Conversion Rate Basics for Retailers

The conversion rate is at the core of a retail store. It represents in large part what drives the business success of the store. It consists of two important metrics.

1. the number of sales, 2. the number of people who come into the store.
The conversion rate (CR) is simply the number of sales (S) per visitor (V) or CR = S/V.

To compute the conversion rate you need a reliable way of counting the number of potential buyer-visitors. You can install an electronic traffic counting system to get this metric. Some stores have someone with a counter clicking people off, however this can be an expensive and error prone method of collecting the metric. Then you have to find a way of eliminating non-buyers like children and staff members from the count.

The conversion rate is really the key metric to assess the attractiveness of a retail business. It is very productive to plot conversion rate over time to measure the effectiveness of alterations in your merchandising, the effects of seasonality, advertising and other treatments. 

If the number of visitors increases but the conversion rate does not, that might suggest a decline in something related to the way your products are merchandised. Factors such as overcrowding at checkout or another factor that weakens the purchase decision might be at fault. It is also possible that conversion rate may increase while customer rates remain constant or decline. This could tell a very specific story about what is going on in your business. 

You can increase the number of sales by reducing prices through sales incentives. You can align your sales staff with peak traffic periods. If you continuously monitor the number of potential buyer-visitors, you can establish peak traffic times and schedule sales staff appropriately. You can make conversion rate a gamification metric. This may encourage staff to build their sales. PCount is a leader in business metrics and analytics, offering hardware and software to help you run your business in a scientific way. For more information, please contact us.