How to determine foot traffic and choose a business location

You may have heard that the location is everything when choosing a business location. There are many factors that influence this business decision. This decision is influenced by key data points such as foot traffic, walkability and local demographics.

The amount of people who walk or drive by a business’s location on a daily basis is an important indicator. It is important to not only consider the accessibility of their location, but also how they advertise themselves with visibility and high foottraffic.

What’s the point of measuring foot traffic?

Neglecting to do proper market research at the beginning of a business is one of the biggest mistakes of small-business owners. How can you launch, manage, and sustain a profitable business if you don’t know what you are getting into with regard to industry, competition and demand?

Foot traffic is a way to assess the location’s accessibility, demand, and visibility. Retail businesses often use foot traffic to attract tourists, shoppers spontaneously, and passers-by. This data can help you choose Location A over Location B.

 

The Key Questions

Business owners can use foot traffic data to answer many pressing questions, such as:

  • Is there a better place to open my own business?
  • How many people pass my business each day?
  • What are the busiest times of the day?
  • What are the most popular times of year for foot traffic?
  • What is the average length of stay for this region?
  • What length of time are they stored in my store?
  • What staff should I have?

 

The benefits that the business owner is willing to trade for good foot traffic are a key factor in determining how much foot traffic you get. Times Square, for example, is the most foot-trafficked retail center in New York City. It has a staggeringly high traffic count of over 500,000. 450,000 pedestrians each day (pre-COVID). The rent there is also staggering, with cashing out at as high as $2,350 per square foot . There is a tradeoff. Here are some examples of how foot traffic may vary depending on where you live and what your cost of living is. Also, how rental rates reflect foot traffic.

 

Foot Traffic Examples in the USA

Time Square in NYC
(47th & Broadway)
San Francisco, CA
(Union Square
Peoria IL
(Main & University)
       
Description Times Square district boasts 1,500 businesses San Francisco generates 1/3 of all consumer goods retail sales A major intersection in a small Midwestern town
Average Foot Traffic
PPD (people per day)
380,000 14,000 15,000

What is Foot Traffic Worth?

When determining the balance you’re willing to strike between ticket price and traffic count in choosing a location, it is–unsurprisingly–a numbers game. This is an example of a small-town location for a gift shop.

  • Location A : This is a scenic and busy intersection. Nearby amenities attract a lot of people and businesses benefit from each others’ foot traffic. The rent is high but the foot traffic numbers are excellent at around 8,000 daily pedestrians.
  • Location A: Located a short distance from the main street and surrounded with offices, not retail. The rent is cheaper, but there are only 2,000 daily walkers.

The question here is: What is the “worth” of spending more on Location A than Location B?

We’ll calculate how many sales the busier location will generate to find out the answer. If an investment, such as higher rent for Location A, doesn’t result in sales, it was not a good investment. Let’s look at the following formula for estimating potential sales at Location A.

  1. Calculate your share of sales from walk-ins vs. customers who drive to the business. Let’s assume that 90% of your customers will come via foot traffic, just for the sake of our gift shop. This could be as low as 10% for a niche service like a guitar repair shop.
Out of 100…
10% for commute
Walk-ins are 90%
  1. Consider the differences in foot traffic between these two locations. This example shows that Location A receives approximately 4x the foot traffic as Location B.
Location A foot traffic: 8,000 ppd
Location B foot traffic: 2,000 ppd
A B = X
8,000 / 2000 = 4x
  1. Next, multiply Step 1’s percentage by Step 2’s. This will give you an estimate of the sales increase that higher foot traffic will bring.
90% x 4 = 360%

Location A can be as high as 360% (or 3.6%) in sales than Location.

The result for the gift shop is 360% (90% x 4), more sales for Location A. This means that sales in Location A will be nearly 3.6 times greater than those in Location B. This scenario shows that it is worth paying 3x more rent to get a better location.

The estimate for a guitar repair shop is lower at 40% (10% x 4). The increased foot traffic doesn’t do much to improve the bottom line, as only a small portion of business is derived from walk-ins. This scenario shows that a better location is worth less than a good one.

Foot Traffic Demographics: More than a Tally

This is where quality over quantity comes into play. Retailers always benefit from high foot traffic. It can be very detrimental to the longevity and viability of a business if it doesn’t consider the characteristics, purchasing habits, and demographics of these pedestrians. The location of your business is influenced by the area and possible demographics. Here are some questions you should ask.

Who is your customer?

Market research is an important step in starting your business. The “golden customer” is a snapshot of your ideal customer. This person will be the one for whom you opened your business and what they are looking to purchase from you. The Experian Segmentation Portal is a robust online tool to build your customer identity. Business owners can access it for free. You can also check our article How To Create a Customer Profil. It covers everything and includes a template.

Which Customer Are You?

Your business location might be receiving as much foot traffic than Times Square. Your foot traffic count could be as low as zero if they aren’t your customers and unlikely to buy your product or services. To make sure your customer is not walking by that area, you should also research and discover foot traffic in the location options.

Let’s look at our previous example, a Main Street gift shop in the USA. I am looking for a profile of my target customers (married couples with children who are comfortable buying souvenirs, gifts and cards, as well as home decor and premium goods) but I also want to see where they live and look at the storefronts. It is possible that Location A might have more foot traffic than Location B, but Location B may be closer to my target customer and offer more visibility.

Continue reading to find out more about paid and free services that can be used to determine foot traffic patterns and learn demographics in potential locations.

Measurement of foot traffic: Traditional methods

You are correct if you think that the traditional method of measuring foot traffic is pen-to-paper people counting.

  • Tally or clicker counting – If you’ve ever been to amusement parks, you might have seen a child at the gate of a ride ticking off people with a manual handheld clicker. This method of people counting is still used by many companies, even though I haven’t seen it myself. Businesses used to count customers with a tally sheet of paper long ago.
  • Security and Camera Systems – There are many shops with cameras and security systems. If you have the time, these cameras can be used to count how many people are on the camera every day. Unfortunately, not every entrepreneur has the luxury to have unlimited time. However, some security systems have been designed for today’s business environment and include integrations, automatic people-counting, and other features that enhance the hardware.

The Problem with Traditional Measures: There is no Demographic Data

You’ve probably already seen the fatal flaw in traditional methods for counting people. The great debate about quality vs. quantity comes to an end. You can count how many warm bodies pass by, but that doesn’t mean you are able to see all the details. Modern methods are more robust and provide better information.

You can’t tell more about the number of people than this. It’s a tradeoff between quality and quantity of data. Fortunately, this is no longer an option for business owners.

The Best Method to Measure with Demographics and Data Aggregators

The technology is becoming smarter in tracking our whereabouts, who we are and what we do as consumers. This makes us a target for data mining, which we are willing to contribute.

Technology provides data about foot traffic, walkability and local demographics as well as competition. These data sets are key to determining whether a business succeeds or fails depending on the location strategy.

Here are some foot traffic counting tools, sorted by price. Remember, you get what your pay for. You can start with some free tools, but you also have the option to invest in more specific information about your customer or target area.

  1. Community Development Corporations (nonprofit) and Economic Development Departments
    Keep in mind the taxes you have to pay each year. Look into the location data available at a CDC/ED department in your city or town to see if you can get your money’s worth. It is free. Some people have only one resource, while others have both. These services are all free and many high-tech offices have data on foot traffic, property, and demographics that can be published on their websites to help commercial districts.
  2. Placer.ai
    This tool provides limited information such as foot traffic counts for any business, venue, shopping center, or casino. You can purchase more detailed reports.
  3. AreaVibes
    Although it doesn’t provide foot traffic counts for this site, it provides valuable demographic and lifestyle data, including insight into the community population, amenities and walkability.
  4. LocationOne
    The “Property Search” free tool allows users to search for commercial properties. You can also download reports that detail everything, from foot traffic within the immediate area to spending by category within a radius of several miles.
  5. LocationGenius
    For years, this site has been a leader in location selection and comprehensive data points. LocationGenius, like its competitors, uses “aggregate data,” which combines millions of anonymous customer data points (such as location, purchasing behaviour, social media pings) into digestible reports.
  6. GravyAnalytics
    GravyAnalytics uses “DaaS” (Data-as-a-Service) to provide detailed information on foot traffic patterns and consumer personas. They also track purchases and visit frequency.

Data is like being able to see inside your customer’s brain and give them what they want. If you had the ability to do so, why wouldn’t it? Business owners can use foot traffic data to make better and more intelligent choices when choosing a location.

Foot traffic in your location

Now, you have done your research, are in a great place, and want to understand the foot traffic in your store. The power of in-store analytics can help you grow your business and thrive in any environment. These are some systems that small businesses can use to analyze and measure the behavior of shoppers at their retail locations. This is just a small selection of options. Make sure to explore all the available solutions and decide which one best suits your business. These options can be broken down into three-foot traffic measurement techniques: AI, DaaS, and POS.

DaaS and Aggregate data

This category can be called Analytics, Big Data (Data as a Service), Analytics and Big Data (Data as a Service), Analytics and Location Analytics, but regardless of how you slice it, these methods allow you to learn about your customers by accessing their phones data. This is usually done anonymously to create a collective consumer profile. These systems can be wired or wireless.

  • Valassis – A software that focuses on measuring the success of marketing campaigns.
  • Dor – a combination of software and hardware that uses thermal technology and machine-learning to measure warm bodies. It also provides aggregate data analytics.
  • Blix -This company uses cloud-based analytics to “look beyond” the door by “measuring customer journey.” Watch the video, and you’ll be convinced.
  • RetailNext -This is a comprehensive suite of solutions that includes Traffic 2.0. It combines hardware with software to measure entry path analytics, visit duration, occupancy metrics and other metrics.

Artificial Intelligence (AI), Facial Recognition

There are many ways to measure traffic patterns, duration, frequency and other factors. These can be measured using everything from sensors-laden flooring to infrared scanners installed at the door. An interesting option is to use some AI.

  • Rhombus – This platform claims to have dominated the people counting market through Artificial Intelligence video software, facial recognition, and artificial intelligence. It doesn’t use mobile data, but it is just as innovative.

Integrations of Point-of-Service Products (POS)

Fun fact: POS does not count foot traffic. It can be used in conjunction with other foot traffic tools to generate powerful analytics, data and insights. Each tool is excellent, but combined they create a powerful arsenal that businesses can use to draw meaningful conclusions and make strategic moves. Double your fun, double your measurement!

It pairs well with Blix

  • Retail Express -couple Retail Express POS with Blix analytics and you have quite the data cocktail. Good POS systems will allow users to manage multiple channels, promote their products, integrate with other companies, and much more.

RetailNext:

  • Lightspeed–Lightspeed is arguably a leader in POS integration, and pairs particularly well with traffic counter RetailNext (listed above). Lightspeed is a robust POS system that can manage your inventory, payments in-store and online as well as your ecommerce store and Customer Relationship Management (CRM).

Use the data to your advantage

You can unlock all sorts of new insights and strategies by using the analytic data and quality foot traffic systems. Entrepreneurs who are smart can make use of foot traffic data to transform their business operations. You will find specific examples of how foot data can be used to improve the business model.

Validate or invalidate the Product Mix

South Carolina novelty shop wants to expand its product range. The current product line includes artwork, mugs and women’s jewelry, as well as linens, gifts and candles. It fills a corner with baby gifts, including blankets, knit caps, blankets and mobiles, as well as books and bibs. It uses its chosen foot traffic measurement platform to discover that the baby corner is not included in traffic flow. The store owner, using POS data and purchasing trends, discovers that baby gifts are not popular with customers. He decides to try other products and stop wasting money.

Assess and revise staffing and hours of operation

To compete with large-box retailers, a mattress store on the West Coast opens every day from 10 a.m. until 8 p.m. It employs 2.5 employees per 1,000 sq. feet of retail space each day, which means that it has approximately five staff members. Traffic patterns showed that Sundays were the busiest days for sales. It shifts its Sunday hours from 12 p.m.-6 p.m. every Sunday to save overhead and utility costs.

Expanding and Growing Decisions

Ohio’s bookstore/coffee shop is a success because it enjoys a college town feel and 20,000 students each Fall. Although the storefront is small and cozy, it lends itself to exclusivity, high demand and high sales. However, traffic counts and flow patterns indicate that there isn’t enough seating for the amount of foot traffic. It eventually accommodates a full house at the local hot spot by expanding to its back and raising two stories. This allows for late-night events such as Poetry Slams or Open Mic nights. It also extends the hours of operation and increases visit longevity. Customers are consistently coming in over 12 hours per day.

Bottom line

Retailers can transform their business with the help of foot traffic data and POS systems. This data allows retailers to make informed decisions about inventory, store layout, return on investment (ROI), target market, buying behaviors, visitation patterns and seasonality. Analyzing data is useless. If you want to measure foot traffic, keep your critics in check. It is important to gain the right insight to help you serve your customer each time they come through your doors, and ultimately win the sale.