Written by Tony Loxton
One percent. It doesn’t sound like much does it?
During my time at Blix I’ve found that very few people understand how important this small number can truly be. It’s this failure to understand how even the smallest of wins or improvements can lead to far greater gains down the line that leads to a number of problems that affect the majority of retailers.
When it comes to metrics, retailers are generally focused on sales revenue, and, if you’re lucky, there’s some interest in their total foot traffic. Revenue in particular is, literally and metaphorically, the big number in the retail. However, there are many metrics that can influence revenue and total foot traffic. These include:
Despite the important role these values have, many retailers are so unconcerned with them that they don’t even bother to track them. The first step to achieve growth is overcoming this mindset. We need to change the way people focus on specific metrics that don’t necessarily give retailers the right information about the state of their business.
This misconception around tracking the right metrics leads to another problem: growth. Quite simply, how do you expect to grow if you’re not tracking the right metrics? You won’t even know about the problems that are holding your business back. Here’s a quick example of why understanding all of these metrics is so critical.
I recently worked with a luxury brand across multiple retail stores. At one of the lower performing stores we managed to boost revenue by 2%. Most retailers in the luxury brand industry would have been content or happy with those growth numbers. However, because we were tracking a variety of metrics, it gave us even deeper insight into how that particular store was performing.
In this case, it turns out that a number of metrics were actually down. Walk-by trends, visits, average visit duration, transactions? All below the numbers for the previous year (some more significantly than others). With so many of these metrics down, you’re probably asking ‘But how did you achieve that 2% growth?’. Surely less traffic and lower transactions mean less revenue?
Despite the decline in these other areas, we were able to raise revenue because of the changes we made that impacted two other critical metrics: average transaction value (up 11.28%), and conversion (up a massive 22%). Making changes to operations that improved these metrics resulted in overall growth, even if other aspects of the business were struggling.
While all these metrics play a key part in growing your business and increasing your revenue, one metric that stands out more than the rest: your company’s conversion rate. A conversion rate is quite simply the number of visitors, or leads, to your store who actually purchase something. As a formula, this is expressed as:
Total Number of Sales / Number of Leads x 100 = Conversion rate
400 / 1200 x 100 = 33% conversion rate
Now let’s take a look at a couple of contextually relevant examples that demonstrate how important increasing your conversion rate by just 1% can be.
In our hypothetical example, we operate a small shoe store that has 400 visitors a day. Our conversion rate is 25%, which means we have 100 customers who buy shoes every day. The spend for each of these visitors works out to an average transaction value of $50. Our store does business 363 days in a year, bringing in a revenue of $5000 per day, for a total of $1 815 000 per year. But what would a 1% increase in conversion mean? Not much right?
Using the Blix calculator, we are quickly able to identify that a 1% point increase in conversion would result in a rather annual increase of $72,600 to your revenue. This represents a 4% increase in revenue.
In our second hypothetical example, let’s look at a much bigger retailer. Let’s say we operate a furniture business. 1000 people visit our store every day. We have a conversion rate of 21%, which means we have 210 people who place an order for furniture every day. The average transaction value for each of our customers works out to $230, bringing daily revenue to a total of $48 300. We’re open for 363 days in the year, resulting in an annual revenue of $17 532 900. What impact would a 1% conversion rate increase mean to this business?
Using the Blix calculator again, we find that a 1% increase in conversion would raise annual turnover by a very healthy $834,900. This is a 4.7% increase in revenue.
When implementing our Blix solution, we’ve found that we’re able to deliver, on average, a conversion rate increase of 7% over the first 12 months to our clients. If we apply this to our hypothetical shoe shop and furniture store, they should have expected an annual increase of $508,200 and $5,844,300 respectively. In addition to this, our approach to transforming your customer experience almost always helps our clients grow their basket size and ATV values, enhancing your potential for growth even further.
If you want to boost your conversion rate and take your retail operation to the next level, be sure to book a free demo with our team at Blix. We’ll share how our customer experience analytics solution can help your business. Or, if you have any other queries, be sure to reach out to us today – we’re more than happy to assist.
There are ghosts that haunt the aisles and stalk the shelves of your establishment.