This article is part of a larger series on Retail Management.
Foot traffic, which can make or break your business, refers to how many potential customers walk past, around, or through your current or planned store location. It includes two elements—external foot traffic and in-store foot traffic—that can answer a host of questions about the pedestrian activity in your area, including what type of people visit the area and when foot traffic is the highest and for how long.
Understanding this data can help you choose the best location for your business and create the best in-store experience for customers.
Measuring Foot Traffic Outside Your Store
Businesses have long counted customers or considered an area’s population as part of their operational strategies, but often they didn’t get the quality demographic data that can be especially important when deciding where to open a business. Fortunately, thanks to technology, that’s no longer a trade-off business owners have to make.
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 dollars 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 CDC or ED 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 cannot 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.
- Kepler Analytics Property Toolkit (pricing not listed, contact to request a demo): Calculate passersby traffic volumes, compare traffic trends across different locations and store types, and forecast foot traffic and sales data. You can also use this information to renegotiate rent.
- GravyAnalytics (pricing not listed, contact for a consultation): GravyAnalytics and some of its competitors use DaaS—Data-as-a-Service—which lifts the curtain on staggeringly detailed data points on foot traffic patterns, consumer personas, behaviors and purchases, visitation frequency, and more.
Foot traffic data lets business owners make more informed and intelligent decisions in choosing a location. You can see how many people pass by a location and gain insights into demographics and possible purchasing intentions.
How to Use Foot Traffic to Choose Your Store Location
When determining the balance you’re willing to strike between rent price and traffic count in choosing a location, it is—unsurprisingly—a numbers game. Consider this example of a small-town gift shop location decision:
- Location A: A scenic and bustling intersection; nearby amenities draw a lot of 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 and surrounded by offices, not retailers. Rent is much more reasonable, but foot traffic is not as high at around 2,000 PPD.
The question is: 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 at Location A:
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 via 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.
For a guitar repair shop, the estimate is much lower: merely a 40% increase in sales (10% x 4) at the better location. Since a small percentage of business comes from walk-ins, the improved foot traffic does very little to boost the bottom line. In this scenario, it wouldn’t be worth paying nearly as much for the better location.
How to Understand Foot Traffic Demographics
Here’s when and where “Quality over Quantity” comes into play. The volume of foot traffic is always great for a retailer. However, disregarding the demographics, characteristics, and purchasing behaviors of these pedestrians can be detrimental to the longevity of the business. Area and potential demographics play an essential role in the location of your business. Below are some questions to ask first.
One underrated exercise in starting a business is market research and knowing your customer. Your “golden” customer is a detailed snapshot of your ideal customer—the sample human for whom you started your business in the first place and what they want to buy from you. A robust online tool for building out your customer identity is the Experian Segmentation Portal, which a business owner can access with a free registration. Also check out our article on how to create a customer profile, which covers all the bases on the process and provides a template.
Your business location could be getting as much foot traffic as Times Square. But if they’re not your customer, and not likely to purchase your product or service in the first place, your foot traffic count might as well be zero. In tandem with researching and discovering foot traffic count in your location options, should be discovering demographics for the target area to make sure that your customer is walking past that location.
So, let’s revisit our example: a gift shop on Main Street, USA. Not only do you want to identify a clear profile of your target customer (married couples with children living in multiple-income households who enjoy purchasing everything from souvenirs, gifts, and cards to premium goods and home decor), you also want to look in neighborhoods and at storefronts where these people actually live. Consider the possibility that even if Location A has more foot traffic, Location B might actually be closer to and see more of your target customer.
Measuring Foot Traffic Inside Your Retail Store
If you already have a store and want to better understand your customer, you can use in-store foot traffic analysis. In-store retail analytics can be powerful mechanisms for growing your business and thriving in any environment.
Below are a few systems small businesses can utilize to measure and analyze the shoppers in your retail location. 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, AI, and POS.
This category has a suite of names—DaaS, analytics, big data, aggregate data, or location analytics. However you slice it, these methods provide insight about your customer by accessing their phone data, usually anonymously, to create a collective consumer portrait. These systems can run wirelessly or wired. Here are some platforms to check out:
- Valassis: Software that puts a special emphasis on measuring the success of marketing campaigns.
- Dôr: Software/hardware combo that combines thermal technology and machine learning to measure warm body count in addition to aggregate data analytics.
- Blix: This company is completely cloud-based analytics to “look beyond the door” by “measuring the customer journey.”
- RetailNext: This is a pretty comprehensive suite of solutions, including Traffic 2.0, a solution that combines hardware and software to measure entrance path analytics, visit duration, occupancy metrics, and more.
- BlueFox: This cloud-based foot traffic analytics service tracks real-time and historical data, including the number of people, stay duration, and traffic between different store locations. For larger spaces, like shopping malls, BlueFox can track customer journeys over the course of a single day.
- SafeGraph: SafeGraph is a points of interest (POI) data company that offers a range of products to build foot traffic profiles. Instant downloads and API start at 2 cents per record with a $100 free data credit incentive when opening a new account. You can also purchase data in bulk with a custom fee based on your business’ needs.
Artificial Intelligence (AI) & Facial Recognition
There are so many new ways to measure your traffic patterns, duration of stay, frequency, and more—everything from sensor-laden flooring to body-heat infrared scanners at the door. One interesting solution is utilizing AI.
- Rhombus: This platform claims to have cornered the people counting market via AI video software and facial recognition. No mobile data here—but it’s just as cutting-edge.
Point-of-Sale (POS) Integrations
Although a POS system is not a foot traffic counter in itself, it’s a great integrative technology to combine with your foot traffic tools to draw powerful analytics, data, and insights. Each tool on its own is great, but together they make for an arsenal, so businesses can draw some truly impactful conclusions and make some strategic moves.
Pairs well with Dôr:
- Square: Square is our top pick for the best POS system and a preferred partner of Dôr with a pre-built integration.
- Shopify: Dôr also plays nicely with Shopify POS, which is our recommended solution for multichannel retailers.
- Lightspeed: Lightspeed is a leader in inventory management and analytics capabilities. It works well with all kinds of storefronts and is a preferred partner of Dôr.
- Vend: Vend has a partnership with Dôr as well, and is an excellent retail POS system for growing shops with complex inventories.
Pairs well with RetailNext:
- Lightspeed: Lightspeed is arguably a leader in POS integration and pairs particularly well with traffic counter RetailNext. Robust POS systems like Lightspeed can be an all-in-one manager of your inventory, payment options in-store and online, ecommerce store, customer relationship management (CRM), and more.
How to Use Foot Traffic to Drive In-Store Sales
Using some of the above systems to generate quality foot traffic and analytic data can open the door to all kinds of new revelations and strategy. The savvy entrepreneur can use foot traffic data to revolutionize their business operations. Read on to learn some specific examples of how foot traffic data can revise the business model.
Validate or Invalidate the Product Mix
A novelty shop in South Carolina wants to add to its product mix. Its current selection includes mugs, artwork, women’s accessories and jewelry, linens, gifts, candles, puzzles, and more. It decides to fill a corner of the store with baby gifts: knit caps, blankets, toys, mobiles, baby books, bibs, and so on. Using its foot traffic measurement platform of choice, it learns that traffic flow is not including the baby corner. Combined with its POS and purchase trends, the store owner discovers that customers are not interested in baby gifts after all and decides to stop wasting money on baby inventory and try something else.
Determine or Reevaluate Staffing & Hours of Operation
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 noon to 6 p.m., saving on overhead, utility, and payroll costs at a rate of nearly $500 every Sunday.
Expansion & Growth Decisions
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.
Optimize Your Store Layout & Displays
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 for 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. Armed with this information, it changed the store layout and made design decisions to increase puzzle sales and get them on par with board games.
One of the greatest failures of small business owners is neglecting to conduct proper market research on the front-end. How can you possibly launch, operate, and sustain a successful business without knowing what you’re getting into in regards to industry, competition, and demand?
As covered above, measuring foot traffic helps you evaluate the demand, access, and visibility of a business location. It’s especially a useful metric for retail businesses, which oftentimes hope to lure tourists, spontaneous shoppers, and passersby. When testing a business idea, these kinds of critical decisions and data gathering can mean the favorable selection of Location A instead of Location B.
Once your store is established, foot traffic data (coupled with POS systems) is a powerful game-changing tool. This information inspires intelligent decisions regarding inventory, store layout, return on investment (ROI) for marketing campaigns, target market, purchasing behaviors, visitation patterns, and seasonality.
Data without analysis is basically worthless, so keep your critic’s hat on if you’re going to tap into foot traffic measurement. The key here is to gain the necessary insight to serve the customer every single time they pass through your doors.