Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
Web-based traffic monitors help stores get a handle on sales, labor and marketing.
When Virgin Mega Stores hosted an in-store product signing by popular rock group Jonas Brothers it expected a surge of visitors. The Jonas boys didn’t disappoint. “Our store traffic skyrocketed,” says Robert Fort, chief information officer and vice president of information technology for Virgin Entertainment Group NA.
But as popular as the music group was with Virgin’s clientele of teens and young adults, the retailer will think twice and check with Crescendo before inviting them back, Fort says. Crescendo is Virgin’s data warehouse, which provides information on store operations for the ten Virgin Mega Stores in the U.S. Among its most valuable information: a count, updated every 15 minutes when retail locations are open for business, of the number of people entering its stores.
Virgin combines the traffic data, gathered by Internet-connected store-monitoring cameras from ShopperTrak RCT Corp., along with constant updates of sales and inventory levels in the customized central database. The data, displayed in the web portal’s Crescendo page in multiple combinations of key performance metrics, give Virgin store personnel a quick look at how store sales and inventory levels are coinciding with traffic counts.
Looking beyond sales
Virgin and other retailers using traffic-monitoring systems are able to find, for example, that particular in-store promotions may be improperly planned or displayed, causing a drop in visitor-to-sales conversion rates. In reports updated every 15 minutes, Virgin can look at such information as visitor-to-sales conversion rates, average dollar value per sale and average number of units per sales transaction at different levels of store traffic. It can then adjust its workforce and in-store pricing and promotions to match expected traffic levels in an attempt to improve sales and margins.
The value of such analysis is that it takes merchants beyond just looking at sales as an isolated all-important metric, experts say.
“You can’t staff stores based just on sales data because it could send you into a death spiral,” says Nikki Baird, managing director at research and advisory firm Retail Systems Research LLC. Without accurate data on store traffic, retailers might respond to dips in sales with a reduction in store staff levels, leaving them without enough workers to drive up sales, she adds. “You need to know how many chances you had with customers and lost, not just how many you won with sales.”
Although retailers might be tempted to think that simply drawing more traffic into a store will boost sales, Virgin has learned that is not always the case. And by looking at reports updated throughout the day on what products are selling during peak and off-peak traffic periods, it can better plan marketing and merchandising campaigns to produce the most visitors and turn them into buyers.
“When a retailer runs a promotion, success is typically measured in sales lift,” says Paula Rosenblum, who is also a managing director at Retail Systems Research. “But if traffic lifted and sales did not, the problem is not with the promotion itself but with other ancillary things-such as not enough employees to stock the shelves, not enough product or poor signage.”
In the case of Virgin’s in-store Jonas Brothers event, the retailer learned that the surge in the number of visitors coincided with a spike in sales of some merchandise, but only in certain areas of the store. Among the lessons it learned: promote better flow of traffic around events, allocate store employees in ways that serve event visitors as well as other customers who just want to browse or shop and don’t care about the event, and put limits on the length of time that special events can overcrowd stores with people not necessarily there to buy things. “Now if a guest artist wants to spend three or four hours in one of our stores, we may say that’s too much time because we know we’ll lose sales,” Fort says.
Virgin has put the system to work in other ways as well. Indeed, getting store managers and others simply to look at combined data on store traffic and sales has led the retailer to be more aware of customer dynamics and how to improve store operations, Fort says.
The 6 p.m. shopper
Near the beginning of a recent holiday shopping season before the traffic-monitoring system was widely used, Virgin asked store managers if they could identify their peak traffic periods. Most had at least some idea, but one manager was completely surprised when the traffic-monitoring system showed a sharp increase in store visitors every weekday around 6 p.m. After he thought about daily traffic patterns, the manager realized that the uptick in visitors was probably related to people passing through his store, which was near a commuter subway line, on their way home from work.
The store manager responded by adding an extra salesperson during that after-work time period and rearranged the entire store staff to accommodate shoppers in a hurry. “The store shifted personnel to the front of the store so they could address the quick in-and-out commuter on her way home from work,” Fort says.
Such tactics have produced substantial increases in store sales, he adds. After Virgin first implemented the traffic-monitoring system in the fall of 2004 at the start of that year’s holiday shopping season, the steps stores took to better align personnel and promotions with store traffic led to several million dollars in year-over-year increased sales across the 24 stores in operation during the first 18 weeks the system was in place.
Fort is also using the traffic reports to judge the effectiveness of marketing programs designed to send more consumers into its stores, and as a measure against traffic levels compiled by operators of malls where Virgin has retail locations. “It’s providing our marketing department with a way to measure their success in increasing store traffic. And if a mall manager tells us that mall traffic is up while our store traffic is down we may commit more e-mail marketing to drive up store traffic.”