Brick-and-Mortar Retailers’ Secret Weapon: Conversion Rate Optimization
Given the difficult business conditions so many brick-and-mortar retailers are facing, it’s baffling that conversion rate optimization (CRO) hasn’t become more of a focus if not an obsession.
In the online world, CRO has become an industry onto itself, spawning a global community of consultants and service providers, formal methodologies and over a hundred books dedicated to the topic on Amazon alone. There is only one book on brick-and-mortar conversion listed on Amazon.
There are a number of factors that may be preventing CRO from taking hold with brick-and-mortar retailers, but just like online marketers discovered after the dot-com bust in the early 2000’s, focusing on conversion can not only help them survive, but even thrive despite traffic declines.
Tracking Conversion vs. Optimizing Conversion
Most major tier-one retailers today track traffic and conversion rates in all their stores, so the basic data needed to conduct CRO already exists. However, the variability in physical stores makes applying conversion improvement initiatives across stores consistently a challenge, and it also makes measuring results more challenging too.
Testing and Measurement to Prove Results
A vital tenant of CRO is testing and more specifically A/B testing. In the online world this is easily accomplished by setting up two variations of a webpage and then directing an equal amount of traffic to each site. But A/B testing is much more difficult for brick-and-mortar retailers since, unlike websites, every store is unique.
So unlike online conversion rate optimization where changes can easily be made and consistently applied with a few keystrokes, in brick-and-mortar stores adjusting variables like staff levels for example must be applied at the store-level.
There’s another important difference between online and brick-and-mortar conversion optimization tests: traffic. In an online experiment, traffic can be precisely controlled so each website version receives the same amount of traffic.
In brick-and-mortar stores, the amount of traffic each store receives can’t be controlled and can vary significantly by store. Extra care needs to be applied when interpreting brick-and-mortar conversion optimization test results.
But just because the conversion variables are harder to control in physical stores doesn’t mean that conversion rates can’t be optimized or measured using A/B testing.
Start with the Biggest Conversion Driver – People
An effective CRO system for brick-and-mortar retailers must begin with ensuring staff schedules are aligned to store traffic patterns. Second, retailers need to examine how staff are deployed – tasking versus servicing customers. Third, retailers need to measure associate and manager productivity by analyzing conversion rates by hour attributed to each employee.
Conversion Rate Optimization can Mitigate Traffic Declines
In today’s rapidly changing and difficult environment, brick-and-mortar retailers should focus on the traffic opportunities they do have and apply CRO strategies. Just like the online survivors of the dot-com bust, brick-and-mortar retailers need to realize that it’s not just about the amount of traffic in their stores, but what they do with the traffic that matters most.
Mark Ryski is author of "Conversion: The Last Great Retail Metric" and "When Retail Customers Count" and CEO and founder of HeadCount Corporation.
Surging online and customer traffic boost Target; ups remodels
Target Corp. came roaring back in its second quarter from a year-long sales slump amid evidence that its investments in online and store remodels are paying off. The discounter raised its outlook for the year.
Sales rose 1.6% to $16.43 billion in the quarter ended July 29, beating analysts' estimates of $16.30 billion. Same-store sales rose 1.3%, also more than analysts had expected. Comparable digital sales surged 32%.
Net income fell to $672 million, or $1.22 per share, from $680 million, or $1.16 per share, in the year-ago period. Excluding items, Target reported earnings of $1.23 per share, beating the average analyst estimate of $1.19.
On its quarterly call, Target gave an update on its store remodeling and new store plans. The retailer now plans to remodel more than 300 stores in 2018, up from its original 250.
Target also plans to nearly double the number of smaller-format stores it will open this year, with 15 new locations announced for 2018 and "more to come," CNBC reported.
Target announced its results on the heels of the news that it was acquiring technology transportation company Grand Junction, and that it was expanding its next-day delivery pilot, Target Restock.
In addition, Target is expanding its private label lines, and will launch two apparel brands, a home goods brand and an athleisure brand this fall. More are in the works.
In a statement, Target chairman and CEO said that the company was particularly pleased that second-quarter traffic increased more than 2%, reflecting growth in both its store and digital channels.
“We continue to focus on our long-term strategy, as we work to transform every part of our business and build an even better Target that will thrive in this new era in retail," Cornell said. "While our recent results are encouraging, we will continue to plan prudently as we invest in building our brands, our digital channel, the value we provide our guests and elevating service levels in our stores.”
For the full year, Target has forecast earning between $4.34 to $4.54 per share. Analysts had called for earnings per share of $4.39 in 2017, falling on the lower end of Target's updated range.
Retail sales rebound in July to a yearly high
Shoppers turned out in force in July, driving retail sales to their largest gain since December 2016.
Retail sales in July increased by 0.6% from June on a seasonally adjusted basis, triple the revised 0.2% growth seen in June, according to the National Retail Federation. Sales have increased by 3.5% year-over-year. (The NRF numbers exclude automobiles, gasoline stations and restaurants.)
"Consumer spending remains solid as retail sales saw healthy improvements in July and revised June numbers were also positive,” NRF chief economist Jack Kleinhenz said. “We have yet to see the full effect of back-to-school spending, but pickup in spending was evident both online and in general merchandise, which includes bricks-and-mortar department stores. Soft or declining prices for retail goods continue to hold down the dollar amount of sales reported even though unit volume was up,”
By category, the biggest gain was in online and other non-store sales, which increased 1.3% over June and 11.4% year-over-year. Industry experts noted that online sales likely received a lift from Amazon.com’s Prime Day promotion.
Building materials and supplies stores were also strong. Sales increased 1.2% over June and increased 8.5% unadjusted year-over-year. Kleinhenz noted that rising home values are encouraging home-improvement spending and home-related retail purchases.
Other specifics include:
• Clothing and accessories stores decreased 0.2% seasonally adjusted from June but increased 0.1% unadjusted year-over-year.
• General merchandise stores increased 0.1% seasonally adjusted over June and increased 1.4% unadjusted year-over-year.
• Electronics and appliances stores decreased 0.5% seasonally adjusted from June and decreased 1.4% unadjusted year-over-year.
• Furniture and home furnishings stores increased 0.4% seasonally adjusted over June and increased 4.3% unadjusted year-over-year.
• Sporting goods stores increased 0.3% seasonally adjusted from June but decreased 5.7% unadjusted year-over-year.
• Health and personal care stores increased 0.4% over June and increased 1.6% unadjusted year-over-year.