Boost sales by converting browsers into buyers - point-of-sale systems - POS Implementation

Discount Store News, Sept 23, 1991 by Christopher J. Carey

Boost Sales by Converting Browsers into Buyers

The 1990s are a very different time for discounters than were the 1980s: The challenge today is to get a larger portion of a smaller pie (consumer spending dollars) by focusing on customer satisfaction to improve earnings.

Discounters who focus only on sales per store and sales per square foot overlook the real opportunity for enhancing store performance: improving quality and customer service.

I believe that by measuring the number of shoppers that come into a store to determine the number actually converted to customers, and by taking action to expand that conversion rate via programs designed to increase customer satisfaction, gross sales will increase dramatically.

Management Horizons, the Ohio-based research consulting firm, designed an interesting formula called its Impact Model by which gross sales are achieved via the critical element of store traffic.

Store traffic is the result of three elements: your market coverage, your penetration level - which I believe is the level of satisfaction perceived by the customer - and shopping frequency. Store traffic, multiplied by your closure rate - the number of shoppers converted to customers - provides the total number of transactions in a facility. That number, multiplied by the average transaction size, gives you total gross sales.

Existing POS system technology gives us a good idea of average transaction size, and in most cases, the number of transactions. What we don't have, and it's the most elusive part of the whole formula, is a count of shopper traffic. It's important to focus on this area to really understand customer satisfaction.

There is a new technology on the market - called the ShopperTrak measuring and reporting tool - which, for the first time ever, helps to give the retail industry an accurate count of shopper traffic. Mounted overhead, the new technology counts people as they enter or leave a facility. It also measures height of anything or anyone passing throught the doors so that children and shopping carts can be excluded. The unit can also be positioned over certain aisles and in front of check-out lanes for line counting.

Shopper traffic information is then reported through either a stand-alone PC in the store, or integrated with the existing in-store POS system (utilizing the PC controller or master terminal) and the data network that communicates with headquarters.

A multitude of dynamics can be realized when shopper count can be compared with POS transaction information to determine the actual closure rate. The closure rate can be defined in percentages as the total number of POS transactions - easily obtained from almost every POS system available - divided by the shopper count.

A management report using shopper counts and POS data to determine conversion rates has tremendous impact. For example, total traffic is really out of the store manager's control. A report could focus instead on what the store manager did with those people once he got them in the store. Consider the power of comparing conversion rates store by store, district by district or against a chainwide goal. Among the many applications, this data can be used as a barometer of your ability to in conversion rates across stores. You can also compare the total number of shoppers and actual conversion rate against the conversion rate plan to get a total number of lost customers. Then you can take the average sale amount (again, off the POS system) to give you a report of lost sales in that store.

What opportunities are we really losing by not converting more shoppers to customers?

In a report published by Inside Retailing in October 1990, four store chains totalling 68 stores were audited. The report found that 71% of the shoppers that came into the stores didn't buy anything! And of all the shoppers that were in the facility, 40% had no contact with a salesperson. So, your store people aren't selling anything to 71% of the people that you get into your store! This represents the single greatest opportunity for sales growth improvement in the '90s.

There are a multitude of things that you can do to improve conversion rates. The single most important element in improving conversion rates is a commitment to quality and customer service. Successful retailers like Nordstrom's, Neiman-Marcus, Disney and McDonald's certainly know the merits of such a commitment. Pages could be written on this topic, but for brevity, I'll zero in on just one sure way to improve customer service - that is, by really empowering your employees down at the store level to service customers, and by backing your employees' "best judgement" decisions. Successful retailers who are really working the service edge are, without a doubt, empowering their people in this way to make decisions to satisfy the customer.

Obviously, good merchandise presentation and quality are also going to improve conversion rates, as will accurate inventory management (available and correct merchandise mix). Improving conversion rates also requires an innovative approach to out-of-stock items, whether it's a raincheck, credit or delivery to your house.