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One, Two, Three, Four – How Many Customers Walked Through Your Door?

by Chris Wadsworth

As furniture retailers adapt to market dynamics, the need for customer intelligence has grown by leaps and bounds. Sophisticated customer relationship management tools have become prevalent in the industry, allowing the retailer to track virtually every “touch” of the customer’s experience with your store. But what about potential customers who have not yet visited your kiosk, given a salesperson their contact information, filled out a card or made a purchase? Just how many of these potential customers visited your retail locations last month? Last week? Two hours ago?

In order to answer these questions, a growing number of furniture retailers are employing electronic systems to count customer traffic and using this information in context of other business metrics. The more comprehensive counting systems available can tie in with a company’s server network and show traffic by hour, location and individual entrances.

What Traffic Counting Shows
Key areas where retailers are using traffic information include:
Total Traffic Profiles – Retailers look at the distribution of traffic by hour, day of the week, store location, seasonal periods, promotion periods, total chain, etc. All of these profiles feed into several other analyses, explained below.

Conversion Ratio – This is the most basic statistic derived from traffic count analysis. Simply defined, it is the total sales transactions divided by the total traffic. Different retail segments can have vastly different conversion ratios, as can different store locations in the same retail chain. For some businesses, 30 percent conversion rate is considered fantastic; for others this figure would be dismal!

Advertising And Promotional Evaluations – Traffic can be segmented to the exact period when a promotion occurred. If you are measuring traffic as well as sales profiles, you can see if your conversion went up, down, or remained constant during the promotion.

Staffing Optimization – Traditionally, retailers have staffed their stores according to historical and forecasted sales. While this is a necessary first step, it will not account for potential opportunities that may have visited the store but did not buy. For instance, did some customers not get waited on quickly enough and exit the store? Traffic information will highlight these factors.

Strategic Marketing And Operations – Using traffic analyses for your total chain, best practices can be implemented for generating traffic among similar stores. In addition, retailers can deploy initiatives that increase the likelihood of conversion and analyze what staffing strategies are best for each store or store group. From an operational standpoint, retailers can use traffic input to optimize physical entrance configurations and traffic flow patterns within the company’s stores.

How The Technology Works
Common retail traffic counting systems use sensors at the entrance areas to count the number of visitors to a store. The simplest systems use infrared technology, which registers a count when a beam is broken as customers come into, or go out of, a store. More sophisticated systems are able to determine the customer’s actual direction of travel (in versus out), as well as handle the counting of multiple people coming through an entrance at the same time. These more powerful systems are usually based on thermal imaging (i.e., body heat detection) or video processing technology. The most elite systems contain diagnostics to show that all sensors are functioning properly. Sensors are either mounted horizontally at the entrance, or overhead above the customers’ path.

Once a count is generated, it is sent to a database. Depending on the system, counts can be segmented virtually in real-time (and combined with real-time CRM systems), or divided into time increments such as five minutes, half-hour, hour, etc. Some software systems allow reports to be generated as to time period, store site, entrances, and segmentation groupings. For combined analyses, traffic data can be linked to sales, transactions, staffing, weather data and other statistics.

What Counting Can Do For Profits
Once the furniture retailer starts counting traffic, the company can discover whole new ways to analyze and optimize its business. For example, the retailer will likely start with benchmarking its current conversion rates and tracking future conversion as the company implements best practices to improve on conversion. Depending on sales levels and chain size, even a one-half percent increase can mean hundreds of thousands of dollars in additional profit. A retailer may find that even though a particular store has lower traffic than its peers, it is doing a much better job of converting the traffic they have to sales.

The retailer may also find, for example, that they are understaffed during peak traffic times and losing sales or paying too much for labor during inopportune times. Even a one-hour shift in staffing levels can mean dramatic increases in closed sales, or huge savings from overstaffing during slow periods.

The retailer’s advertising analysis may show that a great promotion resulted in increased sales. But traffic statistics may reveal that conversion was the same (or worse, lower) during the promotion. What tools could have been implemented to capitalize on the increased traffic associated with the promotion? By combining traffic information with sales and transaction data, assessments can be made to show how to make marketing communications, staffing levels and support, or the merchandising mix more effective.

The Bottom Line
With a relatively small investment and a little bit of time, retailers can positively impact their profits by analyzing visitor traffic. More and more furniture retailers look at traffic, sales and conversion as vital measures of store performance. Fortunately, hardware and software technology have evolved to a point where it is possible to provide the retailer with information in a cost-effective package. So when the question comes up again as to how many people came in your store, you can answer: “This week or last? Morning or afternoon? We had more traffic in the afternoon, but higher conversion in the morning…” It may not be long before everyone knows what you are talking about.

Chris Wadsworth is the vice president of Traf-Sys, Inc. (Traffic-Systems), a Pittsburgh, PA firm that specializes in retail traffic counting systems. He has worked with many top furniture retailers to help these companies use traffic as a strategic tool to impact profits. Chris can be reached at (412) 249-4069, or contacted through Traf-Sys’s website at www.trafsys.com.