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Traffic Intelligence: The Science of Shopper Conversion

BY CSA STAFF

By Craig Szklany, [email protected] and Mark Stier, [email protected]

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 are 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 traffic 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.

The traffic intelligence gathered, however, is only as valuable as its ability to impact the bottom line and help increase customer satisfaction. By consolidating this data into real time reports, retail executives are empowered to tackle specific issues and affect real change throughout their store, like never before. In addition, the ability to integrate a traffic intelligence solution with existing hardware devices and systems, helps retailers lower operating and ownership costs, optimize asset investments, decrease obsolescence and maximize scalability.

Traffic Intelligence — solution components and decision map
Stand-alone “people counters” and other Traffic Intelligence solutions aren’t new, but advanced detection technologies and systems for managing the information they produce have increased their value significantly over just the last few years. This section includes a quick overview of available alternatives, and a “decision map” to help stores of any number and size, whether or not they currently use Traffic Intelligence, Video Surveillance, or Electronic Article Surveillance.

Market Solutions Overview

Detection technologies
Sensors used in Traffic Intelligence solutions are more than simple cameras. Their internal electronics, or external Video Analytics appliances, convert optical inputs into data streams that reflect the presence of shoppers. Some systems transmit additional information about shopper location, direction of travel, and other details.

Beam-break detection solutions use horizontal infrared beams, either stand-alone or built into EAS pedestals. Their main advantage is low cost, with some having the capability for directionality, reducing errors by counting entrances and exits separately.

Thermal detection technologies use ceiling-mounted sensors to detect shoppers’ body heat. Their overhead orientation reduces occlusion issues, and permits them to count effectively when multiple shoppers pass through a doorway simultaneously.

Overhead video detection uses ceiling-mounted cameras, in either monocular (single lens) or stereo (dual-lens) configuration. Both are more accurate than beam-break detection, less susceptible to interference, and both offer a holistic view of traffic, better analysis of activity, and video validation capabilities for their higher price.

Overhead video sensors may be stand-alone, with image processing (recognition, counting, directionality and discrimination) built in into their electronics, or appliance based, in which multiple monocular or stereo cameras feed “raw” video to a Video Analytics appliance, a specialized server that accomplishes the image processing. Stand-alone systems are a good choice for new solutions at smaller stores, up to about four sensors.

Video Analytics appliances offer much greater expansion potential — they are the economical choice for larger stores, and the data-quality leader for installations at flagship and high-value stores. In many cases, current Video Surveillance systems can be upgraded to add Traffic Intelligence by adding Video Analytics devices to convert image data into usable information about store traffic.

Implementation of any Traffic Intelligence solution should be preceded by a planning phase incorporating careful review of unique store requirements. Issues to consider during the planning phase include maximizing the value of legacy infrastructure investments, including multiple use of legacy Video Surveillance and EAS systems; the utility of fully integrated systems vs. traffic-only point solutions; requirements for real-time response; and the need for an open-standards approach that accommodates future technologies offered by multiple suppliers.

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.

Craig Szklany is director, TRS hardware solutions product management, at Tyco Retail Solutions. He can be reached at [email protected]; Mark Stier is director, product management, at Tyco Retail Solutions.He can be reached at [email protected].


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Big Lots taps KC agency for new campaign

BY CSA STAFF

Kansas City-based advertising agency Barkley was hired by Big Lots to help the closeout retailer with a broad range of marketing and brand strategy initiatives.

Barkley will provide Big Lots with full-service advertising and marketing duties including brand strategy, and broadcast, print and in-store executions. Barkley will also partner with Big Lots on web strategy and execution.

"Big Lots delivers amazing value to our customers every day," said Rob Claxton, Big Lots SVP of marketing. "Barkley understood our strengths but also developed ideas that will help us get more credit for our value proposition. They really pushed us and the ideas were backed up by strong strategic insights."

The selection of a new ad agency comes as Big Lots reported a 4.6% quarterly same store sales decline in early December, a 2013 forecast that envisions further declines and the resignation of president, CEO and chairman Steve Fishman. As part of an orderly leadership transition, Fishman will continue to serve in his current roles until his successor is appointed following an executive search by Korn/Ferry International.

Fishman will remain in a consulting role after his retirement and Philip Mallott, chair of the board’s audit committee, spoke highly of Fishman’s contributions at the time his retirement was announced.

"In his role as CEO, Steve provided Big Lots with outstanding leadership and financial results during his tenure," Mallott said.

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REAL ESTATE

GGP’s warrants acquired by Brookfield affiliates

BY Staff Writer

Chicago — General Growth Properties said Thursday it was informed by Brookfield Asset Management that affiliates of Brookfield acquired the GGP warrants held by affiliates of Pershing Square Capital Management.

The warrants represent the right to acquire 18.43 million shares of GGP stock at a value of $0.01 per share.

General Growth also said it has been offered by Brookfield the right to acquire the warrants, for the same price of $271.88 million paid by Brookfield, within the next 30 days.

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