Forget store traffic and bag count when counting shop sales in an online world

New York

MARSHAL COHEN has religiously visited the same stores every holiday season since 1999.

But rather than snapping up bargains and favourite gifts for friends and family, the chief retail industry adviser is there to scrutinise the purchasing habits of others as online shopping upends the retail business.

Major shifts in consumer behaviour and preferences have forced Mr Cohen, who works for market research firm NPD Group, and other retail analysts to approach their jobs very differently than two decades ago.

"If you were to try and replicate research methodology, or even store observation, in today's world, you've got a problem," he told Reuters. "It's no longer good enough to just look at store traffic or parking lot counts."

Mr Cohen and his peers need to get it right because their insights, reported to investors and retail clients, influence marketing, move share prices and guide investment decisions.

A record number of US consumers spending more online, coupled with a condensed holiday shopping season and year-round discount wars among retailers, has forced analysts to get creative, with many shifting away from old-school tactics to measure a company's overall performance.

Instead of simply asking shoppers why they left a store empty-handed, analysts are probing the effect of online giant Amazon.com, asking whether customers started Christmas shopping in July on Prime Day, now a major event in the annual retail calendar to rival Thanksgiving weekend's Black Friday.

Calculation of sales per square foot is giving way to a tally of how many Instagram-native, exclusive and private fashion brands are offered on a retailer's sales floor and website, and analysts - rather than simply seeing how many bags a shopper leaves with - are now counting how many younger millennial and Gen Z shoppers frequent a store and whether they make a purchase.

Craig Johnson of Consumer Growth Partners says that traditional metrics such as foot traffic, average selling price, and average basket size can often still be highly indicative of what's happening in stores.

But other retail analysts said online shopping and a slew of services like "buy online, pick up in-store" can hinder the ability to estimate a retailer's conversion rate - a traditional measure of the proportion of visitors who make purchases.

Brian Field, senior director of global retail consulting for ShopperTrak, part of retail data firm Sensormatic Solutions, said it was particularly difficult to figure out if traffic reported by retailers came from people buying items in-store or shoppers picking up online orders.

"It is kind of synonymous with the fact that retailers are reporting blended sales, which include sales online and sales in-store together," he said.

"I think what it really boils down to is the customer journey has changed - it can start anywhere, in-store, online and end anywhere."

When Marie Driscoll, Coresight Research's managing director of luxury and fashion, received an e-mail from Saks Fifth Avenue less than a week before Black Friday alerting her that several small leather designer goods such as wallets were on sale, she took note.

The department store, she thought, might have been struggling to sell such items, which are often given as gifts.

Saks, owned by Hudson's Bay Company, disagreed.

"It would be flawed to gauge category performance based on customer e-mails, as the majority include personalised recommendations derived from a client's shopping preferences," a company spokesman said.

Consumer Growth Partners' Mr Johnson keeps close tabs on how many fashion brands born on Instagram are on the sales floor when he visits Nordstrom these days. That tells him whether the retailer is catering to young shoppers who search for labels on their smartphones.

US holiday retail sales during November and December are expected to increase by around 4 per cent from 2018 to as much as US$730.7 billion, according to the National Retail Federation - a percentage rise dwarfed by the 13.6 per cent annual jump Adobe Analytics has already seen in online sales between Nov 1 and Dec 19, to US$125.6 billion. Smartphones accounted for 35.3 per cent of that revenue.

But analysts say retail companies are providing too little information too late, forcing them to draw conclusions from very limited data. REUTERS