Retailing and the Internet of You

Walk into a retail store and you may be vaguely aware that you are being counted. Many retailers have long used systems from companies such as Irisys, Nomi, Sensormatic, and ShopperTrak to measure foot traffic entering their stores by time of day, but the growing sophistication of traffic-counting in shaping the customer experience is an evolving story of information aggregation, integration, and scale. The story starts with the counting devices themselves, typically mounted over doorways, which have become increasingly sophisticated so that some can distinguish adults from children or people from baby carriages. After all, retailers are interested in the people carrying the wallet. Unfortunately, knowing how many shoppers entered a store by time of day is not very useful on its own. What retailers really want to know is conversion, the percentage of shoppers who actually made a purchase and the size of those purchases. To analyze conversion, retailers marry their traffic counts to their cash-register data. One of the key factors affecting conversion is the availability of sales help. Many of us have had the experience of walking into a store, taking a quick look, and starting to make a u-turn to leave when a salesperson intercepts us and asks if we need help. That conversation can often result in a sale that otherwise would have been lost. Therefore, retailers now integrate traffic data into their scheduling systems to ensure that they have adequate staffing for their projected traffic levels at different times of day (and are not overspending for staff when it is not needed).

Benchmarking is one more step in the evolution of retail traffic data. Retailers now use traffic, conversion, and staffing data to compare performance across their stores and identify ways to improve their laggards. Some vendors, such as ShopperTrak, now have large enough installed bases to benchmark a retailer against a peer group of stores in the same market (anonymously, of course). For example, a mobile phone retailer might want to compare traffic at its stores in downtown Chicago to other mobile phone stores in the same area. ShopperTrak now also sells market indices that track foot traffic in various retail segments, such as apparel, shoes, and phones, which can be used by investors as early indicators of retail trends. FootFall, a UK-based player, provides similar indices of retail traffic by various countries.

The lesson here, as in other information businesses, is that aggregation, integration, and scale increase the utility and value of simple information. Think about that on your trip to the store.

About Lee Greenhouse

Longtime strategy consultant focused on the business of information content, applications, and services.
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