Retailing 140: Understanding and Measuring Conversion
By Jay Townley
In retail, “product conversion rate” is the percentage of shoppers who enter your store and actually buy something. The product conversion rate is an important measure for retail performance, but unfortunately, many specialty retailers do not capture this important metric. (See below for a simple, non-techy method for measuring the overall product conversion rate for your store.)
Current estimates show that in-store conversion rates are typically below 30 percent, and dropping — meaning that at least 70 percent of your store’s visitors leave without buying something. It’s hard to say what an “ideal” product conversion rate is — there are a number of variables specific to your store and location that need to be taken into account. But it’s probably safe to say you want that conversion rate as high as possible.
We talk about this a lot because it’s extremely important: Getting customers to increase their spend is directly related to their shopping experience. There are literally hundreds of little things that can occur along the path-to-purchase that can make or break a sale. In order to improve conversion rates, retailers must evaluate all areas of their store that contribute to and affect the shopping experience, then identify and act on opportunities to improve.
For the majority of specialty retailers, the most critical areas are staff, inventory and merchandising. Staff-related issues have the greatest impact on conversion — and are the most personal because you as the owner are often the front-line store staff!
Conversion rate will be impacted by:
- How you greet customers. We’re not just talking about simply saying “hi” when shoppers enter. Show an interest in the customer and help get them quickly to their desired product or destination.
- Staff effectiveness. You and your staff need to be adequately trained on systems and products so you can assist in a professional, competent and courteous manner.
- Product availability. You may be able to attract prospects to your store, but if you don’t have enough stock to meet shopper demand, conversion rates will be negatively impacted. Make sure you maintain sufficient inventory levels. Also ensure that you have the right mix of SKUs (your “product portfolio”) for the prospects visiting your store.
- Effective merchandising. It’s all about making products easy to find and buy. Compelling displays can help increase conversion rates. The more effective your merchandising, including your in-store sign strategy, the more easily prospects will find what they’re looking for. If they can’t find it, or if products are displayed in an unappealing way, your conversion rate will drop.
Get In the Game
Here’s a simple way to measure conversion rate for your store. It’s called the “Poker-Chip” method.
- Get 50 to 60 red poker chips, 50 to 60 white poker chips, and a large fishbowl or other clear container.
- Place the container and the poker chips at or near your cash wrap. Start the day with it empty.
- For each shopper who enters your store and is waited on and served, make sure you and your staff place a white poker chip in the container.
- For every sale that is processed and keyed into your cash register or point-of-sale system, put a red poker chip in the container.
- At the end of each day, count the number of white poker chips and the number of red chips, record each number, then calculate the conversion rate by dividing the number of red chips by the number of white chips.
For example, if you end the day with 50 white poker chips and 10 red chips in the fishbowl, your conversion rate is 20 percent (10/50×100), which means 80 percent of the people who entered your store (40 shoppers) left without buying something.
Use this simple method to measure your store’s current conversion rate, and then to continue to track your conversion rate as you strive to increase your store’s revenue and profitability.
This is part of a series of retail tips presented by the Tennis Industry Association and written by the Gluskin Townley Group (gluskintownleygroup.com).
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