Experts constantly tell retailers that they need to be more
data driven. That they need to stop relying just on gut and intuition, which
can often mislead, and instead trust “data.” That advice is correct, but it is
also profoundly unhelpful.
Most “data-driven retail” conversations jump straight to
complex systems, advanced analytics, and expensive platforms. Or, digging even
deeper into the sales transaction data your POS system already produces. That
framing turns a practical idea into an intimidating one. Becoming data driven
in retailing starts with answering two remarkably simple questions:
1)
How many people walked into your store?
2) What percentage of
the visitors made a purchase?
If you cannot answer these basic questions, then you are not
managing performance. You are observing outcomes and there’s a big difference
between the two.
Sales Are an Outcome, Not A Diagnostic
Most retailers track sales daily and transaction detail –
what sold, average ticket, and units per transaction. But very few track hourly
store visitors and conversion rates (i.e., the percentage of visitors who
purchased).
Sales and all the transactional data tell you what happened,
but they do not tell you why it happened, and that is what makes traffic and
conversion rate the foundational metrics so important. They tell you what to
focus on to drive sales.
Sales are a function of only three things: 1) Traffic,
the number of people who visited the store defines the stores’ sales
opportunity; 2) Conversion Rate, the percentage of visitors who made a
purchase, and 3) Average Sale, the average amount each buyer spent.
That’s it.
So, when sales change, you should be able to clearly tell if
it is any one of these three factors, or a combination of the three. If you
only know the sales figures, you cannot tell which of those three moved. That
is why store traffic is foundational. It provides the context that makes every
other retail metric meaningful.
Why Store Traffic Is the Starting Point & Conversion
is the Primary Performance Lever
Every sale begins with a visit. No visit. No opportunity to
sell. That is not philosophical, it’s the mechanical truth that every retailer
needs to be able to see. When you know how many people entered your store, you
can begin answering basic operational questions:
- Did
marketing drive incremental visits? - Did a
merchandising change improve buying behavior? - Are we
staffed appropriately for actual demand? - Are we
converting shoppers at a reasonable rate?
Without traffic, operators answer those questions with
opinion. With traffic, these questions are answered with evidence. That is the
essence of being data driven.
How to Calculate your Conversion Rate
This is not complicated, and that is also why it is so
powerful. Conversion Rate is the clearest indicator of how well your store
turns opportunity into revenue. Example: 200 visits, 100 transactions and
Conversion Rate = 50%
If you improve conversion from 50% to 55%, you increase
transactions from 100 to 110 – without adding a single new visitor.
For every retailer – and especially independent retailers
who typically get less traffic – even a modest increase in conversion rate can
have a meaningful impact.
You can also drive more traffic into your store, but this
usually requires some investment in marketing or promotions to encourage
visits. If you reside in a mall, you likely have little ability to influence
mall traffic. However, you 100% influence how well your store converts the
people who already show up. That is why conversion is the primary operational
lever.
What Drives Conversion in the Real World
I have been studying brick-and-mortar store traffic and
conversion rates for more than two decades, and I can confidently say that
conversion does not improve because you start tracking it and put it on a
dashboard – it improves because of behaviors in your store.
Specifically: Are you scheduling staff to traffic volume and
visit timing? Are shoppers acknowledged? Are questions being asked? Are
products being recommended? Are objections handled? Are associates treating
visitors like the precious gift they represent, or are they merely asking, “Can
I help you?” These are execution issues and focusing on these are the keys to
delivering better sales outcomes.
Traffic and conversion data do not replace good retailing;
they measure the performance in ways that sales outcomes alone could never.
They expose whether good retailing is actually happening or if you’re
squandering the precious store visits that you are getting.
Using Traffic to Diagnose Problems
Store traffic is almost always the first thing that gets
blamed when sales outcomes are down. But the truth is that sales can be down,
even when sales are up, and sales can go up, even if traffic is down. This
happens because of the simple truth: what you do with your traffic is more
important than just driving traffic. Traffic immediately separates marketing
problems from in-store problems. Here are some examples of the insight and
action:
- Traffic
down, conversion stable → awareness or demand issue - Traffic
flat, conversion down → in-store execution issue - Traffic
up, conversion up → it’s working…keep going!
This matters because the fixes are different. Without
traffic, many retailers attempt to solve execution problems with more marketing
and solve marketing problems with more training. Driving more traffic into a
store that has poor conversion is like putting water in a bucket full of
holes…it wastes time and money, and ultimately does more harm than good since
many of these first-time visitors may never return.
High-traffic stores often assume they are performing well.
Sometimes they are, but often they are not. When traffic is plentiful, weak
conversion is masked by volume. When traffic softens—as it eventually does—the
underlying problem becomes visible.
Retailers who already track and manage conversion are far
better positioned to absorb volatility.
Getting Started: A Simple Daily View
Independent retailers do not need enterprise analytics.
Don’t get caught up in the hype and headlines. All retailers need foundational
insights that are easy to interpret and action. They need basic insights to run
their store and make the operational decisions to deliver better outcomes. They
need three numbers: Traffic counts, Conversion Rate and Average Transaction
value. Look at them daily and by hour of the day. Compare to last week and last
year. You will discover that patterns emerge and these patterns hold the key to
improving your results.
If you are not currently measuring traffic, start with
something simple. Invest in a good quality, accurate traffic counter, and then
marry the traffic data with transaction counts to calculate conversion rates –
that’s all you need to get started. Once traffic is visible, conversion rates
become visible, and performance becomes manageable.
Why YOUR Store Traffic Is a Gift
Retail success is not driven by slogans. It is driven by
understanding what is actually happening in your store and how you act on it.
Store traffic is the foundation for that understanding. If you do not measure
it, you are guessing. If you do measure it, you have a chance to improve. That
is what being data driven really means.
Mark Ryski is a retail
analytics expert and Founder & CEO of HeadCount Corporation. He has works with retailers in more than 20 countries to
understand how shopper visits translate into sales, labor demand, and
operational performance. He has authored three books on the topic, including
his latest award winning, Store Traffic Is a Gift: The Retailer’s Guide
to Converting Visits into Sales. Mark can be reached HERE.
