What Makes Shoppers Stop?

Lease Negotiators Can Gain a Powerful Edge with Emerging Shopper-Measurement Technology.

The retail industry has been licking its wounds after an unexpectedly harsh 1995 holiday season and a rough start to 1996 in which regional shopping centers were particularly hard hit. In today's overstored market, embattled tenants can be expected to drive tough bargains in negotiating leases. Managers and owners of malls and shopping centers must use every tool at their disposal to help attract and retain retail tenants while maintaining a profitable rent schedule. Fortunately, new and emerging technology is keeping pace with their needs.

In the Information Age, one of the most effective tools for strengthening a lease-negotiating position is comprehensive data on shopper traffic patterns. Mall and shopping center operators use various methods to gather such information, ranging from live, on-site observation to security cameras. Now, computers can provide never-before-available information on the exact number and direction of shoppers entering and exiting a mall or center, as well as the average time and dollar amount shoppers spend.

General Growth Properties (GGP), a REIT and one of the largest regional mall owners and operators in the United States, has installed state-of-the-art traffic-monitoring systems in six of its malls around the country. Mark N. London, GGP's asset management senior vice president, praises the usefulness of the new technology. "In half of these, we are measuring every exterior mall entrance and learning precisely how traffic moves into, out of, and around the malls," he says.

Strengthening Leasing Negotiations
To remain competitive, mall managers need to offer current and prospective tenants the best deal within the property. With the latest computerized shopper tracking, managers can provide retail tenants with reports containing hard data affecting their business.

  • Total Traffic by Entrance. Provide a count of the number of shoppers using a specific entrance and its percentage of the total mall's traffic.
  • Total Traffic by Time of Day. Effectively position tenants based on their operational background. For example, a tenant that receives most of its business from 2 to 4 p.m. would be best positioned by an entrance that enjoys similar traffic patterns.
  • Total Traffic by Day. Know daily shopping strengths and weaknesses.
  • Comparisons over Extended Time Periods. Demonstrate long-term traffic trends and help evaluate management's performance in delivering shoppers to the tenants.
  • Average Shopping Time. Evaluate the type of customers attracted to the mall based on the time spent shopping.

Existing and Prospective Tenants
With accurate traffic-tracking data, management and ownership can address tenant concerns about traffic patterns and ensure that the positioning of tenants will best suit every party involved.

For example, prospective merchants making a first-time visit to Bellis Fair Mall in Bellingham, Washington, have always perceived the Target and Mervyns wings as producing the lowest traffic, and thus, the lowest sales.

"We are beginning to compare different mall concourses of Bellis Fair and the amount of traffic and sales each location produces," says Gary Shimada, general manager of Bellis Fair.

Grand Traverse Mall in Traverse City, Michigan, owned by GGP and managed by General Growth Management, is also benefiting from its high-tech traffic-tracking system.

"We can take a prospective tenant to the room where the system is set up and within seconds bring up the numbers for a given wing or time of day," says Jody Brown, group vice president of General Growth Management. "It's very convincing. For example, at one center, one section was viewed by leasing prospects as a lower-traffic area, but in fact it was equivalent to the highest-traffic area, just at a different time of day."

Shopper traffic data can also act as an incentive for retailers to choose a certain mall. Grand Traverse Mall offers its tenants monthly traffic counts to help them maximize peak times. "We can now provide our retailers with more detailed documentation on the number of shoppers the mall attracts to their stores and what types of mall promotions are most effective," says Brown.

The ability to provide hard numbers via graphs and charts is a key strength of the newest technology. This eliminates the "guesstimation" method-previously the only means of explaining traffic patterns to ownership. Owners and managers no longer have to speculate on whether certain promotions have been successful, if the tenant mix is favorable, how to efficiently schedule operational staff, whether mall renovations have increased traffic at the desired points and entrances, and overall peak and down traffic periods.

Traffic Signals
How do extraneous circumstances such as weather or competition from other properties affect traffic? Managers can provide a clearer historical picture for ownership if they can record special circumstances, such as a large city event that attracted tourists to the area or a snowstorm that may have affected the results of a promotion.

"One of the most unique features of the [system] we use includes extraneous factors, such as weather or tenant promotions that may affect traffic for a given day," says Maureen Taylor Crampton, marketing director at the Forum Shops at Caesars in Las Vegas. "This has been incredibly useful in qualifying and reporting the success of mallwide marketing promotions, because it allows us to record the circumstances surrounding the promotions, providing a more accurate picture of the event's success."

Some malls monitor the entrances into the mall's common areas, as well as those at exterior entrances of anchor tenants. This "mall circumference monitoring," in conjunction with monitoring entrances between anchors and common areas, provides management with powerful information on the percentage of each anchor's contribution to mall traffic. Detailed, accurate reports on traffic and long-term trends can be provided for ownership review. This data also can provide base lines on the average number of people who travel past a specific retailer in a day.

Mall and shopping center managers can compare the monthly shopper traffic data with the volume of sales of their combined retailers to determine the average amount of purchases per shopper. For example, if a mall recorded 12,000 shoppers in the month of May and combined retailer sales were $400,000, the sales-to-patron ratio would be $33 per shopper for that month. This is also helpful in evaluating marketing efforts and determining changes in customer behavior and demographics.

The information revolution in retail customer tracking means that shopping center and mall managers can document whether operational staff is being scheduled efficiently to maximize service in peak traffic times, as well as to cut costs by decreasing staff during slower traffic times.

Staff scheduling and mall closing times have been altered at the Forum Shops as a result of information gleaned from its shopper-measurement system.

"The data lets us know when we must be heavily staffed, where to place security, and how and where to manage housekeeping-such as adding restroom maintenance and supplies during high-traffic times," says Crampton. "We also discovered that a number of people were getting out of shows late at night and were shopping on the way back to their hotel rooms, causing us to reevaluate closing times."

Grand Traverse Mall, which is located in a very strong tourism market, has retailers that periodically report having sales equal to those during the usually busy holiday season. To accommodate shoppers, the mall is considering extending its hours during the season tourism.

"We have started to evaluate the months of May through August by comparing traffic counts with data from the holiday season. This information will help determine if we will schedule extended hours during next year's tourism season," says Brown.

As competition in the retail industry toughens, mall and shopping center owners and managers will need to embrace emerging technology to ensure the continued survival of the traditional shopping center. Increasingly, owners will need to make informed decisions on what is and what is not attracting shoppers to their centers. Accurate customer tracking can provide data for long-term planning and assessment that can be applied on a portfoliowide basis. Traffic patterns, conversion rates, demographic shifts, and other recorded factors can provide an invaluable historical picture for owners. As the industry evolves, high-tech customer-tracking systems will be a key source in identifying the reasons behind shopping centers' success.

Brad Rice

Brad Rice is project manager for Wheeling, Illinois-based RCT Systems, Incorporated, the developer of the People Counter, a high-tech shopper-traffic tracking system. The system uses video image-processing technology, some of which was pioneered in the U.S. defense industry. You can contact Rice at (847) 215-2277.