Fall 2005 Traffic by the Numbers
Most entrepreneurs who are completely new to specialty retail still know enough to ask mall management for foot-traffic numbers before signing a lease. But like many seasoned retailers, they often don’t know much about the technology used to conduct these counts. And they don’t know how to use the data when they get it.
The two leading companies with traffic-count systems on the market today are Traf-Sys (trafsys.com) in Pittsburgh and ShopperTrak (shoppertrak.com) in Chicago. They say that today’s traffic-count systems offer mall management and retailers highly valuable retail intelligence. Chris Wadsworth of Traf-Sys says, “The methodology, accuracy and consistency of collecting the data [are] of supreme importance.” Traffic-count information can have a major impact on sales if the data is accurately gathered and effectively applied to the “real” retail world, which starts at the mall’s entrance.
Eye in the sky
At the entrances to more than 350 malls in the US, the UK and the Middle East, overhead “Orbit 3″ digital video cameras record and count each customer going in or out, and marks the time. Each Orbit 3 then feeds this information to ShopperTrak’s data facility. There, the company processes and repackages the information into a reader-friendly format for ShopperTrak’s 30 mall-developer clients.
At any time, developers can log on to a ShopperTrak Web site to access the most current traffic counts for a certain mall, region, or the developer’s entire portfolio. The ShopperTrak “Mall Reporting Suite” includes reporting tools that correlate traffic data with staffing requirements, special events information and tenant sales.
Another module allows developers to group malls and compare performance based on any number of criteria, including geographic region or reporting-group level. The system also allows users to set benchmarks for properties based on key metrics such as visitors per square foot, sales per visitor and security per visitor. Bill Martin, ShopperTrak’s co-founder and senior VP of sales and marketing estimates that 50 percent of US malls have foot-traffic counting systems in place.
According to Martin, mall developers and managers have used traffic-counting systems for years to help them control overhead cost—for example, running air conditioning at peak traffic times; and to plan staffing levels—such as how much security is needed at special events, or the size of the maintenance crew for post-event clean-up.
Of course, anytime mall management saves money by keeping operating costs in check is good news for the retailers who pay rent, says Martin. “You have to assume that if the malls are more efficient—if they have the ability to take costs out of the management of the mall—that should impact lease rates” for the better.
Martin says that traffic counts can also help retailers get a better handle on their staffing levels: Sometimes a half-hour change in scheduling can yield enormous results. “For example, if you think your peak traffic time is from 3:00 pm to 5:30 pm but a traffic count would suggest that it’s really 2:30 pm to 5:00 pm… you could be missing that half-hour right at the beginning,” he says. “And you could be overpaying for labor on the back end, as well.”
On a more advanced level, traffic counts help mall management measure the effectiveness of mall-wide marketing and advertising campaigns, detect changes in consumer buying behavior, track trends, plan expansions and, in one of those worst-case scenarios, figure out ways to counter and reverse a confirmed drop in foot traffic.
Martin says mall managers want to know how their mall compares with other malls locally and nationally, or with malls with specific demographics. Comparing current data with last year’s can identify trends. This tells you where you’re going, and provides priceless time to react proactively.
Mall managers also use traffic counts to track the effectiveness of special events and other marketing efforts. If traffic counts reveal that customer traffic was up during a certain special event, but retail sales were down, that tells mall management—and their tenant retailers—that the advertising campaign worked well to bring in customers, but something went wrong in terms of converting those customers into sales.
But that doesn’t mean the problem necessarily lies with the retailers, although it might. Martin says the retailer should ask questions like, “Did the promotion attract a demographic that isn’t my demographic?” and “Did the promotion attract more traffic than we anticipated, and weren’t staffed properly to take advantage of it?”
According to Wadsworth, traffic-count data must be assessed on a case-by-case basis. “As with any other key business parameter, traffic is only part of the story,” he says. There are many variables to be factored in, he says, including such things as merchandising profiles and even the weather. Sometimes a mall with a lower traffic count will outperform at capturing sales. Those malls are doing a better job of converting traffic into dollars.
When combined with sales information, accurate traffic data allow retailers to see “how much of the total mall traffic they’re capturing, and implement strategies to capitalize on more traffic,” Wadsworth says. Martin goes a step further: he suggests that retailers who manage their staffing levels and sales promotions based on traffic data may be better off than retailers who manage based on the number of sales transactions.
“Retailers aren’t aware of how many people come into their stores unless they’re measuring it,” he says. “They’re always aware of what their transaction count is because that’s captured with sophisticated point of sale equipment. So they know that at the end of the day that they had 100 transactions, but they have no idea if 500 people came in [to their store] or if 1,000 people came in.
Looking at sales as an indicator tells you one thing, he says. But looking at the consumer and the total number of shoppers who came in tells you a completely different story. So with an accurate count, “we can say to our retailers: You had 100 people in your store and 25 people bought something, so you converted 25 percent of your opportunity.” From there, he says, you can figure out how to get 26 percent, then 27 percent… and those incremental sales increases greatly contribute to margin and additional sales revenue. Wadsworth says smart retailers “collaborate” with mall management to stage cross-promotions and other initiatives in order to generate more traffic and visibility. “Partnership between retailers and mall management is more important than ever,” he says, because shoppers have more choices than ever for places to shop.
“Taken with other factors in context, traffic can be a powerful strategic tool in running a retail business,” he says. As with anything else, “the key to higher profits resides in the actions taken as a result of the total picture—including foot traffic.” Thanks to traffic counts, retailers can know who’s coming, how many, and when. And that knowledge is power.
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