This article is part of a larger series on Retail Management.
Foot traffic refers to how many people walk past, around, or through your store. This data lets you understand the pedestrian activity in your area, including peak traffic periods, local demographics, and the efficacy of your store initiatives. Studying foot traffic in an area before you open your store can help you choose the best location for your business and cater your in-store experience to the people that are already in the area. Understanding foot traffic inside an existing store can help you improve your layout, merchandising, and staffing levels.
Measuring External Foot Traffic
Determining external foot traffic gives you insight—demographics, purchasing intentions, etc.—into the population around your store, rather than just your customers. This leads business owners to more informed and intelligent decisions in choosing a retail location.
Thanks to modern technology, there are lots of great tools you can use to gather this information reliably and without being disruptive.
Demographics & Data Aggregators
Below are a few demographics and data tools that give foot traffic counts and often much more.
Remember: You get what you pay for. Some free tools are a great place to start, but you can choose to invest in some eerily specific information on your target area, customer, and foot traffic.
- Community Development Corporations (nonprofit), and Economic Development Departments (government): Take advantage of your tax dollars by looking into location data at a Community Development Corporation or Economic Development Department in your town or city. Your location may have one or the other resource or both. Some high-tech offices even have property, demographic, and foot traffic data published on their websites for commercial districts. All of these services are free.
- Placer.ai (free): This free tool gives foot traffic counts and other limited data for any existing business, venue, shopping mall, or casino. More advanced reports can be purchased.
- AreaVibes (free): This beautifully designed site doesn’t give foot traffic counts, but it does provide other valuable geographic lifestyle and demographic data for free, including insights into community population, amenities, and walkability.
- LocationOne (free): Using the free “Property Search” tool, you can not only access available commercial properties but download reports outlining everything from foot traffic in the immediate area to category spending within a multi-mile radius.
- GravyAnalytics (pricing not listed, contact for a consultation): GravyAnalytics and some of its competitors use Data-as-a-Service (DaaS), which lifts the curtain on staggeringly detailed data points on foot traffic patterns, consumer personas, behaviors and purchases, and visitation frequency.
Measuring In-store Foot Traffic
To better understand your customer base and the efficacy of your store’s products and overall customer experience, you will also want to measure and analyze your in-store foot traffic.
Below are a few systems small businesses can use to measure and analyze the shoppers in their retail locations. This list is only the tip of the iceberg of solutions that might best suit your needs as a business owner. These featured options highlight three-foot traffic measurement tactics: DaaS, artificial intelligence (AI), and point of sales (POS).
Understanding your business from an analytical, data-driven perspective can be a powerful mechanism for growing your business. You can learn more with our guide to retail analytics.
How to Use Foot Traffic Data
Once you have aggregated some data about your foot traffic, what’s next? How can you use these insights to improve your business operations and make smarter decisions? Let’s take a look at ways you can use foot traffic data.
Choose a Store Location
Choosing a store location is—unsurprisingly—a numbers game, and understanding a location’s foot traffic in relation to its rent price is a huge factor in choosing the best spot for your store.
Consider this example of a gift shop location decision:
Location A: A scenic and bustling intersection; nearby amenities draw people out, and the businesses all benefit from each other’s foot traffic. Rent is high, but foot traffic numbers are optimal, at about 8,000 pedestrians per day (PPD).
Location B: A short walk off the main strip; surrounded by offices, not retailers. Rent is much more reasonable, but foot traffic is not as high at around 2,000 PPD.
How much more money is “worth” spending on Location A vs Location B?
To find the answer, we’ll estimate how many actual sales will result from the busier location. After all, if an investment (like higher rent for Location A) doesn’t ultimately result in sales, it isn’t money well spent. Let’s try the following formula to project potential sales:
1. Estimate your percentage of sales derived from walk-ins (vs customers who commute to the business). For the sake of our fictional gift shop, let’s say 90% of customers will be from foot traffic. For a specialty destination service business like a guitar repair business, this will be much lower—potentially as little as 10%.
Out of 100% of customers:
2. Now, consider the difference in foot traffic between the two locations. In this example, Location A has about 4x more visitors via foot traffic than Location B.
Location A foot traffic: 8,000 PPD
Location B foot traffic: 2,000 PPD
A ÷ B = X
8,000 / 2,000 = 4x
3. Next, multiply the percentage you came up with in Step 1 by the number in Step 2. The resulting number is an estimate of how much sales will increase due to higher foot traffic.
90% x 4= 360%
Location A means as much as 360% (or 3.6x) more in sales than Location B
For the gift shop, the result is a whopping 360% more in sales for Location A. In this scenario, it’s worth paying 3x more in rent for the better location.
Learn more about leasing a retail space with our article, How to Find & Lease a Retail Space.
Locate Your Target Market
One underrated exercise in starting a business is identifying your target market. Using foot traffic data, you can determine where your target market is located and, by extension, where your store will be most successful.
Your target market is the people that have been identified as the most likely potential customers for a product because of their shared characteristics such as age, income, and lifestyle. This is the group to whom you will also aim your marketing and cater your brand.
A robust online tool for building out your customer identity is the Experian Segmentation Portal, which business owners can access for free. Also, check out our article on how to create a customer profile, which covers all the bases on the process of creating a customer identity and provides a template.
Validate or Invalidate the Product Mix
Foot traffic data can tell you a lot about the success of your products and whether they appeal to customers. For this, you will want to look at how many people enter your store versus how many people make a purchase.
For example, say you introduce a new product line to your store, and suddenly, a much higher percentage of people make purchases before leaving. This would tell you that your new products appeal to your customers and you should continue to keep them in stock.
Conversely, say you see the opposite effect—when you introduce your new product line, fewer people that enter your store are making purchases. This would tell you that the new products are unsuccessful and you should not reorder them.
Optimize Your Store Layout & Displays
Foot traffic data can tell you a lot about the success of your store layout—if you were to make a change to your store layout and then see an increase or decrease in the number of customers making purchases, this lets you understand whether your layout is working to inspire sales.
Additionally, you can look at how long people are staying in your store. If shopping times increased with a new layout, this indicates its success; meanwhile, if shopping times decrease, this would indicate you should reevaluate.
For example, a children’s toy store sells its products online. Board games and puzzles sell at a similar rate and are in the same product category. It opened its first brick-and-mortar shop in Oregon and noticed a significant difference in sales between the two. The store sold a lot more board games than puzzles. Further investigation revealed that the visual merchandising techniques were different. Board games were placed prominently with a display near lots of foot traffic, while puzzles were simply stacked on a table where few people walked by.
Determine or Reevaluate Staffing & Hours of Operation
Foot traffic data will help you identify peak shopping times and when the most (and least) customers are in your store. This will help you make better staffing decisions—adding more staff to the floor at peak hours and fewer during slow times.
For example, a mattress store on the West Coast is open every day from 10 a.m. to 8 p.m. to compete with big-box mattress retailers. Each day, it follows the square footage staffing formula of 2.5 employees per 1,000 square feet of retail space, so it always has about five team members on the floor. Traffic patterns determined that Sundays mean almost no sales, except around 1 p.m. or 2 p.m. It changes its Sunday hours to noon to 6 p.m., saving on overhead, utility, and payroll costs at a rate of nearly $500 every Sunday.
Expansion & Growth Decisions
Foot traffic data can also help identify when it is time to expand your business or open a new location. First, traffic figures will help you see when your store is overstretched and there are more customers than your space can accommodate. Additionally, it will help you nail down exactly who your target market is so you can search for that specific market sector when looking for a new location.
For example, a successful bookstore/coffee shop in Ohio enjoys a college-town atmosphere and an onslaught of 20,000 students every fall. While the small, cozy storefront lends itself to exclusivity and high demand, traffic count and flow patterns show that the shop doesn’t have adequate seating relative to the foot traffic. Eventually, it accommodates a packed house at its local destination hot spot by expanding to the back of the building and up two stories. This also opens space for late-night Poetry Slams and Open Mic nights, which expands its hours, extends visit longevity, and consistently brings in customers over 12 hours each day.
How to Determine Foot Traffic Frequently Asked Questions (FAQs)
Click through the questions below to get answers to some of your most asked questions.
What is foot traffic?
Foot traffic refers to how many people walk past, around, or through your store. Typically, there are two types of foot traffic that you can measure—external foot traffic and in-store foot traffic. The data from these can help you understand the pedestrian activity in your area, including peak traffic periods, local demographics, the efficacy of your store initiatives, and more.
How can you measure foot traffic?
You can measure foot traffic using demographic and data aggregators, DaaS, AI technology, and foot traffic counting software.
Why is measuring foot traffic important?
You can use foot traffic data to understand the population of an area, which can help you choose a location that serves your target market. Foot traffic data can also help you test the effectiveness of your product choices and layout. It can also indicate when it is time to expand your business.
How does foot traffic increase sales?
Foot traffic improves sales because as more people walk past your store, the likelihood of more customers increases. This, in turn, means a greater likelihood of more purchases.
As covered above, measuring foot traffic can help you evaluate the demand, access, and visibility of a business location. This information is pivotal in choosing the location of your storefront and then testing out new products and ideas. The key here is to use the insights gained by your foot traffic data so that you can make smart decisions that will help you to serve your customers and provide them with the best experience every single time they pass through your doors.