How do you measure the success of your retail store? You could point to data such as the number of items sold per week or the total profits for the year. But there’s a key piece of information you might be overlooking: your sales conversion ratio. Tracking this number can give you the best assessment of how your stores are performing and can help you measure the effects of strategies such as marketing campaigns or staffing decisions.
Your sales conversion ratio refers to the percentage of store visitors who actually make a purchase. To calculate it, simply divide the number of sales transactions in a given time period by the number of people who walked in the door during that period. For example, if 250 people visit your store in a week, and 50 of them buy something, your sales conversion ratio is 20% (50 ÷ 250 = 0.2). If 75 of the visitors buy, the ratio is 30% (75 ÷ 250 = 0.3). Increasing this percentage by even a few points can translate to a noticeable increase in profits.
A Better Picture of Performance
The conversion rate can give you a more accurate picture of overall performance compared to looking at sales figures alone. If your widget store sells 10 widgets on Monday, that might seem pretty good — until you add in the fact that there were 85 potential customers in the store that day, and only 10 of them made a purchase (11.8%). The other 75 people represent lost revenue. But if you’re armed with this knowledge, you can start examining why the ratio is so low (maybe checkout lines are too long, or the most popular widgets are out of stock) and can take steps to improve.
Using Sales Conversion Ratio for Decision-Making
You can track your sales conversion ratio by the month, week, day, hour, or even smaller increments. The data can help you chart peak and off-peak traffic times, so you can adjust your staffing schedule (and even their break times) accordingly. If the ratio is consistently low on Wednesday afternoons, you could save money by cutting back the number of sales associates on duty during that period. The data can also help you evaluate the effectiveness of an advertising campaign or a change in store layout. You can see, for example, whether moving the clearance racks closer to the front entrance makes the ratio rise or fall.
If you’re not utilizing your sales conversion ratio, then you’re neglecting a highly useful tool that can improve your business and your bottom line. But in order to calculate the ratio, you need to know the number of potential shoppers who enter your store. You need a people counting solution. Traffic counting systems use infrared sensors or video cameras mounted at store entrances to register the number of visitors who cross the threshold. Reports can then be generated that provide actionable information. The insights you gain from using a people counter and monitoring your sales conversion ratio can help you turn those potential customers into paying ones.