by Anh H. Nguyen
A master of the game
If you have spent some amount of time in the US, especially during your collegiate-transitioning-to-young-professional years, chances are you are somewhat familiar with IKEA. The Swedish brand, with its minimal, utilitarian designs and neutral color palettes, has become ubiquitous among urban dwellers. But besides its modern, functional aesthetics and delicious meatballs, IKEA is also famous for being the expert of the traffic flow.
An IKEA store seen from above
IKEA stores are about 300,000 square feet on average, or about five football fields. Sprawling, right? To help customers navigate, the stores are set up in a deliberate way with different colored arrows, guidance signs, and maps. It is a one-way route, and customers must walk through all the showrooms before making their way to the warehouse areas. Many believe this maze-like layout is an intentional ploy to get customers to fully experience IKEA's showroom space and the merchandise in it. Customers could rush through it, but they could not entirely skip it. The official name for the one-way path is the "Long and Natural Path". Do some people think it is manipulative of IKEA to subject their customers to this "natural path"? Certainly. Does it work? Without a doubt. Most customers come to IKEA because they have something specific in mind. Very few leave IKEA without buying something else.
An illustrated example of IKEA's one-way system
A (very brief) guide to section analysis
IKEA's approach, while a bit heavy-handed, fulfilled their goal very well: to get customers where they want them to be. It is simple: no traffic to a section means no sales there. That is why getting customers inside the door is only half the battle. Even when the overall traffic is fine, some sections may have abnormally low traffic, indicating deep-rooted problems in the store layout.
It is not only about getting enough traffic to a particular section, either. Even if the section traffic is adequate, the conversion rate of that area may not be. This may be due to issues with the staffing or product selection. Without knowing an accurate count of the section traffic, retailers have no way to quantify the performance of each section in their stores.
Who go where?
So section analysis really consists of two parts: the section traffic, and the section conversion rate. As you could deduce, there are quite a few possible ugly outcomes if retailers have no insights into their section analysis. The biggest pain is of course missed sales opportunities. Customers swooping in to buy what they need while ignoring most of what is on display is of course not ideal. Far worse is when a key product with lots of resources invested in it cannot garner attention in a store.
If the store is a kingdom, then each section is a province. A good ruler must know what is going on in every part of his domain. But in reality, many retailers only care about the overall traffic while neglecting the section traffic.
They are not necessarily shortsighted, either: the fact is while there are many people counting solutions on the market, far fewer offer section traffic analysis. For any retailer serious about improving sales and customer experience though, it is a must. After all, you could only build on what you know. Even the cleverest housewife cannot cook a meal without rice!
Palexy's take on section analysis
At Palexy, we are passionate about traffic. We love measuring, dissecting, and analyzing it. We are fascinated by the way it represents and reveals people's behaviors and preferences. We love detecting the patterns and anomalies in it in order to help our clients resolve their problems, both seen and unseen. And we firmly believe that any people counting solution must include section analysis, complete with customer analysis in order to be beneficial for retailers.
After seeing our section analysis in action many times, we have learnt two facts:
1. The root causes that impact section performance could be diverse, even among the same retailers.
-Take our client, Guardian, for example. Guardian is the largest beauty and health care chain in Hong Kong with more than 350 outlets. They have also established a prominent presence in Asia at large with over 2300 stores. It goes without saying that Skin Care and Make Up are both hugely important product categories for them. Yet when we drilled down the section data, we found out a few upsetting facts.
-First of all, while Skin Care was Guardian's key product category, at some stores it only attracted 20-40% of the total visits, which was inadequate compared to the Total Chain average of 70%. A puzzling pattern also emerged for the Make Up section: despite the high traffic and long dwell-time, the conversion rate remained low, indicating lost sales opportunities. Customers were interested in the selection, they enjoyed visiting the Make Up area, and spent plenty of time browsing the products, but somehow they did not end up making a purchase.
A Guardian store
-It turned out that for the Skin Care section, the problem was a disadvantageous layout. After we worked with the Merchandising team at Guardian to implement some changes including rearranging product sections, enhancing the lighting, and widening the gap between shelves for easier movement, the traffic to Skin Care improved by 8% on average, and the revenue of the Skin Care section alone increased by 22% on average.
-For the Make Up section, customers were confused and overwhelmed by the large selection of products, hence the reluctance to buy. Our data convinced the cosmetics suppliers to provide extra makeup testers and add more PGs & Beauty Advisors who were well-trained in Make Up consultation. Periodic reviews were performed to continuously monitor the conversion rate and evaluate the effectiveness of the Beauty Advisors. During the one month following the rolling out of the action, the conversion rate of the Make Up section increased by 4 percentage points on average, and the revenue from the Make Up category alone increased by 6% on average.
2. However, layout is usually the culprit for bad section performance.
- Let's look at two retailers from two widely different verticals: Vua Nem (The King of Mattresses), the leading retailer of bedding and sleep-related merchandise in Vietnam, and PNJ, the largest jewelry brand nationally with over 300 stores all over the country.
- For Vua Nem, the hit of COVID-19 epidemic has had a negative impact on store traffic. We needed to help them find an optimal layout that coaxes more buyers out of a small volume of store traffic. At each store, we calculated the traffic by product section and identified “hot zones” (areas that attract the most traffic). The hot zones depended almost entirely on the store layout: the floor plan, the floor shape (rectangular, L-shape, with/without columns).
- Based on our insights, the client changed the method of product arrangement: they began putting mattresses with high profit margins at the “hot zones”. As a result, the profit per unit of Vua Nem increased by 20%.
A Vua Nem store
- For PNJ, diamond jewelry was both the leading category and also had the highest profit margin. But after we measured the traffic to the diamond sections, it turned out that in many stores, the majority of PNJ's customers had not shown great enthusiasm for diamond jewelry. In those stores, the visitors to the diamond section only accounted for 5% of store traffic. We realized that in the case of diamond jewelry, customers needed good lighting to examine the cut, color, clarity, and carat weight of the diamonds in question. The relative position of the diamond section in the store should also be more prominent and attractive, befitting its esteemed status. Low-performing stores often mis-located the diamond section, putting Italian jewelry in the most traffic-drawing spot, for example.
- After we determined the area most conducive to attracting visitors in each store and advised PNJ to relocate diamond jewelry to those areas, section traffic to diamond jewelry increased at all stores. In the case of PNJ's store in Aeon Mall Tan Phu, for example, diamond's traffic jumped from 5% of overall traffic to 48%. That was a staggering 9X increase.
A marketing campaign for PNJ Diamond
So Why Palexy?
If we have convinced you of the importance of section analysis for your store, that is great. It is a good first step towards eliminating lost sales and growing sustainably and strongly. But as we have touched upon in the last blog post, not every traffic counter is created equal. And even among the "good" traffic counters that do effective section counting, not all of them could give you a seamless and convenient user experience. We could.
The following reasons are why you should choose Palexy for all your retail needs, including but not limited to section analysis:
We could deploy anywhere. Globally, that is. (We have not expanded to extra-terrestrial territories yet, but never say never.) Currently we have clients in South America, the Middle East, Southeast Asia, and Japan. We provide our clients with timely, efficient remote support anywhere regardless of time zone, currency, and language differences.
Our plug-and-play solutions are simple, straightforward, and easy to use. We have world class integrator tools to ensure successful, scalable deployments for our clients. Our IT team have a proven track record when it comes to accommodating clients' existing systems, applications, and hardwares.
We comply with all global standards of privacy. There are several frameworks you could choose from to customize what you want recorded and analyzed. Your data is totally safe with us.
We offer cloud management so you can access your data with ease wherever you are.
We require no additional hardware purchases. You do not need a traffic counter to start using Palexy.
Are you ready to enter the next stage of New Retail yet? Shoot us an email at info@palexy.com or reach us on Linkedin and Facebook. We are excited to hear from you!