More than footfall, why it is not enough anymore?
Traditional footfall is dead. Footfall is not enough anymore and shopping centers managers can’t manage their malls just counting people. Even gathering monthly sales, as many of the top performing shopping centers do, valuable information is being missed and thus, malls are losing an opportunity to increase their performance.
As you can read in this case study, shopping centers are moving towards a new relationship model with tenants because of omnichannel opportunities.
Footfall is not enough
In the retail industry, footfall is defined as the measurement of the number of people entering a shop or shopping center.
For decades, footfall, sales and rental have been the basic for mall and tenants performance analysis. But is it enough?
For tenants analysis
The digital era has transformed the way that customers and brands interact. The challenge, for shopping centers and tenants in the next years, will be to adapt their physical spaces to the new customer’s behavior and explore new leasing models to take advantage from omnichannel strategies.
But how can we explore new leasing models without adding new KPIs? And which KPIs could be more useful to make this approximation?
- Passing by-traffic: this KPI allows shopping center managers to measure in the impact of marketing campaigns on their tenants. With this information, the asset manager has a stronger position in the tenant-shopping center negotiation process.
- Entries: using entries to the tenants helps managers to understand how tenants are capitalizing the passing-by traffic.
- Capture Ratio: Capture ratio gives the opportunity to understand and identify anchor tenants, benchmark between different tenants and same tenants in different locations as well as potential top performers even if they are in low interest areas (“cold areas”). This is important because it is a great indicator to detect low performing tenants, so managers can be proactive.
- Phantom Ticket: A phantom ticket is the result of dividing the tenant revenue by the entries in the same period of time. It shows, not a real average ticket, but a KPI to track tenant health.
The retailer usually has much more data about its business than shopping center managers has, and thus, the power. Balancing positions and power in a negotiation is highly important and makes relationships trustier between parts.
Do you know how is impacting online sales in the tenants performance? Don´t you think that just monthly sales and footfall can throw wrong conclusions?
Let´s see it with a simple example:
We show data from the same tenant located in two different shopping centers. Last month data was:
|Women Fashion Shop||Mall 1||Mall 2|
|Monthly Mall Traffic (people)||813,810 people||1,016,165 people|
|Monthly Sales (€)||720,000 €||820,000 €|
Which tenant has the best performance? Can you really answer the previous question with this information?
Apparently, the Women Fashion shop has been a better performance in Mall 2. Monthly sales have been higher than in Mall 1. And in absolute terms that is true.
But, when new metrics like Entries, Passing-by traffic and Capture Ratio, appear conclusions are extremely different:
|Mall 1||Mall 2||Variation|
|Average Daily Mall Traffic||27,127 people||33,872 people||25%|
|Average Daily Entries||1,638 people||2,037 people||24%|
|Average Daily Passing-by Traffic||6,459 people||11,291 people||75%|
|Capture ratio||25.4%||18.0%||-7.4 p.p|
|Average Daily Sales||24,016 €||27,333 €||14%|
|Phantom Ticket||14.7 €/entries||13.4 €/entries||-8.0 %|
Including additional information makes the difference. We could observe that traffic in Mall 2 has increased in 25% and passing-by traffic in 75% so this tenant is much more exposed to visitors in Mall 2 than in Mall 1. Also, sales have increased in Mall 2 in 14%. It seems Mall 2 location should rock it. Despite of that, capture ratio and phantom ticket are better in Mall 1 and they are really showing the health of the tenant in terms of fitting and engagement with visitors. So, if we compare the difference between malls´ passing by-traffic, entries and sales, we could conclude that they are not as good indicators as they look like in an isolated way. And this view radically changes the perception and more important, the reality of the tenant, doesn’t it?
This example, with just 2 malls, shows how traditional metrics by themselves can hide relevant information and don’t show a complete image of the real situation. When you analyze and compare all the shopping centers between them or different tenants in the same shopping center, patterns arise, and smart metrics gives a new management vision.
New leasing models
We can’t stop evolution but being part of it. As it was said before, it is necessary to explore new leasing models with the tenants in order to capitalize brand´s omnichannel strategies. And because many outstanding tenants are claiming new contract conditions that better fit with the new consumer and business reality. If shopping centers want to be relevant both for brands and people, they must find the way.
For Shopping Centers Managers, it is crucial to know how sales in other channels are impacting in store entries and measure that to be beneficiated. If managers add some of the previously explained metrics to the agreements with tenants, they will start to build the new framework in which everyone is winning..
And this will be the future, if not the current situation already, as you can read in this article about new leasing models written by icsc.org
As it was said before, footfall is not enough, sorry.
As it was shown, it is easy to imagine how these new metrics can open non previously imagined improvement opportunities to managers since a better knowledge of what is happening in the shopping center is achieved.
Consequently the shopping center industry must evolve because the new people behavior. And technology is available to help it on this transformation and adaptation.