Up for the Count
Traffic in North American stores and malls is down. Given the struggling economy, now more than ever retailers should be focusing on increasing sales based on existing traffic vs. generating more traffic.
St. Michael Strategies (SMS) of Chambly, Quebec, pioneered the use of pedestrian-traffic data as a Key Performance Indicator more than 30 years ago. Today, the solution is used in stores and malls around the world. There is still work to be done in expanding the technology industrywide, however. Senior editor Deena M. Amato-McCoy talked with David Di Cristo, SMS’s new general manager about the importance of conversion rates and the current status of the industry’s use of traffic-counting technology, as well as future trends, and his involvement with SMS.
You are the first SMS general manager who is a non-founding partner. What drew you to the opportunity?
I was drawn to the potential for growth, both for our company and for our customers. After 35 years, a conversion rate is a far more widely used KPI [key performance indicator], yet only 25% of large North American retailers currently collect traffic data. The potential for growth is huge.
My background is technology and I believe the current—and future—technology will bring significant additional functionality to the systems we provide.
From all indications, 2009 is going to be another challenging year for retailers. Traffic counting is not a magic solution. But it will provide key information about store potential. And this will reveal specific actions that can improve the business, sometimes significantly, for a very reasonable cost.
My job is to continue to provide a wide choice of cost-effective traffic-counting technology solutions to retailers to help them accomplish this.
Why is traffic counting still used by such a small percentage of the industry to date?
There are two factors: financial and cultural. Traffic counters cost money. When budgets are tight, non-essential technology is one of the first projects to be put on the back burner.
Issues revolving around corporate cultures are more difficult to overcome. Head offices are full of expensive people working very hard—and often unsuccessfully—to increase store sales. It’s sometimes difficult for them to accept that moving a conversion rate from 20% to 21% will increase sales 5%, and that this can be achieved with minimal cost and effort.
What efforts are being made to increase awareness of traffic counting as a solution?
Interestingly, a slow economy can help. Retailers who have unsuccessfully tried everything else to increase sales will sometimes decide to take a second look at a traffic-counting solution in a downward economy. And there are more chains now than five years ago that have successfully increased sales using conversion rates, so the risk factor is disappearing.
SMS is also partnering with an increasing number of point-of-sale and software vendors that see value in incorporating traffic data into their systems. The result of these partnerships will be that more traffic data will be available to more retailers at a lower cost.
You explained that traffic-counting solutions are evolving into “traffic-flow management” systems. How so?
Most current traffic-counting systems monitor traffic entering and leaving the store. New technology will allow us to cost effectively monitor traffic passing in front of the store, traffic moving within areas of the store, traffic using fitting or wash rooms, and much more. Retailers will be able to buy, merchandise and sell far more effectively with more detailed traffic information.
Where do you see the traffic-counting industry evolving over the next 10 years?
Solutions will become less costly and more sophisticated, which will make it financially feasible to monitor more points of traffic flow over larger areas. Understanding the relationships between traffic flow and space usage will permit more efficient utilization of many types of public spaces. For retail, this will probably involve a sharing of their traffic data with malls.
As this cooperation evolves, both the mall and its retailers can share the common objective of getting more people to the facility and converting the optimal percentage of this traffic into sales. Some malls are starting to base rent on traffic and to allocate prime space to retailers that can demonstrate an ability to convert their traffic.
Similarly, retailers have started to hold the malls accountable for generating certain levels of traffic. The partnership is in its early stages, but the results have been positive.