Stepping It Up
In a sluggish economy, retailers can’t just rely on tried-and-true strategies, such as opening new stores or using mass marketing, to increase sales. As “do more with less” becomes the mantra, retailers are rethinking how traffic-counting technology could jump-start sales.
Over the last few years, retailers have employed a mix of new store openings and mass-marketing efforts to expand their brand presence and boost sales. However, as chains slow down new store plans (and in some cases, shutter select locations), retailers should concentrate on increasing sales among existing customers vs. acquiring new ones.
“Most retailers are challenged by how to increase sales and profitability among recent capital-spending constraints,” explained Amir Chitayat, president, Count Wise, a Sunrise, Fla.-based company that provides traffic-counting technology. “They need to consider new ways to promote service and create higher baskets from customers who already visit existing stores.”
While some retailers argue that they do target their loyal customer base, they may be giving these shoppers more credit than they deserve.
“Years ago, if retailers saw a 90% conversion rate, they figured the remaining 10% would return another day to make a purchase,” said Michael Bunyar, president, St. Michael Strategies, a Montreal-based traffic-counting provider. “If that 10% was already in the store, the retailer would need to know who they are and why they didn’t make a purchase.”
That is not to say chains haven’t tried. “Retailers have always measured sales,” said Ariane Boisclair, sales and traffic analyst, Liz Claiborne Canada, Montreal. “But if you don’t know what factors generated an increase or decrease, it is hard to leverage a profitable initiative or eliminate unprofitable ones.”
Since the early days of retailing, merchants have tried to tie sales to store traffic. “Five-and-dime clerks counted traffic by placing match sticks in a box. Later, stores featured turnstiles to count traffic,” said Bill Martin, co-founder, executive VP, ShopperTrak, Chicago.
Other retailers, such as Bernie Robbins Fine Jewelry, Somers Point, N.J., relied on in-store personnel, or “security guards who counted incoming shoppers,” said Joe Bernard, the chain’s director of sales. “It is not a complicated task. It also isn’t all that accurate.”
Rather than play a guessing game, many retailers are harnessing the power of traffic-counting solutions, technology that enables them to view and measure store-level traffic information. By analyzing reports on weekly, daily, even hourly increments, chains are in a better position to deliver merchandise and services that meet shoppers’ needs, thus spurring them to make a purchase.
Anew path: The current economic downturn pushed Bernie Robbins to explore the solution’s potential. “It is about working smarter and making sure you are leveraging every dollar you spend,” he said.
By adding the Count Wise solution in all nine of its stores, privately held Bernie Robbins is primed to make those educated decisions. A camera located on top of each store’s door “houses shape-recognition technology that determines the exact number of shoppers that come into and leave each store,” he explained.
Video data is transmitted over the jeweler’s VPN (virtual private network) and into its server for analysis. “By analyzing traffic volume on an hourly basis, we can calculate our sales close ratios,” he said.
These details also help Bernard determine if the right amount of sales staff is available to service shoppers and drive conversion rates.
Liz Claiborne Canada has been using a traffic-counting solution from St. Michael Strategies since 1995. It has been helpful in keeping the company strong against competitors suffering from flat sales.
For example, in January, the retailer’s same-store traffic increased 4%, and comp-store sales jumped 12%. “Our items per transaction also increased 3%, so we really did a great job,” Boisclair explained.
But these results don’t happen overnight. Boisclair creates reports that detail hourly traffic on a per-store basis, and what sales performance is in each store. If results are not meeting the retailer’s hit rate, or the number of transactions divided by total number of traffic, “We can coach managers on their scheduling methods and teach them to staff in line with traffic,” she said. “By optimizing staffing, we can support more conversions.”
All 140 of the chain’s stores use the technology.
Stepping up: While this technology segment generates approximately $50 million annually, “only 25% of retailers are using the technology,” said Chitayat.
As new functionality emerges, however, that number is sure to rise. “More sophisticated shopper analytics will be combined with other data sources, including loyalty programs and inventory-management systems,” said John Szczygiel, president, Mate Intelligent Video.
For Bernie Robbins, the solution could boost marketing efforts. “Being very event-driven, it will be interesting to have a solid set of data that our marketing director can use to determine what campaigns are effective, especially as we prepare for the holiday season,” Bernard said.
New wireless options are also making the solutions more appealing. By eliminating the cabling expense required with wired solutions, wireless options can be used in new settings, including across store departments and fitting rooms.
OfficeMax 1Q sales fall on weak economy
NAPERVILLE, Ill. OfficeMax announced that for its first quarter ended March 29, total sales decreased 5.5% to $2.3 billion compared to the first quarter of 2007. Net income increased in the first quarter of 2008 to $63.3 million, or 81 cents per diluted share, from $58.5 million, or 76 cents per diluted share, in the first quarter of 2007.
OfficeMax Retail segment sales decreased 5.5% to $1.11 billion in the first quarter of 2008 compared to the first quarter of 2007, reflecting a same-store sales decrease of 8.7% partially offset by sales from new stores. Retail same-store sales for the first quarter of 2008 declined across all major product categories due to weaker U.S. consumer and small business spending and the negative impact of the Easter holiday occurring in the first quarter of 2008.
IKEA to open first U.S. manufacturing facility
DANVILLE, Va. IKEA, through its subsidiary Swedwood, announced that it will open its first U.S. furniture manufacturing facility on May 21 in Danville, Va. The 930,000 square-foot Swedwood factory will produce a variety of wood-based IKEA products, the company reported.
“We made excellent progress on construction last year and our installation of equipment and machinery has gone very smoothly,” said Bengt Danielsson, North American president of Swedwood. “Now our primary objective is to complete appropriate operational training for 175 coworkers as well as to ensure a seamless production and packaging process.”