As a result, every expert agrees, we are now dangerously over-retailed—too much is for sale, through too many outlets. The economy even at its strongest can’t keep up with retailing’s growth. Judging from birthrates, we’re generating stores a lot faster than we’re producing new shoppers.
In 2008, across most of the first world, we are building stores and malls no longer to serve new customers but to steal someone else’s. There is no irony that the cutting edge of retail today is no longer found in North America or Western Europe. Moscow, Dubai, Shanghai and Mumbai are the newest retail hot spots—places where money is young, economies are booming and you have a whole lot of pent-up demand.
Still, here in the United States, our focus has been on same-store sales—how can you do more business in the same space or location? That focus on tactics has been another accelerant that has fueled the growth of the science of shopping.
There’s another reason that the science of shopping is a force today.
Generations ago, the commercial messages intended for consumers’ ears came in highly concentrated, reliable forms. There were three TV networks, AM radio only, a handful of big-circulation national magazines, and each town’s daily papers, which all adults read. Big brand-name goods were advertised in those media, and the message got through loud, clear and dependably. Today we have hundreds of TV channels, and remote controls and TiVo to allow us to skip all the ads if we choose to. There’s FM and satellite radio now, a plethora of magazines catering to each little special interest, a World Wide Web of infinitely expanding sites we can visit for information and entertainment, and a shrinking base of daily newspaper readers, all of which means that it is harder than ever to reach consumers and convince them of anything at all.
Simultaneously, we are witnessing the decline of the influence of brand names. A generation or two ago, you chose your brands early in life and stuck by them loyally until your last shopping trip. If you were a Buick man, you bought Buicks. If you were a Marlboro woman, you smoked Marlboros. You chose your team—Coke or Pepsi, Kenmore or Whirlpool, Zest or Ivory—and stayed with it. Today, in some ways, every decision is a new one, and nothing can be taken for granted.
What all that means is that fewer buying decisions are being influenced outside the premises of the store. And many more of those decisions are being made in the store itself. It means that shoppers are susceptible to impressions and information they acquire inside stores, rather than relying on brand-name loyalty or advertising or marketing to influence what they buy. The level of impulse purchasing is going through the roof—in supermarkets and everywhere else, too. Even big decisions are being made right there on the selling floor.
As a result, the most important medium for transmitting messages and closing sales is now the store and the aisle. That building, that place, has become a great big three-dimensional advertisement for itself. Signage, shelf position, display space and special fixtures all make it either more or less likely that a shopper will buy a particular item (or any item at all). The science of shopping is meant to tell us how to make use of all those tools: how to design signs that shoppers will actually read and how to make sure each message is in the appropriate place. How to fashion displays that shoppers can examine comfortably and easily. How to ensure that shoppers can reach, and want to reach, every part of a store. It’s a very long list—enough to fill a book, in my opinion.
Finally, our studies prove that in general, the longer a shopper remains in a store, the more he or she will buy. And the amount of time a shopper spends in a store depends on how comfortable and enjoyable the experience is. Just as Holly Whyte’s labors improved urban parks and plazas, the science of shopping creates better retail environments—ultimately, I would argue we’re providing a form of consumer advocacy that benefits our clients as well.
When I started work on this book in 1997, Envirosell was a pioneer in the world of stores and commercial environments. Ten years later, the term “science of shopping” is part of the vocabulary of any merchant or marketer. And a lot of firms now claim to do what we do. After all, observation is a seminal form of how human beings learn, so why not start an observation business? To every company that has copied what we do, I welcome you to the community of people dedicated to making our lives work better. At the same time, there are other interlopers who have truly muddied the waters.
The first? Technology companies that have streamlined data collection. They have software packages that can hook up to a facility’s surveillance cameras and count bodies, one after another. How relevant is it to measure the number of people passing a sign or a display? Does that mean they’ve looked, read or shopped? As I sit at my desk on the corner of Twentieth Street and Broadway in New York City, I have a stream of technology companies coming in to showcase their latest cutting-edge products. How many times have I heard the expression “This is going to transform retail”? Most of it is what I call technology in search of an application. It can do this and gather this piece of information, and there’s bound to be someone out there willing to pay for it.
Or I get a call from someone begging me for an hour and I agree to meet them, but before we do there arrives a seventeen-page nondisclosure agreement, or NDA. I have to explain that if someone hires me I’m happy to sign documents left and right, but to call me out of the blue and expect me to review a seventeen-page legal document borders on the obnoxious. Over the years I’ve come up with a good plan. I’ll meet for an hour with anyone who wants to show me something and I’ll give that person my honest response—if he, she or the company gives a $750 donation to the charity of my choice. I’ve raised tens of thousands of dollars for halfway houses for homeless women in New York.
Some of the stuff I get is outright silly, like a software package designed to track tank movements from spy satellites. Put enough cameras with wide-angle lenses into your ceiling and voilà!—instant science of shopping. Quite a few of these companies are backed by serious venture capital money and propelled by slick presentations, expensive Las Vegas dinners at the appropriate conventions and lots and lots of promises. The venture capital firms see them not as research or consulting firms but as software ventures. Once in place, the output is automated; you sign a two-year contract that promises you weekly reports. The only problem is that two months later, you look up from yet another weekly report and ask, what in the world do we do with this? We have a number of clients who defected from us and bought a fancy software package only to return to us two years later. We were happy to have them back.
The other objection I have is with what we around the office call Envirosell Lite, where untrained and inexperienced people are sent into the field to do the same work we do: observe what is seen, what is touched, what is read. Simple as it sounds, these terms have to be defined carefully or what you get out the other side of the process is gobbledygook. We now have a number of competitors who sell a lower-priced version of what we do. You get what you pay for.
TWO
What Retailers and Marketers Don’t Know
It might be useful right about now to pause and look at the science of shopping from the perspective not of the scientist but of the practitioner—that is, the retailer and marketer. He or she is certainly part of the equation we’re studying, the provider of product services and shopping experiences, as it were. The retailer is also the one who’s expected to absorb all our lessons and then apply the principles of what we’ve learned. The marketer needs to understand how his or her product or category of goods is shopped and bought. And since it’s his or her own store we study, it’s fair to ask: How much doesn’t the retailer already know?
Well, more than you might think. For example, it’s a testament to the until-recently uncharted state of the untamed retail environment that an extremely intelligent and able man, a senior executive in a multibillion-dollar chain, could be so very wrong when asked this simple question:
How many of the people who walk into your stores buy something?
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br /> You’d know that, wouldn’t you, if you were he? You’d think so, and trust me, this fellow is no slouch in the knowing department. He knows quite a bit that goes on in his chain’s thousands of stores, and he learns more on a daily basis—genuinely important things like total tickets (the number of transactions and their dollar value), and average sale amount, and sales in any given store compared to sales on the same day the year before, and sales within the various regions, and profitability by item and category and store and maybe even phase of the moon.
He knows all that.
When I asked how many of the people who walk into his stores buy something, his answer was: all of them, pretty damn near. And when I say it was his answer, I mean it was also the answer of the huge, PC-networked, data-chewing, number-crunching, cipher-loving organization at his command. Everybody there agreed: What we call the conversion rate—the percentage of shoppers who become buyers—was around 100 percent. After all, this corporation reasoned, their outlets were destination stores, so people didn’t go there unless they had some very specific purchase in mind. Hence, they believed, the only time shoppers didn’t buy was when their selection was out of stock.
In fact, the very concept of conversion rate, implying as it does that shoppers need to be somehow transformed—“converted”—into buyers, was alien to this man and this corporation (as it still is to many other successful companies and executives).
I was asking the question because we had just performed a large-scale study of this chain’s stores. And I knew the conversion rate, based on our having spent hundreds of hours counting, among other things, the number of shoppers who entered and the number who made purchases. It was a very good conversion rate for stores of this kind. But it was about half of what this man thought it was. To be precise, 48 percent of shoppers bought something.
The man, because he believes in the value of information, was taken aback but eager to hear more. Some in his organization, though, were incredulous, outraged, insulted, and certain that we had made a terrible miscalculation. So they performed their own homegrown version of our study, standing at the door of a store or two, counting the number of people who went in and the number who emerged holding bags.
Their result was identical to ours. Which, in the end, was very positive news for them. It meant that a good company could change some very specific things and become even better. If you talk to the executive, he’ll say that our study brought about “a fundamental change in some of the long-held beliefs and opinions of this company.” At any rate, they’ve begun to do some things differently in store layout, display, merchandising and staffing, and I have no doubt that they’ll improve their conversion rate and make more money as a result.
Our findings were also important to that company’s big picture. We showed that meaningful growth—which Wall Street demands and everybody else is pretty fond of, too—can be stimulated at the store level, without having to expand the empire, an expensive strategy that always runs out of gas sooner or later. In 2007, same-store sales are the bellwether for a chain’s good health.
The marketer was equally in the dark through the end of the twentieth century. Until the past decade, there was sales data or the compilation of register tapes. Today, however, almost all major consumer product companies have shopper-and consumer-insight groups. They often fiercely debate the difference between what happens to people in the store (shoppers) and what happens once they get their products home (consumers). All in all, insight groups have been a positive change. Yet for the marketers sitting in their suburban campuses, there are often some pretty striking disconnects. In 2008, it is easier to collect data than to figure out what it means, much less map out what you can or should do about it. Since the science of shopping was invented, there are now a lot of companies talking about the scale of their databases—we tracked a million shoppers with security cameras and so on—yet, in the end, what does it mean? To me, ten years after I wrote the first edition of this book, the rightful evolution of the science of shopping is for a corporation to look at what they do with this information and, based on whatever measure they use, ask themselves: Did it make or save us money?
Let’s go back to the basics. Conversion rates vary wildly depending on what kind of store or product we’re talking about. In some sections of the supermarket, the conversion rate probably is around 100 percent (I’m thinking of dairy or toilet paper here). In an art gallery or high-end jewelry store full of big-ticket items, maybe one shopper in a hundred will buy something, and that’s plenty. Whatever’s being sold, though, I think it’s impossible to dispute that conversion rate is a critically important measure of performance. Marketing, advertising, promotion and location can bring shoppers in, but then it’s the job of the merchandise, the employees and the store itself to turn them into buyers. Conversion rate measures what you make of what you have—it shows how well (or how poorly) the entire enterprise is functioning where it counts most: in the store. Conversion rate is to retail what batting average is to baseball—without knowing it, you can say that somebody had a hundred hits last season, but you don’t know whether he had three hundred at-bats or a thousand. Without conversion rate, you don’t know if you’re Mickey Mantle or Mickey Mouse.
Yet conversion in its simplest form has its limits. In the past ten years a number of companies have rigged up electronic counters on the doorways of stores, then hooked them up to the register. Voilà—instant ongoing conversion rates. Yet the real story is often hiding in the details. What’s the difference between men and women? What happens when you add a kid to the process, or an African-or Latino-American? That counter at the door counts bodies, and that’s all it counts, never mind the fact that it’s unlikely a family of four will walk out of a store lugging four big-screen TVs, one per person. Yes, some of the more upscale ones can calculate body mass and get some gauge on people’s gender, but I wouldn’t bet the farm on it. We get a lot of calls from companies that installed counting systems, and three months into the daily stream of data, they’re still wondering how they can turn that information into an ongoing, proactive, workable tool. For store managers it can be frustrating when the home office fires off numbers, and they respond, “Well, of course we have lower conversion numbers, because we get more casual, time-killing people in the door; as you might notice, we’re located next to a kitchenware store and thus attract an entire army of exiled male spouses.”
Still, a great many businesspeople don’t know from conversion rate. It’s not one of the ways of measuring a business that business schools emphasize. It’s not about profit margins or return on investment or money supply or any of that. It’s all about what happens within the four walls of the store.
I can think of other underutilized ways to measure what happens inside a store. Once I asked a major cosmetics executive how much time women actually spent shopping for makeup per store visit.
“Oh, about ten minutes,” he said.
“Hmm,” I replied, knowing from the study we had just completed for him that the average shopper spent two minutes in the cosmetics section. The average shopper who bought something spent only thirty seconds more. Putting it into broader context, the average supermarket visit is about twenty-five minutes, including checkout. The average time spent in a hypermarket, or multidepartment store—whether a Wal-Mart Supercenter in the U.S., a European Carrefour, or a Pick n Pay in Cape Town, South Africa—is about thirty minutes. That’s stopwatch time. But if you ask someone how long he or she spent in a store, that person will often double that number. In any commercial setting, time comes in three forms. There’s real time, there’s perceived time and then there’s a combination of the two.
Now, the amount of minutes a shopper spends in a store (assuming he or she is shopping, not waiting in a line) is again an important factor in determining how much she or he will buy. Over and over again, our studies have shown a direct relationship between these numbers. If the customer is walking through the entire store (or most of
it, at least) and is considering lots of merchandise (meaning he or she is actually looking and touching and thinking), a fair amount of time is required. In an electronics store we studied, nonbuyers spent five minutes and six seconds in the store, compared to nine minutes and twenty-nine seconds for buyers. In a toy store, buyers spent over seventeen minutes, compared to ten for nonbuyers. In some stores buyers spend three or four times as much time as nonbuyers. A great many factors contribute, one way or the other, to the length of a shopping trip, and studying them is most of what we do. The majority of the advice we give to retailers involves ways of getting shoppers to shop longer. But you’ve got to know how long people spend shopping your store or your product before you can know how to increase it.
The flip side of that measure is what we call the confusion index, or the number of people walking around stores completely at sea. Remember that time is relative, so if the ten minutes you spend at a Target or Wal-Mart is spent walking in circles, it’ll feel like you’ve been in there for a half hour. And in the end, while you may stumble on something good, if you can’t find what you came in for, what’s the point? One of the major victories we have won in the past ten years has been with office product superstores. In 1997, whenever Staples, OfficeMax or Office Depot opened a new location, they used a warehouse format. Shelving ran twelve to fifteen feet in the air—making it a challenge, to say the least, for customers who didn’t shop the store every week to find stuff. In many aisles, a third of the people there weren’t shopping for anything in that aisle. They were browsing, or killing time, or, far more often, they were utterly clueless as to where the computer paper was stacked. All too many shoppers found what was on their list and left. Staples was the first superstore to make changes based on our suggestions. They developed what we call an “arena concept,” where the aisles in the middle of the store are low and get gradually higher as customers reach the perimeter. The change, I have to say, is pretty remarkable. You walk in…and even in a large store you see everything. The full monty. Almost no one walks down a particular aisle who doesn’t want to be there. OfficeMax and Office Depot have come up with their own versions of an arena. In some cases, same-store sales are up 20 percent or higher. Do the new stores hold people longer? You bet, and the time customers spend there is considerably happier.
Why We Buy Page 4