There’s More to Retail than Sales: Counting Retail Traffic

At the end of each financial year retailers generally look at their sales figures and declare that it was either a ‘good’ year or a ‘bad’ one. But how many can actually say why the results turned out that way?

Retail sales outcomes are a function of many factors including stock selection, staff expertise, appearance of displays and advertising effectiveness. Unfortunately none of these can be quantified which makes an analysis of their contribution difficult to determine.

However, one critical factor does have a number attached to it although many retailers fail to measure it because they don’t understand how relevant it is to their annual results. That factor is customer traffic.

Unless a retailer knows just how many people come through the doors and how many shoppers are on the premises at any time during the hours of trading, planning for staffing, promotions and opening hours is being done without vital information.

Traffic counts will help explain why a year was good or not, whether a promotion has worked well or poorly, and when to plan for extra sales staff. It puts all other results from dollar volumes to average transaction values into perspective.

Take a typical retail situation – a store runs an advertisement for a one-day sale on a Saturday. Management knows that Saturday’s sales average around $20,000 so it’s willing to spend $1500 in the expectation of gaining another 15%-20% in sales on the day.

The ad runs but sales don’t rise to expectations. Instead of at least $23,000 the day’s total is only $21,000. The simple conclusion is that the advertising didn’t work and something else will need to be tried next time.

But was the advertisement really a failure? Unless an accurate count of customer traffic is incorporated into the evaluation it’s impossible to answer this question with certainty.

Sales data can only tell a retailer what happened but not why. And it can’t tell whether sales are being missed because shoppers entering the store walked out without buying. If traffic numbers are up but sales volumes are down it serves as an immediate alert that something’s not right, but an accurate count of customer traffic is needed to know this.

Retailers too often focus on increasing the volume of shoppers they bring into their stores when they should be paying more attention to the results obtained from shoppers already in the store. The customers on the premises are a lot more likely to buy something than those outside the doors.

If customer traffic on the Saturday of the sale increased from 75 people per hour entering the store to 90 people per hour it can be said the advertisement did its job by generating an additional 20% in potential customers. So the next question is: why were sales up just 5%?

If management had only scheduled the same number of sales staff as a typical Saturday it would mean that each salesperson had an extra 20% of customers to attend to and consequently less time for selling to each. If most of that extra 20% was squeezed into just three or four hours of that Saturday the sales team was probably overwhelmed!

Delving a bit deeper into the numbers, if the average transaction value on a Saturday was $48 but on sale day it fell to $43 during the three peak hours of customer traffic it provides further confirmation that staff weren’t given enough time with each shopper to generate sales.

So instead of the advertising being the reason for a disappointing result the fault really lies with management being unprepared to handle the customers attracted into the store by the advertisement. In fact, the ad worked very well.

If accurate records of customer traffic and hourly sales are correlated each time a promotion takes place it’s much easier to know when to plan for extra staff and how many will be needed.

Accurate traffic counters aren’t expensive and many types are available. They provide the ‘missing information’ retail management needs to accurately evaluate the results from promotional activities. Retailers who don’t count customer traffic are simply guessing why results are ‘good’ or ‘bad’.

Copyright 2004, RAN ONE Inc. All rights reserved. Reprinted with permission from www.ranone.com.