It isn’t as easy to get consumers in stores today as it once was, and it isn’t easy to get those who do make it to stores to actually buy something that isn’t either wildly compelling or on sale for 40 percent off.
One company, however, thinks innovative data-driven coaching is the answer.
Or, in other words, scrutinizing traffic counts and traffic’s relationship to sales will be key to bringing stores back to profitable.
“Stores are in the midst of an existential crisis,” a report released Tuesday by RetailWire and analytics firm HeadCount said. “The writing is on the wall: traffic counts are indeed eroding and the attention of digitally-attuned shoppers is splintering.”
That isn’t to say that stores aren’t important anymore, quite the contrary. The International Council of Shopping Centers said 91 percent of holiday shoppers still bought in stores, and 72 percent of shoppers surveyed for an L2 Intelligence Report said traditional stores are important to making a purchase.
But, as RetailWire CEO Al McClain explained, “Physical stores are on the chopping block,” and, “Yes, retail execs are experimenting with all sorts of initiatives to drive results, but few have connected the dots to pull the ROI they need from their investments.”
Retailers have typically relied on store traffic as an indicator of how a store is doing, but these days the “more traffic, more sales” notion doesn’t always hold true.
“The measurements in most stores are at a very ‘gross’ or macro level—far too simplistic to be meaningful or diagnostic,” retail business analytics consultant Chris Petersen said. Sometimes more shoppers means more sales and other times it’s the inverse.
Naturally, the formula for converting traffic to sales varies considerably by location, category and season, among other things, but each store’s data can be a veritable “gold mine” that hasn’t been fully leveraged yet, according to the report.
Stores need to start using their data to coach store and district managers on how to apply those insights to turn bigger profits.
In looking at the potential financial benefits that could come from combining data-driven coaching with simplified reporting, analysts found that among the seven discrete test groups across four retail verticals, net sales productivity improved by 537 basis points.
That translates to an average sales productivity increase of $0.67 per traffic count, which would roughly equate to annualized revenue increases of $33 million.
What made the difference? Simplicity, coaching and engagement.
When visual traffic and conversion reporting subbed for tabular data, store managers could see the previous day’s traffic and conversion trends by hour, pointing to places where loss was occurring.
And even with easier-to-read reports, researchers found that store managers performed best when given guidance on the best ways to apply those insights.
To keep store managers engaged, training has to be more than “once-and-done” as the report noted. It should be adaptive for each individual and make traffic analytics a part of the store’s daily culture.
RetailWire and HeadCount outlined five key takeways in the report.
1. Stores are the new Internet. “In this data-driven, customer-centric age, retail stores will live or die on the strength and effectiveness of their data management and analytics initiatives.”
2. The ultimate destination for insights is the front line. “Those most likely to exercise the greatest influence over sales performance—store and district managers—are given the best opportunity to do so when they are afforded the necessary insights, skills and ongoing support.
3. Traffic and conversion are your watchwords. “Of the wealth of resources available to retailers, basic store traffic and conversion data should be prioritized because of its usefulness in understanding precisely how sales productivity can be improved.
4. People are not computers. “Big Data gets more (astoundingly) complex every day, making it that much more important to have a process in place for harvesting the key insights, presenting them to managers in digestible bites, and inspiring action that delivers meaningful and measureable results.”
5. Replace “once-and-done” with “forever learning.” “Everything in retail changes, all the time. Adapt—continually—or die. To avoid the quick “pop and atrophy” syndrome experienced when the initial glow of a new traffic and conversion program quickly wanes, retailers need to support store and district managers with ongoing coaching to help them interpret and apply the insights.”
It’s simple really, according to HeadCount CEO and founder Mark Ryski. “No matter what’s going on in the industry, good results don’t go out of fashion.”