Very rarely are furniture retailers satisfied with the quantity of shopper traffic entering their stores. In nearly all situations, they are engaged in a search for ways to increase it. In the July/August installment of this article series, traffic was identified as the number one challenge and one that most retailers address by trying to find the elusive “holy grail” with a balance of traditional and digital advertising.

Traditional Elements #1 and #2: Base Traffic & Advertising Generated Traffic

Typically, retail traffic is thught of as a combination of, #1, base traffic plus, #2, advertising-generated traffic. Base traffic is made up of customers who would come in with-out any prompting, due to location, brand awareness, past purchases, referrals, etc. Advertising-generated traffic is bolstered by shoppers who are influenced by paid campaigns. Traffic generated by advertising can be quantified by the following formula: Advertising Traffic = Ad Spend × Response Rate.

When either base or advertising traffic declines—often due to economic, geopolitical, or other uncontrollable conditions—total traffic falls. Since In-store Sales Volume = In-store Traffic × Close Rate × Average Ticket, a decline in traffic puts revenue, profitability, and cash flow at risk.

Traffic has a significantly greater impact compared to close rate and average ticket because there is much more variation in traffic volume. Close rates (averaging 30%) and average sale (averaging $2,000–$4,000) tend to remain consistent over time, without good sales leadership and merchandising practices. When advertising slows or base traffic weakens, the traditional formula has no backup plan. That’s why retailers could benefit from a new, expanded traffic formula that helps them understand and control the levers that influence their businesses, to increase total traffic volume and, consequently, revenue and profitability.

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