Conversion rate in retail refers to the percentage of visitors to a physical store who make a purchase (a conversion). Conversion rate is a key performance indicator (KPI) that helps retailers measure the effectiveness of their brick-and-mortar stores in converting potential customers into paying ones. A higher conversion rate indicates that the store is successful in attracting and engaging customers, and is likely to generate more revenue.
How to Calculate Conversion Rate?
Retailers can calculate the conversion rate by dividing the number of transactions by the number of visitors during a specific time period, such as a day, week, or month.
The number of visitors, also referred to as footfall, can be obtained manually with tally counters or automatically via sensors or video-analytics.
The number of transactions can be obtained from the Point of Sales (PoS) system.
What is the relation between conversion rate and footfall?
The conversion rate and footfall are closely related in retail. Footfall refers to the number of people who visit a physical store, while conversion rate refers to the percentage of those visitors who make a purchase.
The higher the footfall, the greater the potential for sales, but this does not always translate to a higher conversion rate. In other words, while a high number of visitors may be a good thing for a store, if they are not making purchases, then the store's sales will not increase.
On the other hand, a store with a lower footfall may have a higher conversion rate if the store is doing a good job of engaging customers and persuading them to make a purchase.
In order to maximize sales, retailers should aim to increase both footfall and conversion rate.
How to optimize conversion rate?
To optimize conversion rate in retail, retailers can implement the following strategies:
- Improve the store layout and merchandising: The store layout should be visually appealing, easy to navigate, and designed to encourage customers to explore and make purchases. Merchandise should be displayed strategically to showcase the products in the best light.
- Train and motivate the sales staff: The sales staff should be knowledgeable, friendly, and engaging. They should be able to answer customers' questions, provide recommendations, and help customers find what they are looking for.
- Offer promotions and discounts: Offering promotions and discounts can encourage customers to make a purchase, especially if they feel like they are getting a good deal.
- Provide exceptional customer service: Providing exceptional customer service can help create a positive shopping experience and build customer loyalty. Retailers should make sure their employees are trained to provide top-notch customer service.
- Use technology to enhance the shopping experience: Retailers can use technology such as interactive displays, mobile apps, and augmented reality to enhance the shopping experience and make it more engaging for customers.
- Customer Intelligence: By deeply understanding the customer, the store experience, service and product offerings can be improved. Surveys, experiments and sales analysis are common strategies to gain better customer intelligence.
How can video analytics improve customer intelligence?
Video analytics can help improving customer insights, hence conversion rate in retail. Video analytics is the process of using video footage and advanced analytics technology to extract valuable insights about customer behavior, preferences, and engagement patterns. By analyzing the data collected from video footage, retailers can gain a deeper understanding of their customers and use this information to make informed decisions about their store layout, merchandising, and marketing strategies.
For example, video analytics can be used to track customer foot traffic, identify popular product displays, and monitor how long customers spend in different areas of the store. This information can help retailers optimize their store layout, move popular products to more prominent locations, and make adjustments to their marketing and merchandising strategies to better meet customers' needs and preferences.
Video analytics can also be used to monitor customer interactions with sales staff and identify areas where additional training may be needed. By improving the quality of customer service, retailers can enhance the shopping experience and increase the likelihood that customers will make a purchase.
What is a good conversion rate?
A good conversion rate in retail can vary widely depending on the type of store, the industry, and other factors such as location and customer demographics. However, on average, a conversion rate of 20% to 30% is considered good for brick-and-mortar stores.
It's important to keep in mind that conversion rate is just one of many metrics that retailers use to evaluate the performance of their stores. Other factors such as average transaction value, customer acquisition cost, and customer lifetime value also play an important role in determining the overall success of a retail operation.
Moreover, the conversion rate can also vary depending on the time of the year, the day of the week, and even the time of day. For instance, during holiday shopping seasons, conversion rates tend to be higher due to increased foot traffic and consumer spending.
In summary, while a conversion rate of 20% to 30% is considered good for brick-and-mortar stores, retailers should consider multiple metrics to evaluate their store's performance and should also take into account other factors that may influence their conversion rate.