By Mark Heckman / August 2016
It is not news to anyone associated with retailing, that Amazon and other on-line retailers continue to carve out increasingly large portions of market share traditionally owned by bricks and mortar stores. This phenomenon is driven both by vastly improved technology and a corresponding increase shopper adaptation of the on-line process.
Much of this growth can also be attributed to on-line retailers leveraging the plethora of shopper behavior data that e-commerce sites yield. Accordingly and to their great credit, e-retailers have used this information to create an increasingly efficient, customized, shopper centric on-line experience.
Such has not been the case for physical retail facilities. While some progress can be claimed in terms of improved fixtures and in-store technology, most retailers are still mired in the past as they design, merchandise, and operate their physical stores.
You Can Only Manage What You Can Measure
The vast majority of traditional retailers continue to do a very credible job in tracking what I will refer to as ‘P&L’ metrics, that is those critical numbers that reflect sales, profits, expense control, and return on investment. With these vital numbers driving their merchandising, marketing, and operations, retailers continue to manage their business. Unlike their on-line counterparts, among other critical customer data, traditional retailers do not, on a regular basis track the time spent in-store by the shopper or how shoppers engage (or not) their merchandising efforts.
To put a finer point on this topic, ask any retailer how long shopper’s spend shopping their stores and how long it takes to make a purchase. The on-line retailers will be able to tell you immediately, while their cousins on the bricks and mortar side will mostly likely wonder why you asked the question.
A Shopper’s Time is Much More Limited Than the Amount of Money They Are Willing to Spend in Stores.
Millions of data points indicate that shopper’s are gifted with an internal clock that dictates how much time they are willing to spend in-store. Most retailers are either unaware of this or are in some degree of denial that their merchandising and store offerings will entice the shopper to remain in the store past the time they desire to move on.
Retailers are often surprised as to the average trip length times, even in their largest stores. The adjacent chart reflects such measures in a package liquor store with 5,000 sku’s.
The average trip time is just 6.5 minutes, which puts extreme pressure on the retailer to merchandise efficiently to the shopper in such a brief visit.
Supermarkets and mass merchants with stores over 100,000 square feet of selling area are faced with the same problem. Fifty to seventy-five thousand sku’s are offered to shoppers often spending less than 15 minutes in their stores.
The point remains that even as stores have grown significantly larger, the average trip times for shoppers are on the decline. In addition, the consensus of many recent shopper-tracking studies reveals that shoppers spend more than four times as much time searching in-store than actually engaged in making a purchase.
Measuring the Physical Store’s Shopper Centricity is Not Only Possible, It’s Imperative to Future Success
Affordable and practical technics now exist to provide retailers all the information they need to measure in-store shopper efficiency.
Traffic counters with clocks provide the time shoppers spend in the store from the moment they enter the store to the time they leave. The neighboring chart is an example of an observational shopper-tracking audit.
Personal observational technics enable a comprehensive shopper map that includes density of shoppers, their directional flow within the store, the time they spend in each area of the store, as well as their gender, and the direction they are facing. This information, coupled with compatible transaction logs from the retailer’s point of sale system, yield important diagnostics as to efficacy of the store layout and design and the critical merchandising plan within the physical store.
Shopper Tracking Map
Enter Category Management
While most retailers manage their business at the category level, their shoppers are most oblivious to this approach. They shop at the item level and in their world, the faster they can find the items they are looking for, the more likely they are to have the time to impulse purchase unplanned items.
Accordingly, it is incumbent upon category-organized retailers to better understand how and where those categories are merchandised in their stores. The shopper centricity of a category can be defined on two distinct levels.
Shopper Exposure: (What percentage of shoppers actually travel by the category in the store)
Purchase Conversion: Once a shopper ventures by a category, at what rate do these customers slow down to browse and actually shop and most importantly, at what rate do shoppers actually put an item in the basket and make a purchase?
Scoring each of a retailer’s critical categories with exposure and conversion rates is vital to truly unleash the potential of category.
Techniques to measure category level shopper centricity have been in existence for a number of years. What is changed is the cost and the ease of measuring exposure and conversion and the vital importance of actually doing so to remain competitive in the new, challenging world of digital commerce. There is much more on these topics to come in subsequent writings.
In addition, look on Amazon.com for Dr. Herb Sorensen’s new edition of “Inside the Mind of the Shopper” later this summer for expanded thinking on the new mandate to understand the shopper inside the physical store. The contributions of Mark Heckman are found in Chapter 2, Transitioning Retailers from Passive to Active Mode.