The Relationship of Shopper Traffic to Sales

Proof that a Strong Correlation Exists

The Top Line

Comprehensive data spanning from 2004 to 2011 has been gathered and analyzed to determine that a strong correlation between shopper foot trafc and retail sales exists. This means that increases in foot trafc correspond directly with increases in retail sales. By thoroughly understanding the data and analysis techniques used in proving this correlation, retailers may be in a better position to justify efforts to increase store trafc in order to help drive more sales.

Understanding the Data and its Source

Before discussing the correlation between trafc and sales, its important to understand the source of the data on which the analysis was based. Here is a brief explanation of what is meant by trafc and sales - and how the data for each is derived.

Source Data for Trafc

Trafc refers to shopper trafc data. Initially gathered via trafc counters in over 30,000 retail locations across the globe, the trafc data used in this analysis came from the U.S. and was derived by using a random stratied sample of stores. Then trafc from these stores was projected to the total base of retail stores as dened by the U.S. Department of Commerce.

A side note regarding shopping malls: If a shopper visits ve stores in one mall each with its own trafc counter ve trafc counts will be recorded. However, it cannot be detected that this one shopper made the ve visits. Therefore, the shopper visits metric, or the act of a shopper visiting a store, is used as the basis for its trafc projections

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Source Data for Sales

The term sales refers to GAFO Retail Sales, a measurement that the U.S. Department of Commerce reports in its monthly Retail Sales Reports. GAFO Retail Sales are dened as sales from rms that specialize in department store types of merchandise.

What is and isnt included in GAFO Retail Sales?

INCLUDED:
n n n n n n

NOT INCLUDED:
n n

Furniture & home furnishings stores Electronics & Appliance stores Clothing & Accessories stores Sporting Goods, Hobby & Music stores General Merchandise stores Ofce Supply, Stationery and Gift stores

Motor Vehicle & Parts dealers

Building Material & Garden Equipment Supplies dealers

n n n n n

Food & Beverage stores Health & Personal Care stores Gasoline stations Food Services & Drinking places Non-store retailers

It is important to note that the types of stores selling merchandise included in GAFO correlate with those from which shopper trafc counters have gathered data for this analysis.

The Correlation of Trafc & Sales The Proof is in the Numbers

The graph below plots GAFO Retail Sales and Trafc for the period 2004 through May 2011. Prior to the recession in 2008, shopper trafc and retail sales tracked fairly closely together. As the recession hit full-force in 2008, retail trafc dropped, as did GAFO Retail Sales. However, after the recession, GAFO Retail Sales tended to approach levels seen before the recession, while shopper trafc has remained below its pre-recession levels. Although the distance between numbers increases slightly here, the relationship between shopper traffic and GAFO Retail Sales remains strong.

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Relationship of Trafc to Sales

$160,000 $140,000 $120,000 Sales ($US millions) $100,000 $80,000 $60,000 $10,000 $20,000 $0
4 Oc 04 tFe 04 b Ju 05 n Oc 05 tFe 05 b Ju 06 n Oc 06 tFe 06 b Ju 07 n Oc 07 tFe 07 b Ju 08 n Oc 08 tFe 08 b Ju 09 n Oc 09 tFe 09 b Ju 10 n Oc 10 tFe 10 b -1 1 Fe Ju n b -0

7,000 6,000 Shopper Visits (millions) 5,000 4,000 3,000 2,000 1,000 0

GAFO Sales*

Trafc (millions)

Further Correlation Analysis Reveals Strong Relationship

WA correlation analysis between shopper trafc and GAFO Retail Sales reveals that there is a very strong relationship with a correlation coefcient of 0.82. Remember that a correlation coefcient of 1.0 means that items are perfectly correlated (i.e. - They would move in perfect concert with one another) while a correlation coefcient of -1.0 means that items have perfect negative correlation (i.e. They would move in opposite directions). The correlation analysis reveals that trafc and GAFO Retail Sales move together -- as traffic goes up, retail sales goes up and as traffic goes down, retail sales goes down. However, a correlation analysis does not show causal relationships. Causal relationships are obtained by running regression analyses.

ShopperTrak

| 200 West Monroe Street, 11th Floor | Chicago, IL 60606 | www.shoppertrak.com

Regression Analysis shows Signicant Impact

When a regression analysis was performed, using trafc as the independent variable and GAFO Retail Sales as the dependent variable, a signicant causal relationship was uncovered. The regression analysis revealed that trafc alone explains 67% of the variance in GAFO Retail Sales. This means that the other 33% of the variance in GAFO Retail Sales are explained by all other independent variables that could impact Retail Sales such as weather, unemployment rates, gasoline prices, etc. The regression analysis also tells us how much GAFO Retail Sales are impacted by trafc. For instance, if shopper trafc for a given month were to increase by one million shopper visits, GAFO retail sales would go up approximately $18 million.

The Bottom Line

Data gathered over the years clearly shows that there is a strong correlation between shopper trafc and retail sales. Increases in foot trafc coincide with increases in retail sales. Consequently, it is very important that retailers generate increases in store trafc in order to drive more sales. If a decrease in trafc is detected, an expected sales decrease may necessitate the need to implement programs to reverse the trend.

Gary Dispensa is ShopperTraks Senior Economist and Lead Statistician. During the past seven years Gary has used his considerable background in forecasting, statistical analysis and marketing research to develop ShopperTraks Business Analytics products. The Trafc Report and the National Retail Sales Estimate are made possible as a result of Gary retail industry expertise and the exclusive availability of ShopperTraks data. Gary holds a MBA from DePaul University and a B.S. from the University of Illinois at Urbana-Champaign.

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| 200 West Monroe Street, 11th Floor | Chicago, IL 60606 | www.shoppertrak.com

Copyright 2011 ShopperTrak RCT Corporation All Rights Reserved

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