This short post examines Shopper Yield, a metric that enables retailers to assign a value to each incremental store visitor. Shopper Yield is used by retailers with multiple stores for benchmarking and measuring the ROI of marketing, advertising, and training efforts.
Shopper Yield is calculated using the formula: Net Sales / Traffic Out, or sales per shopper.
It allows retailers to understand how their locations are performing over time. This became even more important during the pandemic because brands saw in-store sales plummet while online sales soared. Many brands still see physical retail as a competitive advantage and are investing in programs such as Experiential Retail and in-store services. Examples include DICK’s House of Sport and Michaels Community Classroom. These programs are driving incremental store visits.
Originally conceived by technology company RetailNext, Shopper Yield helps combine three very important metrics in the retail space: traffic, conversion, and average transaction value (ATV).
Let’s take two stores as an example:
Store A has a conversion of 15% and ATV of $15
Store B has a conversion of 23% and ATV of $9
The initial instinct would be to incentivize store A to increase their conversion rate. What could happen is that Store A is now so focused on increasing their conversion rate that they stop focusing on ATV. Vice versa, incentivize Store B to increase their ATV, and they can stop focusing on conversion rate. Both scenarios would have a negative impact on the most important metric, total sales! Thus, Shopper Yield normalizes ATV and Conversion so that you can look at that across different stores and stores with more or less traffic. The goal is to increase the dollars spent by each shopper at any point in time by learning from top performers and adopting best practices.
How to Succeed
What retailers should investigate is why certain segments have higher traffic and Average Net Sale and attempt to emulate both those numbers across segments not performing as well. In general, Shopper Yield makes more sense when investigating segments where a purchase has already taken place. Initial traffic and sales numbers can be misleading without year-over-year results to analyze, and an industry benchmarks layer to help brands understand how they’re performing relative to peers.
So how does a brand increase both traffic and sales? It’s been estimated that a knowledgeable sales associate can increase sales by 23% directly because of the knowledge they have applied to the retail sales process.* This knowledge allows them to convert business at a much higher rate, and once trust is established, a higher Average Net Sale takes place as well.
A smart retailer will invest in training and recognition but also measure results before and after to determine the effectiveness and ROI. Then recalibrate and continue to measure.
As a final takeaway, we recommend that retailers take a holistic look at all the inputs that contribute to shopper yield – traffic, conversion, ATV, and Sales Yield. By better understanding all four metrics, a retailer can make meaningful optimizations that improve store performance and, ultimately, profitability.
*Wharton doctoral candidate Santiago Galino studied data from 63,500 salespeople at 330 stores. The resulting report, titled “Do Online Training Work in Retail? Improving Store Execution through Online Learning,” was completed Sept 5, 2015.
For additional thoughts or advice, feel free to reach out to us at [email protected].