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Retail Economics
Retailers face a multitude of challenges that threaten their ability to operate profitably. Market over-saturation, ever-rising operating costs and a dynamic economy strain nearly all retail sectors and magnify the importance of every business decision. Add rising customer expectations and fewer shopping visits to the mix, and the margin for error becomes razor-thin. It is more important than ever for retailers to accurately monitor shopper traffic and conversion rate.
Measuring Shopper Traffic
Foot traffic data is perhaps the most accurate leading indicator of future sales. ShopperTrak's retail research shows that a steady decline in foot traffic indicates that sales will similarly decline in approximately 13 months. Therefore, if a store sees that sales are steady and is unaware that traffic has declined, that store will not be prepared to take corrective action. Additionally, without precise data, it is impossible for a retail company to know its true potential. Each shopper that walks through the door represents a sales opportunity, so a retailer relying on outdated footfall-counting methods is akin to a doctor making a patient diagnosis without the benefit of the most basic medical equipment.
Traffic monitoring is essential for the cost-effective management and evaluation of:
- Conversion rates
- Labor usage
- Advertising and promotional programs
- Prime selling hours
- Visual merchandising strategies
- Future opportunities or challenges
- New store concepts
- Store location analysis
- Merchandise assortment and stock levels
Monitoring Conversion Rates
Conversion rate - a store's number of retail transactions during a certain time period compared to its traffic - is by far the most accurate indicator of a company's performance. Some of the world's most successful retail companies, including The Gap, The Limited and Movado, have ingrained conversion rate intelligence into their corporate cultures for the simple reason that it is one of the most fundamental, not to mention cost effective, means of improving profitability.
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