Ipsos Retail Performance. Blog.

How to Calculate Retail Conversion Rate

Trends and Insights

Store Conversion Rate – Why is it Important?

In-store retail analytics are increasingly giving business owners crucial insight into what’s happening in their own stores. Without this key information, ideas about customer behaviors and strategy decisions are informed only by guesswork. One of the key metrics is a store’s conversion rate i.e. the percentage of customers who come into a store vs. the people who leave with a purchase.

It is crucial to measure conversion rate. After all, it’s one of the key indicators of how well a store is performing.

Historically, retailers have concentrated on driving people (footfall) in to stores and increasing the number of transactions, however conversion rate can tell a much more detailed story.

In the following example we look at the difference between transactions and conversions and show how, together with footfall data, conversion rates can highlight missed sales opportunities which can be improved on with small operational changes

Average Transaction Value (ATV) – Conversions or Transactions?

Conversion rates paint a much clearer picture of performance when compared to simply measuring transaction data. Take for example ‘Client X’ who only monitors store performance based on transaction data.

The table below shows that week on week (WoW) transactions and sales has increased but Average Transaction Value (ATV) has remained the same. Suggesting store performance has improved week on week.

Performance Last Week ($,£,€) This Week ($,£,€)
Transactions 100 126
ATV 50 50
Sales 5,000 6,300

Including footfall traffic and conversion rate into the scenario shows a different story. Although footfall increased week on week, the stores ability to convert these additional visitors into buyers decreased by 1.6%.

Performance Last Week ($,£,€) This Week ($,£,€)
Transactions 100 126
ATV 50 50
Sales 5,000 6,300
Footfall 1,000 1,500
Conversion 10% 8.40%

Therefore, despite transactions and sales increasing the store did not meet its full potential and missed substantial sales opportunities. Had the store maintained its 10% conversion rate the store would have seen $7,500 worth of sales.

Conversion Rate Formula in Retail

The retail conversion rate is fairly easy to calculate – it’s a simple matter of dividing the number of transactions that are made within a period of time by the footfall for the store in that same time period. The result will demonstrate not just the basic numbers but also be able to offer insight into other factors.  For example, high footfall will mean the store is attracting plenty of customers but a low conversion rate – or one that is erratic – will indicate that it is not doing a good job of maximizing sales opportunities.

Conversion rate by day of the week

Store A – Conversion rate across a typical week. The conversion rate is much lower on the busier days, Saturday and Sunday

This could indicate a need to revize staff scheduling, stock availability and goods in stock – and if you do decide to change any of these then the same metrics will once again demonstrate what is working and what is not.

The value of conversion

Changes can be made to high-level strategies that influence store layout or product mix. That’s not to say that operational changes can’t have a big impact too.  Take for example Store A’s trading hours broken down for a typical Sunday.

The stores proven average conversion is 7.5% and during their busiest hours, their conversion success dramatically drops as you can see in the graph below.

Conversion rate by time of day

Store A – conversion rate on a typical day. The conversion rate is lowest during the busier times in store

Implementing strategies to improve conversion during the stores busiest hours to lift the conversion can have a significant impact on bottom line figures. For example increasing the presence of shop floor staff during these hours or altering their duties so their focus is client faced is likely to increase conversion.  In this example Store A could see an increase of $28,358 per week by lifting the conversion on a Sunday from 5.7% to their average of 7.5%.

Traffic flow Conversion rate Average transaction value ($,£,€) Sales value ($,£,€)
Actual 3714 5.70% 413 86,675
Budget 3714 7.50% 413 114,033

Calculating your store’s conversion rate – and knowing what to do with it – could dramatically change the shape of your business.

Want to know more about the conversion rate formula?

ipsos-download-banner-v3

Related Articles

WHAT DOES KPI STAND FOR IN RETAIL? A GUIDE TO RETAIL AUDITING

In an industry ruled by competition, setting key performance indicators (KPIs) and organising audits are often a store manager’s first steps towards improvement. By understanding customer patterns, retailers can improve
Continue Reading...

How data analysis with staff exclusion can improve footfall in-store

Throughout the year, we welcome retailers and industry experts at retail trade shows such as NRF to discuss all things footfall and customer behavior-related. Talking points often circle around how to
Continue Reading...

What does ‘good’ look like when it comes to footfall data?

Most leading retailers now include Conversion Rate on their weekly KPI dashboard, tracking how effective their businesses are at turning browsers into buyers, by comparing store footfall with the number
Continue Reading...

blog comments powered by Disqus