Talking Retail Traffic Count Blues
What do we make of the on-going softness in retail traffic counts?
As my independent retail clients, who represent a wide range of product categories, run more consistent year-over-year sales increases each month, traffic counts continue to remain soft. Each month, sales are up, but the composition of those sales is split; transaction counts (in many cases a good surrogate for traffic counts) are down, but the average retail value of each transaction is up. In some cases, the average retail value of each transaction is up considerably.
This is a pattern that I’ve seen since the recession set in. Declining transaction counts led the way down. Average retail value (average ticket) held up pretty well. Those customers that were buying were still prepared to spend as much as they previously had. There just weren’t as many of them.
Most of the monthly sales increases now are being driven by increasing average tickets. The customers that are buying are spending more than they have before. In many cases, units-per-transaction are holding steady, which means those customers are buying more expensive things rather than just more things.
So, how much of a concern is the on-going softness in traffic counts and transaction counts? Let’s overlay this against what we hear is going on in the larger world. The economy is slowly improving, but the benefits aren’t being felt evenly, either by income group or regional area. Luxury retailers are faring particularly well.
The instinctive response to soft traffic counts is often to moderate price points to reach a broader customer base, and perhaps even increase promotional activity, to drive more sets of feet in the door. After all, fewer feet mean fewer overall units being sold, and that suggests eroding market share.
Things have changed, however. Independent retailers engage in discretionary goods, and the disposable dollars for those goods, while increasing as the economy picks up, seem to be concentrating in fewer hands. It is what it is.
Rather than dwelling on soft traffic counts, I think a better approach for most independent retailers is to focus on those customers who are spending. They are the ones with disposable income and aspirational taste-levels. They are the ones who are in your stores today. Rather than dwell on soft traffic counts, I think a better strategy is to drive the average ticket.
This has implications for your marketing message and strategy, but I’d recommend that you focus on your merchandising strategy, and let the marketing message and strategy flow out of that merchandising strategy. While maintaining assortments of core merchandise at key price points, seek out opportunities to extend assortments into better, more exclusive goods, at higher price points. Focus your testing in that direction, continually seeking to trade up your existing, proven customer base into higher priced goods, and higher average tickets.
This is not to say you should ignore those soft traffic counts. Rather, focus on existing customers, delight them with unexpected treasures, and deliver such a memorable experience that they simply have to tell their friends about it. As we go forward, that word-of-mouth buzz is the best antidote for those soft traffic counts.