by Anh H. Nguyen
‘In the beginning God created the retail stores and the customers.
And the retailers had no way to measure the traffic. Sales were lost, resources were wasted. Confusion reigned.
And God said, Let there be traffic counters.’
The traffic counter: what, why, and why not?
1. What is the traffic counter?
The traffic counter, sometimes also known as the people counter, tracks the number of visitors entering or exiting a specific space. It is a wonderful invention for retail, although there are many other applications.
2. For what purpose do retailers use the traffic counter?
Most importantly, retailers count their traffic so that they would know about visitors who came in but ultimately did not take the plunge. They are the unconverted prospects, the sales they almost had, the ones who got away. Without knowing exactly how many potential sales opportunities were missed, retailers simply could not determine how well their stores convert traffic into sales. And in most cases, the conversion rate is the most accurate representation of performance. If you do not fully understand how your stores are doing, how could you possibly improve and grow?
Hoang Phuc International flagship store
Let’s begin with an example of a classic problem. One of our clients, Hoang Phuc International, is the distributor of many renowned sportswear brands such as Dr. Martens, Kappa, and Ecko Unltd. For a long time, Hoang Phuc relied on their POS data as the sole indicator of their store performance. On the surface, everything was fine: their sales were stable, and their customers seemed happy enough. It was not until Hoang Phuc launched a “You are happy - We are happy” initiative that they used our analytics solution to look deeper into their traffic. It turned out that when traffic increased at peak time, the conversion rate dropped. All in all, the chain might have lost about 700 transactions every week. Without counting their traffic, those missed sales opportunities would remain undetected for good. Unfortunately, such mishaps are rampant in the retail world.
3. Why are some retailers still resistant to the traffic counter?
The biggest reason is cost. A simple traffic counter may usually cost anything from a few hundred dollars to $1500/device. When we factor in the number of stores, the overhead costs of installation, maintenance, and replacement, getting traffic counters could carry quite the hefty price tag. Retailers love seeing results, but they are understandably reluctant about investing in new technologies. If only seeing is truly believing, then potential sales losses are not a strong enough motivator. As a result, many underlying problems in store performance are hidden for far too long until they fester and impact the business in irreversible ways.
That is why a solution like Palexy’s that requires no physical hardwares is ideal for hesitating retailers. Our solution does not calls for any additional equipment or traffic counter, effectively removing a significant barrier to entry. All our clients need is a pre-existing CCTV camera system.
4. Does it mean that retailers who already have traffic counters are all set?
Not quite. Although the traditional traffic counter is sensible feature to have, it has many drawbacks:
-Most traffic counters cannot automatically separate the staff traffic from the shopper traffic. This usually causes the count to be muddled. Some new generation traffic counters address this problem by requiring the staff to wear electronic tags, which piles on even more cost.
Since traffic counters work by thermal detection, they cannot tell visitors from staff without some kind of exclusion tags
-Traffic counters cannot record the visitor-staff interaction. Even if you know for certain the conversion rate is not good, you would not be able to fix it without identifying the root cause. Are the staff not engaging with customers enough? Are they not reading them well? Are they approaching them too quickly? Too slowly? Too aggressively? Too lethargically? You have no insight at all.
A good example of why retailers must examine their visitor-staff interaction: Guardian, a major global beauty and healthcare chain, had a good overall conversion rate. Only when we measured their hourly conversion rate and monitored the staff performance did we discover that the conversion rate usually dropped at 1-3 PM, coinciding with the shift change period. After we advised Guardian to review and change the priority of the daily tasks in order to help the staff focus, the conversion rate from 1-3 PM increased by 5-7 percentage points for street stores, and by 2-4 percentage points for mall stores.
Guardian store in Crescent Mall
-Traffic counters cannot break down store traffic into section traffic. So if a retailer wants to measure the traffic to a specific section of their stores, they are out of luck.
Here is a great story about the importance of section traffic. One of our clients is PNJ, the biggest jewelry brand of the country. Diamonds and diamond-encrusted jewelries have the highest profit margin and therefore are considered their key product category. As such, our client tried many tactics to drive more traffic to the diamond section. Yet our data showed that the diamond traffic accounted for a disproportionately low percentage of the overall traffic because of layout issues. This insight allowed PNJ to fix those problems and increased the diamond traffic significantly. In the case of PNJ's store in Aeon Mall Tan Phu, for example, the diamond traffic jumped from 5% of overall traffic to 48%. That was a staggering 9X increase.
As the national pioneering brand of diamond jewelry, PNJ is especially invested in customers' reception of the diamond sections in their stores
-Traffic counters provide no insights into customers demographics and behaviors. So if retailers want to learn anything about their shoppers beyond how many there are, such as, if the customers are male or female, old or young, if they linger at one particular section, if they prefer shopping in solitude or need assistance, and how long they shop, they simply cannot do so. Yet such information are vital for developing sales strategies, creating good store layouts, and maximizing staff performance.
Palexy's solution not only shows you who your customers are, but also how they act and respond to elements in your stores
We have another story from our client, Guardian. Always keen on building on their connection with customers, Guardian tasked us with studying their customers’ behaviors, namely their shopping times, and the impact of staff interaction on the conversion rate. We found out that different customer subgroups required customized interaction strategies: slow-buyers who spent more time deliberating before making a purchase needed more interaction time, while with quick-buyers, the staff could speed up the interaction with each customer and quickly move on to the next. The optimal cut-off time and rate of interaction were also calibrated for the best conversion rate. As a result, the overall Conversion Rate of Guardian increased by 7 percentage points on average and the revenue grew by 10%.
As you can see, for modern retailers who constantly demand bigger data and better data analysis, the traffic counter is in fact quite rudimentary and insufficient. However, while the limitations seemed huge, they are not entirely unexpected. After all, the traffic counter could only fulfill what it is designed to do: counting people. Who they are, what they want, and how they behave are not the traffic counter’s concerns. But they should be the retailers’ concerns if they have any intention of thriving.
5. So what is the endgame here?
There is an all-in-one solution that eliminates the cost problem of 3., and the four function problems of 4. If you have kept reading until this point, you know what it is. Palexy’s Store Optimizer, a powerful new-generation solution that measures and analyzes traffic, is a must-have tool for the modern retailers. It requires zero hardware purchase, minimum deployment effort, and gives retailers maximum results in return. For a handy guide of our advantages over the traditional traffic counter, see below:
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