Stuck on Traffic

Executives at Anna’s Linens are counting far more than threads these days.

The Costa Mesa, Calif.-based bed, bath and home decor chain has been installing traffic-counters at the entrances of all its stores. By the time you read this, management expects to be able to track how many people have walked through any of Anna’s 253-plus doors.

Anna’s executives have crunched plenty of numbers, like sales volume and units per transaction, “but we recognized that we were missing a tool that would allow us to measure a store’s potential, the effectiveness of our marketing and whether or not we had effectively aligned payroll and staffing,” says COO Scott Gladstone. “For us, that was a key gap.”

So Anna’s signed up for I-Count, a video-based technology with shape recognition from Sunrise, Fla.-based CountWise. Average shoppers might mistake the modules for smoke detectors, but they can shed valuable light on conversion rates.

Anna’s is not alone, of course: 35 percent of 168 North American retailers surveyed for a 2007 AMR Research report were using some form of traffic-tracking technology, and another 32 percent were in the evaluation stage.And the technology is moving beyond the realm of the retail giants, according to “Traffic-Tracking Technology Brings New Level of Demand Insight to Retail Operations,” a report by Robert Garf and Heather Keltz. That report found that, while 43 percent of the companies using the technology had more than $5 billion in revenue, 33 percent of companies with revenues of $1 billion or less were researching traffic-tracking.

Anna’s decision to deploy a CountWise solution throughout the chain followed a five-store test during the fourth quarter of 2007. The test stores were selected based on a variety of factors. “They even picked them based on being in hot and cold [climates],” says CountWise president Amir Chitayat. “They wanted to see if it would work in both. Of course, they didn’t tell us that until later.”
One of the test stores was the highest-volume unit in the Anna’s chain. Another was a store that Gladstone had long found perplexing — one that shares a wall with a Wal-Mart and has a high-volume Ross Dress for Less on the other side. Both neighbors were doing great, he says, “but our store was not performing to plan. … We really struggled with why.”

The first month of testing showed that, in terms of traffic, the store in question was actually within 6 percentage points of the chain’s highest-performing location. Sales volume, however, was about half. “We realized that our marketing efforts and customer traffic in that store [were] more than acceptable … so we looked at staffing,” Gladstone says.

Payroll hours were based on performance at the cash register and were thus considerably less at the “perplexing” store than at the highest sales performer. “What we found was that it was something of a self-fulfilling situation,” Gladstone says. “We had pulled hours out of that store and sales had responded accordingly.”

An analysis of traffic vs. sales showed the conversion rate at this particular store was at its lowest when it was the most crowded. “We weren’t staffed to handle those spikes and peaks in traffic,” Gladstone says.

Mindset switch
The concept of comparing sales to traffic is nothing new in online retail, where hit counts and conversion rates go hand in hand, Chitayat says. For bricks-and-mortar stores, however, it can be a bit of a switch. “The question is, can you change your mindset?” he says. “Instead of planning based on the past, you’re now planning based on potential.”

Gladstone likes the traffic-counting data because it empowers management at the store level. “I really want them to be able to measure against themselves,” he says.

Accountability is always a challenge, so Anna’s is tying bonuses and incentives to traffic-counting-related improvements. Gladstone wants to ensure that the new technology is viewed as a carrot rather than a stick.

Anna’s, which started with a single store in 1987, plans to open 20 units this year and has its long-term sights set on 1,000 locations. “We are, of course, being very mindful and cautious about growth in the near term, given the current retail environment,” Gladstone says. The soft economy makes the kind of ROI data the chain is now gleaning through traffic-counters especially important, he says.

Measure advertising impact
Take advertising. With traffic-counting technology, “we’ve been able to measure the impact of different types of advertising … and we can look at opportunities to more appropriately allocate our investments toward markets that … need additional drivers,” Gladstone says.

CountWise technology is based on shape recognition, which means the equipment can be adjusted to factor out children, take into account family units — whatever works best for a particular retailer (other clients include adidas, H&M, Havertys, Gucci and Lord & Taylor). In addition to entrances, some retailers choose to install CountWise in locations that allow them to track traffic in individual checkout lines or within specific departments.

“They want to see, ‘How long did they stay there?’ And did they just pass by or did they browse?” Chitayat says.

Gladstone feels fortunate that he had dinner just over a year ago with a well-known retail executive who had just unveiled a new concept. His dining companion mentioned that traffic-counters were being installed in the new concept, beginning with store No. 1.

“He very adamantly made his point that you can’t ignore this metric,” says Gladstone, who refers to it as “the metric that measures potential. And it’s up to you as a management team to train and educate your people to capture that potential.”