HeadCount Retail Insights Blog

Business Intelligence Has Become Unintelligible

The value of transaction data that comes from your point-of-sale (POS) system is undeniable — it helps you understand sales results, manage inventory, optimize distribution, and even deploy staff. 


So what then is the glaring flaw? 


If you are primarily relying on your sales data to fuel your business intelligence systems and team discussions, you have absolutely no perspective on the sales you lost.  

The pressure to be smarter, faster and better has never been more intense and retailers are investing heavily in business intelligence. According to Fortune Business Insights, the global retail analytics market  is predicted to grow to $18.33 billion by 2028.

But why does high levels of investment not necessarily return high levels of value? Many retailers are missing the foundational piece. 

Traffic and Customer Conversion – meat and potatoes analytics 

Analytics is a hot topic. And analyzing traffic and customer conversion should be at the very top of retailers' analysis. 

Traffic and customer conversion analytics focus on what happens before the transaction is recorded in your POS system – if it ever is. That’s what is especially powerful about traffic and conversion: together, they tell you about the sale you almost had. They give you a perspective on what might have been based on the opportunity that actually crossed the threshold and into your store. 

Business Intelligence is Unintelligible

It all starts with traffic. It is essential to understand prospect visitation as it represents your true opportunity to sell. Furthermore, your investment in advertising should be primarily measured by the increased traffic driven into your stores. 

But once prospects have arrived....then what happens?

If they have a successful customer experience, then the end result should be a sale. But, if for whatever reason, the prospect does not buy, you will never know, unless you have traffic data. 

Customer conversion is the only measure that can quantify your sales potential. It measures what your POS can’t see — your missed opportunities.

The idea of measuring store traffic is not new. Electronic traffic counters have been available since the 1970’s. Terms like 'conversion rate' and 'close rate' have been part of the retail lexicon for decades. So why are they misunderstood and underused in retailing today?

Are you underusing these metrics? Can you and all of your store teams answer two basic questions:

  1. How many prospects visited your stores yesterday?
  2. What percentage of the visitors actually made a purchase? 
Even the most brilliant analyst cannot script a query to extract answers to these fundamental questions if the system doesn’t contain traffic and conversion data. 

In many ways, brick-and-mortar retailers are playing catch-up when it comes understanding what online retailers already know.

Two of the most fundamental metrics in online retailing are website traffic and conversion rate. Traffic and conversion play key roles in understanding the performance of these online channels. So...why do they get so little attention as measures for brick and mortar retail? These great metrics are at least as important, if not more so, for brick and mortar stores. 

Consider this example: 

During a meeting with a major department store chain, the CEO was absolutely gushing with pride about a recent press acknowledgement listing his chain’s website as one of the most visited retail websites in the country with about 360,000 web hits a year. 

Then we showed him the results of a traffic study we conducted for his marketing team. On the basis of the traffic counts logged in a sample of his stores, we estimated that, chain-wide, his brick and mortar stores received hundreds of millions of visits annually. 

360,000 web visits versus hundreds of millions of store visits each year — yet conversion KPIs were reserved for online analysis only. Stores focused on sales.

Ask yourself: What are your stores focused on? 

Measuring store traffic is essentially the same as measuring website traffic.

How many people 'hit' the front door compared to the main page on the website? Think about it this way: Just as there can be 'mis-hits' to the website when people make a wrong keystroke and end up on your website unintentionally, there are 'mis-hits' to your storefront as well. These 'mis-hits' are traffic counts that don’t represent true prospects e.g., children visiting the store with their parents. 

Note: The fact that there are 'mis-hits' doesn’t mean you shouldn’t measure them, just as you do for your website. It’s funny — executives will often question the accuracy of the electronic store traffic counts, but they never seem to question the validity of the hits to their websites. 

Store traffic is just as important as website traffic — in fact, in some ways it's even more critical. While websites can be scaled up relatively inexpensively, scaling up a store can mean staffing up (which is expensive) or creating new instore experiences. 

"While I have no argument with the Business Intelligence industry, the problem seems to be that for many retailers, the sophisticated tools and systems offered by the purveyors of these systems are fundamentally beyond what most can put to practical use." Mark Ryski
"I highly recommend two books: 'Competing on Analytics: The New Science of Winning' by Thomas H. Davenport and Jeanne G. Harris and 'Analytics at Work: Smart Decisions, Better Results' by Davenport, Harris and Robert Morison". Mark Ryski
"Ironically, any retail executive can recite Google website traffic and conversion statistics like a pro, but when it comes to measuring traffic and conversion in his own stores, somehow the logic doesn’t apply — or at least doesn’t seem as compelling." Mark Ryski
Questions that only measuring traffic and conversion can answer.

The following list is not exhaustive, but it represents some of the more important questions that confront and confound retailers. Traffic and customer conversion analysis can answer all of these questions: 

• How are we performing compared to the sales opportunity? 
• Which are my best performing stores? 
• Where and when am I losing sales? 
• Does my advertising work? 
• Is staff scheduled optimally? 
• Are my sales associates effective? 
• Are my store hours right? 

How many of the questions can you easily answer?  

To improve your sales, you need to understand what lever to pull. Traffic and customer conversion help you do that.


Excerpted from 'Conversion: The Last Great Retail Metric', written by Mark Ryski, Founder & CEO of HeadCount
What are your thoughts?