Traffic analytics: Powering Australian physical stores in the e-tailer age - Retail Intelligence Series: ShopperTrak APAC
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Traffic analytics: Powering Australian physical stores in the e-tailer age Retail Intelligence Series: ShopperTrak APAC
Traffic analytics: Powering Australian physical stores in the e-tailer age
Adapt to win
Newly arrived web giants
Amazon, Alibaba and JD.com pose
a major competitive threat to
physical retail in Australia. How
can traffic data solutions help
retailers survive, adapt and thrive?
In this report we look at where improvements
can be made to store performance, based on the
insights that can be provided by traffic counting
technology and analytics. You will learn:
• How operational planning based on traffic
data insights can maximise sales opportunities
at seasonal peaks and during marketing
campaigns.
• Tips on using traffic data to make best use of
store associates to drive sales.
• Methods of improving the in-store customer
experience based on data insight.
Human interaction is something Amazon can’t
currently offer. With a store portfolio as part of
the multichannel offering, retailers in Australia
have a massive competitive advantage. With
traffic analytics, it’s possible to supercharge
that benefit.
Overview of challenges in
the Australian retail market
Amazon arrived in full force in Australia in November 2017,
building distribution capability and setting out aggressive
plans to grow sales. Alibaba Group and JD.com – China’s
online goliaths – opened Melbourne offices at the start of
2017 and 2018 respectively, from which to build their
businesses in Australia.
The looming threat of these retail disruptors, as well as the wider strain on sales from online
shopping and international brands crowding the market, mean a potential time bomb is ticking
for Australian retailers.
At the same time, store groups are faced with dampened consumer sentiment, squeezed
margins, and the rise of ‘digital first’ Millennials. Survival depends on the ability to bolster their
brands and boost operational efficiency, add retail theatre and digital engagement, and improve
customer service to lessen the impact of the web giants.
“There’s a sense of urgency in the retail community today and widespread acceptance that
change is essential,” says Adam Ioakim, General Manager for Australia & South East Asia at
ShopperTrak. “We have seen several long-established retailers enter administration in Australia
in recent times, and Amazon’s entry into the market will only add to the pressure. The rhetoric
among industry experts is that those companies that don’t adapt will fall the quickest.”
3
Traffic analytics: Powering Australian physical stores in the e-tailer age
Economic outlook
Australia has a buoyant economy and has been recession-free
for 27 years, experiencing the longest run of uninterrupted
GDP growth of anywhere in the developed world. It also has
the most generous minimum wage in the world at AUS$18.93
per hour.
The Reserve Bank of Australia (RBA) sees the economy expanding at “a solid pace” over the
next few years, and cites positive labour market developments with a steady jobless rate of
5.5% in 2018 and 2019.
But inflation and wages growth remain a sticking point with the RBA warning
that both will rise “only gradually over time”. Australian wage growth has been
uncomfortably slow, averaging around 2% in recent quarters.
Australian retail market in focus
• Total retail sales in Australia are expected to grow by A$60bn (US$46bn)
between 2016 and 2021, with no signs of a decline.
• The online channel is outperforming bricks-and-mortar, and is expected to
grow its share from the current 7% of all sales to 10% over the same period.
• Online marketplaces are a popular shopping channel for Antipodeans.
Ebay, the market leader, is estimated to make up almost 5% of Australia’s
total retail sales and, despite its roots as an online auction house, 91% of
products bought on the site are new.
• New Zealand’s biggest online marketplace, Trade Me, has 3.9 million active
users – which is a huge 83% of the 4.7 million population.
• Despite the presence of international retailers such as Nike, Superdry,
Uniqlo and Body Shop, the Australian market across many segments is still
dominated by local retailers such as JB Hi-Fi, Woolworths and Coles.
Source: GlobalData
Store closures
hit the headlines
Macquarie Bank has calculated that landlords face up to
344,000 square metres in vacancy in 2018, with large
retail groups including Toys ’R’ Us and Payless Shoes
closing hundreds of stores across Australia. Department
store group Myer is reducing the size of stores and
closing some, while Wesfarmers-owned Target is also
restructuring.
Gap Australia held closing down sales in January, and
during 2017, Specialty Fashion Group — the company
behind brands including Katies, Millers and Rivers —
announced it had been forced to close 300 stores across
the country.
Meanwhile, Dick Smith Electronics, Masters, Howard’s
Storage World, Topshop and Topman Australia, Marcs,
David Lawrence, Herringbone, Rhodes & Beckett and
Pumpkin Patch have all collapsed over the past several
years, according to News.com.au.
Australian shopping centre owners are adapting to
this new landscape. “Scentre Group, the country’s
biggest retail landlord, has continued with its strategy
to Amazon-proof its Westfield shopping centres by
increasing the number of tenants offering lifestyle,
entertainment and food options,” reported the Sydney
Morning Herald, in August 2017.
Scentre’s latest Westfield development at Coomera on
the Gold Coast is described as “a new-look mall offering
Coles and Woolworths supermarkets, an Event Cinemas
complex including Gold Class, Kmart and Target discount
department stores, and 140 specialty stores including an
alfresco leisure and dining precinct.”
Australian retailers and landlords alike are increasingly
data hungry, aware that technology and ‘big data’ will
help them understand and keep pace with this fast-
changing market.
5
Australia shopping trends • The busiest month of the year is always December, with traffic increasing by around 65% on average when compared to November. • The quietest month tends to vary, with February, August, and October usually seeing the lowest store visitor numbers. • Fridays and Saturdays are the busiest shopping days of the week, with Monday to Wednesdays being the quietest. Traffic on Thursdays and Sundays tends to be similar, although Sunday traffic tends to be around 27% lower than that of Saturdays. • The Gold Coast, Perth, and Melbourne are the top city performers for shopper numbers, with Newcastle being the worst performer, followed by Canberra. Adelaide, Brisbane, and Sydney are in the middle range. • Melbourne somewhat deviates from the national shopping trends, with Sunday traffic often surpassing that of Friday. Source: ShopperTrak data Australia’s peak shopping days • Boxing Day has been the busiest day in shops for the past 4 years. • Either the 23rd or 27th December is the second busiest day (i.e. run up to, or post-Christmas). • Traffic on the Saturday before Mother’s Day always experiences an uplift of +10% on average when people go out to buy gifts. • The day before Father’s Day consistently sees an uplift (+6.65% on average since 2013). • Valentine’s Day doesn’t have a noticeable impact on shopping trends. • Black Friday is a popular shopping day in Australia, with large uplifts in traffic for the past three years – 2017 was the busiest so far. • Easter Saturday and Easter Monday are popular shopping days in Australia, with traffic being up by +21.7% and +68% on average respectively. Source: ShopperTrak data
What’s that coming
over the hill…
Amazon primed for action
In the initial months since Amazon arrived and began setting up its new fulfilment centres,
there has been scant evidence of a hit to store traffic for existing bricks and mortar retailers.
But as other regions have discovered, Amazon wastes little time bedding in its infrastructure,
enlisting customers to its Amazon Prime delivery subscription, and securing vast numbers of
loyal customers.
With the launch of localised distribution, Amazon customers can now buy goods from
Australia-based warehouses with reduced delivery time and costs, meaning Amazon can finally
compete on price in Australia. Physical stores could be on the agenda too.
“To compete with local retailers over time, Amazon may look to open physical stores such
as Amazon Go checkout-free grocery stores,” suggests a special report by GlobalData. “The
revolutionary and fully automated store concept is backed by sophisticated artificial intelligence
(AI) with image recognition and machine learning (ML) capabilities. The first Amazon Go store
has just been opened in the US, with plans to expand these stores to major cities globally.”
Chinese web giants Alibaba and JD.com have landed
Amazon is not the only threat. A strategy to grow Australian sales is high on the agenda of
China’s leading e-commerce players too. Alibaba Group opened an office in Melbourne in
February 2017, with an initial plan to strengthen the support network for the thousands of
Australian and New Zealand businesses selling via its online platforms Tmall and Tmall Global.
Alibaba formed a partnership with Woolworths Australia and in May 2014, signed a deal with
Australia Post to connect Australian consumers with Chinese manufacturers, while at the
same time boosting Chinese consumption of Australian products.
Meanwhile online giant JD.com — China’s largest retailer by revenue — opened an Australia
and New Zealand (ANZ) headquarters in Melbourne in February 2018. Initially the Beijing-
based company is putting down roots to offer Chinese consumers a more extensive range
of Australian products. With food, dairy, baby products and cosmetics highly sought-after by
the Chinese, many Australian sellers have already been recruited to its platforms reaching a
massive overseas market.
However, JD.com reportedly has plans to help Chinese companies sell products to Australian
consumers too, in the near future. “There are now a lot of great brands in China. Chinese
goods are getting much better in terms of global quality and brand recognition,” says
Winston Cheng, Head of JD.com’s International Operations, quoted in CEO magazine.
7
Traffic analytics: Powering Australian physical stores in the e-tailer age New ways to shine Lessons learnt from other regions where Amazon has entered the market In Europe, Asia, Latin America and the US where the impact of Amazon has been felt for a decade, innovative retailers have remodelled, introducing drama and verve into their physical space, often integrating store systems for a more omnichannel approach to customer service and engagement. Many are using store traffic data to help them design new layouts, on-site features and cross-channel marketing campaigns in line with tracked customer behaviour. Benchmarking across a store estate helps retailers fine-tune these transformations, making informed decisions as they future-proof their businesses. Here are examples of how next generation bricks and mortar retail is coming to the fore in Australia:
‘Retailtainment’ – experiential retail on offer
Retailers are hosting workshops, throwing parties, and offering unique
experiences in their stores rather than merely displaying products. French
group Sephora, allows beauty fans to take classes and experiment with beauty
products, while Paperchase in the UK offers in-store crafting events such
as ‘make your own Valentine’s Cards’. In Australia, JD Sports, the branded
sportswear retailer, is opening stores that boast state-of-the-art lighting,
DJ sets, and store events such as street dance performances, enhancing the
customer experience.
Staff assistance – human interaction
Stores that can differentiate with unique product and knowledgeable staff to
help progress the customer journey are likely to keep the threat of the pure-play
retailers at bay. Offering exclusive, luxury or own brand ranges, coupled with the
human touch puts the Amazon/Alibaba experience firmly in the shade. Globally,
retailers such as John Lewis, Apple, Warby Parker, Fossil and Lego have well-
trained staff on hand to share product knowledge, upsell with hand-held devices
and engage directly with customers. In Australia, retailers such as Bunnings and
Country Road are wising up to the opportunities their staff present. Traffic data
analytics can help optimise labour scheduling in line with peak trading hours,
making sure the very best service is on tap when needed most.
Click-and-collect – omnichannel services
on site
In the US, 40% of 2017 ‘holiday’ season shoppers used click-and-collect,
according to the International Council of Shopping Centres, and of these 90%
made additional purchases while in store to collect. Many US and European
department and specialty stores are investing in tech to make sure omnichannel
services are slick, and staffing adequate. Australian retailers are also seeing
the benefit of in-store collection. For instance Myer has said that its click-and-
collect had grown strongly to represent 15% of orders in July 2017, and the
department store group is developing smaller format stores where this is a
key feature.
9
Traffic analytics: Powering Australian physical stores in the e-tailer age Embracing opportunities It’s clear that bricks and mortar retailers have considerable advantages over Amazon, Alibaba, JD.com. Now is the time to ramp up these benefits and make them work harder to drive sales and secure a long-term future. Traffic analytics will empower retailers in the new landscape With traffic counting technology and data insight, it’s possible to pinpoint stores, or areas within stores, that aren’t performing, so that strategic improvements can be made. Labour can be optimised to ensure the best sales people are on the shop floor exactly when the biggest sales opportunities are expected. Marketing can be insight-driven and vastly improved thanks to benchmarking. Campaigns can be tailored to known peaks and troughs in trading. [See box on May traffic in Australia.] Digital engagement with customers in-store — via digital signage or location based marketing for example — is cited as a big opportunity. Traffic data analytics can help in understanding the shopper journey and behaviour patterns, enabling retailers to introduce new ways of connecting with customers. One major challenge for companies is turning data insight into action, and gaining buy-in for data-driven strategy across the organisation. This is where expert advice can add real value. When highly-trained consultants work collaboratively with retailers, they can make sure traffic data is put to work effectively, and delivers commercial advantage.
How traffic data drives
retail profitability
1. It’s possible to benchmark your stores’ traffic against the regional
averages by day, week, month, using the ShopperTrak national index,
and plan strategically based on this insight.
Retailers can be fully prepared for known calendar peaks, and able to
2.
focus on boosting conversions on key dates.
Retailers know when to expect weekly or daily power hours, or traffic
3.
surges driven by sales or marketing campaigns.
4. Store layouts can be designed to maximise traffic hotspots and traffic
flow, ensuring the use of space is as profitable as possible.
5. Marketing initiatives can be fine-tuned in line with measured traffic
trends over time.
6. Retailers can make property portfolio decisions based on traffic and
demographic data analysed over a set period of time.
7. Store labour can be tailored to traffic, to maximise sales opportunities at
peak trading times.
8. Data can be blended with other data sets for a richer understanding of
the local audience and shopper needs.
9. New concept stores can be tested and benchmarked over time to ensure
the best ideas are rolled out.
10. Traffic data as a KPI keeps store teams engaged with strategic projects
and personal goals.
11Traffic analytics: Powering Australian physical stores in the e-tailer age
Federal Budget announcement
Effect on May traffic in
Australia
Traffic insight can help retailers turn a negative into a
positive situation
180 27,000
160 26,000
140
25,000
120
24,000
Retail Sales ($M)
100
Index
23,000
80
22,000
60
21,000
40
20,000
20
0 19,000
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Visitors Consumer Confidence Retail Sales May Visitors
Consumer confidence in Australia has been known to tumble in the wake of the Federal
Government’s budget announcement, which takes place annually on a Tuesday in early May.
According to ShopperTrak’s data, May retail traffic was down against the previous month by
-9.8% in 2013, -7.1% in 2014, -11.9% in 2015, -9.8% in 2016, and -6.8% in 2017.
Inevitably, Australia’s stores are affected if the budget has a negative impact on consumers, and
ShopperTrak data confirms that every May there’s been a sharp traffic decline in the lead up to,
and in the immediate aftermath, of the Federal budget announcement.
Analysts note that autumnal May is quiet in stores generally in Australia, and that shoppers are
jittery at this time, super-sensitive to any financial hit to their stretched household budgets that
might be announced in the budget. There’s also a clear trend that traffic and retail sales pick up
in June. This knowledge can be used to commercial advantage in stores.
Retail groups that offer eye-catching deals and in-store events to help ease any expected
financial pain, could see conversions rise, and customer loyalty boosted. And with traffic
analytics, it’s possible to measure the traffic and conversion outcome of these activities, and
keep building on successes over time.With traffic
analytics, it’s
possible to
measure the
traffic and
conversion
outcome of these
activities, and
keep building on
successes
over time.
13
04Traffic analytics: Powering Australian physical stores in the e-tailer age
a double boost to the economy, with tourism
and retail both benefiting from these vital
consumers.
Why are Australian retailers investing in
traffic analytics systems?
They are looking for ways to operate more
cost-efficiently, to vastly improve the customer
experience, and to increase sales in their
stores. While many are building multi-channel
capabilities, there’s still a strong feeling in
Q&A — Adam Ioakim, the Australian retail community that bricks
and mortar stores can remain relevant to
General Manager for Australia shoppers. Convenience and great customer
& South East Asia at service are obvious differentiators, and
there’s a realisation that having insights to
ShopperTrak customer behaviour trends, traffic patterns
and demographic data, will help retailers
Which sectors of Australian retail do you perfect that personalised offer, and hold on to
think are most at risk today? customers.
We’re seeing traditional apparel, accessory How is traffic insight helping retailers beat
and jewellery retailers struggle to compete the threat of online giants?
in the face of online competition, and It’s allowing them to understand their
incoming global brands opening stores. Also audience’s behaviour, to improve the
in the electronics, books and entertainment consumer experience in a methodical,
product sectors, pricing competition is a big scientific way, and to develop precise
challenge. As in the US and UK, department targeted marketing activities. They can track
stores are struggling. Problems at Myer performance by comparing their own store
are well documented, for example. The traffic data with our national traffic index, and
other significant player – David Jones – is plan strategy accordingly. They can measure
in the midst of an attempt to turn around the success of store events and promotions.
the business, in the shadow of a changing Retailers accept that they increasingly need
consumer landscape. data to help them make the right decisions.
Are there regional differences when it For some this is a matter of sink or swim.
comes to Australian retail? How is the human aspect of Australian
The gap between regional and metropolitan retail being amplified?
centres has been closing over a number of What really resonates with retailers in Australia
years as retailers look to expand to new and is making the very best of their shop floor
emerging markets within Australia. Stockland teams. Retail wages are healthy – at least
Green Hills in northern NSW opened recently compared to international markets – and
to much fanfare, as did Mandurah Forum this means that often staffing is the second
which is located 75km south of Perth. Both highest operational cost to retailers after rent
have attracted major retailers from a variety of commitments. Data solutions that ensure the
sectors including international players such as right number of staff are being allocated at the
H&M at Green Hills. right time, to maximise sales and customer
The continued rise of the Chinese middle satisfaction, are of real interest, and seen as
class also drives sales in the luxury sectors in an astute step in the race to secure sales.Traffic data in action:
3 best practice examples
1) M
easuring traffic means a retailer understands the
in-store opportunity
Sales figures provide a measure of how a store is performing commercially. However this metric
fails to provide a view of the opportunity of each store to improve their performance.
For instance, an apparel retailer may find that its store in Melbourne Central is ranked second
highest, based on sales output. However, traffic counting reveals that it is actually the highest
traffic store in the group, but only 5th in terms of customer conversion. The results here could
be vastly improved with staffing, customer service and training.
Site Sales Traffic Conversion ATV
QVB, NSW 1 3 2 2
Melbourne Central 2 1 5 1
Adelaide Central Plaza 3 2 2 6
Karrinyup, WA 4 5 1 3
Indooroopilly, QLD 5 4 6 4
Canberra Centre 6 6 4 5
Another interesting example is a store like Karrinyup where it ranks 4th for sales, 1st for
conversion and 3rd for average transaction value (ATV). In this scenario there is room for
improvement, as the store is only 5th in terms of store traffic, therefore marketing would need
to do more in order to drive traffic to this location.
15Traffic analytics: Powering Australian physical stores in the e-tailer age
2) Not all stores are built the same, meaning that targets
must be store specific rather than brand specific
There is a simple fact in retail in that no two stores are ever the same. A variety of factors
influence performance including store location, geography, store size, product range, visibility in
their particular location, the age of the store, quality of the fitout, management experience… the
list goes on.
In this context it is impossible to create specific targets, be it sales, conversion, or average sale
at a brand level, so that each store has the same target. Specific targets set at a store level are a
much more effective means of driving performance and maintaining morale of store teams.
The variability between conversion rates varies by sector, however in apparel it is not uncommon
to have a portfolio of stores where the ‘lowest’ conversion rate is 5% and the highest 40%. Does
that mean that the store at 5% needs to aim for 40%, or even 20%? Absolutely not, as it is highly
likely that the factors that ensure this store converts at 5% mean that it will more than likely never
be a 20% store. Setting such a lofty target for this store will only serve to demotivate store teams
and possibly even ensure the store’s conversion declines further.
The simplest solution is to benchmark similar stores into groups which allow for more realistic
targets to be set.
For example, we know that Australian high street stores outperform metropolitan
shopping centre locations by between 25% and 40%. Why? Well consider the factors that
influence a high street store:
• These locations are largely in higher socio-economic geographic locations where
disposable income is greater.
• The propensity for competition is much greater in shopping centres than on the
high street.
• Customer loyalty can be higher on the high street meaning visitors are more often
than not customers who are not only familiar with the proposition of the retailer but
advocates of the brand as a whole.3) Customer service is a powerful way to differentiate
Do you have customers walking out of your stores due to a lack of service?
In a customer pilot run by ShopperTrak with a big-box Australian retailer, a series of
exit surveys were undertaken to provide further context around store performance and
identify opportunities for conversion rate improvement. The results were surprising,
and the key findings were:
• The store had an average conversion rate of 27%, so for every 100 visitors 73 were
walking out without transacting.
• For every 100 people that walked into the store, 55 of them knew the product that
they wanted, and wanted to purchase it on that day. The highly activated consumer
base meant that the stores’ conversion opportunity was 55% - almost double their
actual result.
• Further investigation proved that the vast majority of the visitors that did not make
a purchase, left the store as they had waited too long for service. The others cited
product availability, price and product quality as the main reasons for not transacting.
In an age where technology is king and the power has shifted to the consumer rather than the
retailer, staff availability and customer service are the most prominent areas where gains can
be made.
Having too few staff on the shop floor at times when the store is full of potential customers is
unforgiveable and makes for a poor experience for anyone in the store. Inversely, having too
many staff members working at times when the store has little or no visitors is just as bad,
given the high operational cost of wages in Australia.
Aligning staff rosters and wage spend to patterns of visitation is not new or revolutionary,
however it is vital to growing profit in retail stores.
17Traffic analytics: Powering Australian physical stores in the e-tailer age
Supercharge stores
to survive
When facing new challenges or ‘game-changer’ moments, it
pays to invest in solutions that will improve retail performance
and enhance the customer experience. Traffic analytics will
allow Australian retailers to supercharge the advantage they
already have over the pure plays, and use insight to inform
decisions and plan a strategy for survival, maximising the
potential of their stores.
While the retail climate is tough and ultra-competitive, it can be weathered by being
good at retail. ShopperTrak can provide tools to help stores raise their game, and
survive the threats ahead.
More than 2,100 retailers, malls and entertainment venues around the world trust
ShopperTrak to optimise the shopping experience and improve profitability.
With ShopperTrak’s retail analytics solution, you’ll be able to:
Understand your busiest Benchmark performance with
hours based on traffic with YoY trend analysis and shopper
98% accuracy and assess visit data at the national,
shopper movement patterns regional and local level for
within a space. multiple retail categories.
Increase mobile engagement Earn the highest return on
and shopper loyalty to investment with a dedicated
drive traffic, conversion and results coach and proven
transaction size. change management process.While the retail climate
is tough and ultra-
competitive, it can
be weathered by
being good at retail.
ShopperTrak can provide
tools to help stores up
their game, and survive
the threats ahead.
2,100
More than 2,100 retailers,
malls and entertainment
venues around the world
trust ShopperTraK
19
04Retail Intelligence Series Contact ShopperTrak if you’d like to improve the performance of your stores, based on traffic data insights. info.au@shoppertrak.com au.shoppertrak.com linkedin.com/company/shoppertrak/
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