For retailers, point-of-sale data measure only captures the "what" of retail success and failure, with no indication of the "why." Just as important is the blindness to lost opportunities — store visitors who came but didn't buy.

Store traffic, corrected for recurring time, day, weather, and seasonal effects, reveals the objective performance of advertising and promotions, freed from the self-interested opinion that drives advertising discussions today. More important, store traffic and currently-measured POS results are the essential factors in calculating conversion to unlock adaptive strategies to build retail success.

At the store level, conversion is defined as total transactions per store visit — how many shoppers became buyers? But with appropriately fine-grain traffic measurements, conversion can be measured within a store as well — how many of the shoppers who walked by or stopped at an end-cap display purchased the item? With information like this in hand, traditional retailers can begin to manage their stores as rigorously as e-commerce experts manage their websites, without compromising the quality shopping experience that is their most compelling advantage.

Traffic intelligence — the capture and analysis of traffic in and around the store — delivers three kinds of value. First, it builds revenue. By analyzing the impact of promotions on both traffic and conversion, traffic intelligence helps retailers allocate their resources by answering questions like:

• Did a promotion bring in more shoppers than last year's?
• Did it raise conversion of shoppers into buyers?
• Did it raise average order size/market basket?

In the longer term, certain knowledge of store -raffic patterns eliminates guesswork about expensive strategic marketing and merchandising initiatives:

• Did the store remodel attract more shoppers?
• Which endcaps, bulks and center-aisle fixtures increase shopper dwell times?
• How are shoppers navigating the store, and how can you position impulse items to maximize purchase?

Second, traffic intelligence maximizes profit by optimizing resources for maximum effectiveness. Optimizing staffing — the largest expense for many retailers — sets staff levels, breaks, shift length and shift changes according to traffic, to maintain ideal associate-to-shopper ratios throughout the store. Optimizing staff according to traffic, on the other hand, simultaneously improves coverage and customer service even as it cuts expenses. The same logic applies to staff allocation within the store: traffic-based assignments optimize staff distribution; sales-based assignments tend to "lock in" missed opportunities in understaffed locations or "choke points."

A third set of benefits comes from integration within multi-purpose devices, or with other store solutions. A clear, objective understanding of store traffic can help a store improve inventory management, merchandising, facilities management and energy consumption — virtually any aspect of store operations where resources can be allocated according to the number of shoppers in the store:

• Traffic solutions can cut nuisance alarms from electronic article surveillance (EAS) systems, by distinguishing entrance and exit traffic from non-directional traffic of nearby shoppers, store greeters, etc.
• Traffic solutions can help manage associate staffing to assure adequate coverage during peak traffic hours, at POS terminals, and in departments when and where shopper traffic justifies redeployment.
• Traffic tools can help manage power and cooling costs by adjusting or powering down lighting, heating and cooling, and detection systems when shoppers are not present.

Once traffic intelligence solutions are deployed at a store, store managers' performance at driving or converting traffic becomes a matter of fact, not guesswork. The improved performance that comes with this increase in management accountability more than compensates for the cost of a modern traffic intelligence solution and offers a competitive advantage to forward-thinking retailers looking to succeed in retail today.

Nancy Chisholm is vice president & general manager of Tyco Retail Solutions.