It’s not rocket science, but Mark Ryski wants to teach retailers a few things about customer traffic
The Advanced Technology Centre in south Edmonton looks like a cluster of greenhouses dug into a grassy hillside. Heavy on the concrete, the building is an example of how the bunker has influenced modern architecture. There’s also plenty of glass, however, and when Mark Ryski greets me at the door of his mainfloor office, the room is bright with sunlight.
Almost before he’s finished shaking my hand, Ryski launches into the history of his company, HeadCount. I’m not surprised: I’ve heard he’s a salesman. Enthusiastic, certainly, but by no means cloying, Ryski is not interested in delivering a sales pitch. He’d rather just talk about how he developed a company that interprets customer patterns and literally wrote the book on the “science” of understanding retail traffic.
HeadCount’s analysts are the engine that drives this science. While getting acquainted with Ryski, I notice three of them rolling their chairs away from computer terminals and congregating in the middle of the office. One, a young woman, has discovered something unusual at a national retailer’s Edmonton outlet. Late spring customer counts were up, she says, but the number of shoppers who actually bought anything was conspicuously low.
The two other analysts, both young men, flip through pages of charts and graphs. Earlier in the season, says one, few browsers left without buying. In their lingo, they call this “a high sales conversion rate,” and it seemed stable, the analyst reports. So why the drop? This is the type of mystery – often associated with revenue loss – that some of the country’s biggest retailers pay HeadCount to solve.
Before the three analysts finish their sleuthing, alas, Ryski whisks me away on a tour of the Edmonton Research Park business incubation complex where his company is a tenant. “I wanted an office here from the beginning,” he says as we walk through the corridors. He likes the credibility of the Advanced Technology Centre address on his business card. More importantly, the location positions HeadCount across the street from South Edmonton Common, North America’s greatest concentration of retail power centres – almost every one, according to Ryski, a potential client.
After stopping at a large, empty space that’s being renovated for HeadCount’s expansion, Ryski shows me one more room: a basement office that’s maybe 150 square feet. Despite the open-concept building’s pyramidal glass ceiling, little sunlight penetrates the windowless, celllike room where HeadCount was born just over two years ago. Ryski peers into the darkness at a single, paper-strewn desk. “Looks like another entrepreneur is getting started here now,” he says.
A dozen years ago, long before he became an entrepreneur, Ryski was a commerce student at the University of Alberta who worked parttime at Softwarehouse, a computer store specializing in hard-to-find programs. Responsible for advertising spending, Ryski was challenged by a boss to prove that the marketing plan was working. The trick was finding a way to measure the impact of advertising. The solution, Ryski figured, had to be out there. It wasn’t.
Open business books, even new ones, and there is no solution, says Ryski. “I gave a lecture at the U of A recently and bought a copy of their advertising textbook. It says you should measure the impact of advertising, and that you can’t use sales to measure it. Then they conclude it’s pretty difficult to measure the impact of advertising, which reads like a punch line.”
Back in 1993, instead of a textbook, Ryski found a dusty copy of a business periodical called Chain Store Age Executive on a basement shelf in a university library. Inside, there was an ad for a retail traffic counting system, a simple device that registered a count every time a beam across the store entrance was broken. It could be used to determine whether ads attracted customers.
Costing a fraction of the marketing budget, Ryski concluded it was a bargain. His bosses felt otherwise. Denied, Ryski and two engineer colleagues built their own apparatus using similar light-beam technology. It worked. With it, Ryski could determine which ads brought people to the tills and which didn’t. Moreover, by comparing hourly and daily customer counts to transaction records, he could set store hours and staff schedules. He had devised a metric to mitigate some of the uncertainties of managing. Today, he considers this nothing short of an epiphany.
For a short spell three years ago, Ryski’s days involved little more than the couch, daytime television, and maybe a trip to the mall. His formative years at Softwarehouse led to a vicepresident post at Intuit, where he managed retail channels for the company’s accounting software. Then, at 38, Ryski found himself wondering, “Isn’t there more?” He accepted a sabbatical from then Intuit CEO Bruce Johnson, but the holiday didn’t last.
Two months into the break – time he took to reconnect with his wife, year-old son and six-year-old daughter – Ryski got restless. “What’s next?” he wondered. Inspiration hit during those shopping excursions. Stores, he noticed, weren’t counting traffic.
While at Intuit, Ryski never forgot his Softwarehouse traffic project, occasionally selling one of his counting systems. But what if he could build a viable business around this technology? “There are two major reasons that businesses fail,” says Bruce Johnson. “One is cash flow. The other is that it’s a bad idea. Mark had a great idea.” The plan was to combine the technology with a service-based business model. If he counted customers and interpreted the data, Ryski realized he could show clients how to improve sales.
Ryski went a step further after establishing HeadCount. This past February, he released a book, When Retail Customers Count. Penned over 13 months of weekends, it is the self-ordained “traffic evangelist’s” take on a new approach to retail management. “I think what we’re doing is creating a new retailing science, one that isn’t really used, that isn’t really formulated,” says Ryski. “The book tries to create a foundation for this. Retail businesses are so focused on financial results; it’s like as long as sales are going up, it’s okay. Well, no. You may be under-performing.”
Learning to look beyond revenue and focus on sales conversion rates – the statistic at the core of most HeadCount analysis – means relinquishing some of the principles that Ryski claims have long dominated retail management. But conversion rates, his book stresses, can identify “areas of opportunity” for overall improvement. Take, for instance, staffing. Low conversion in times of high traffic could be rectified by ensuring there are more staff on the floor at certain hours of the day – such as during the busy lunch hour or during Saturdays. If that fails to improve conversion, perhaps the staff itself might need a bit of tweaking.
It’s hard to call When Retail Customers Count an outright sales pitch. It contains no success stories or self-congratulatory case studies; nowhere does it mention how HeadCount installs and maintains its own hardware, tallies customer counts, and provides the accompanying interpretation. A glorified calling card, as one interviewee called the book, seems more appropriate. To broaden clientele, Ryski has sent copies directly to select CEOs. To his surprise, some call back. “It’s almost inappropriate,” he says about this marketing approach. “But with the book, it’s not a salesman calling – it’s an author.” Though Ryski insists he’s just “a retail guy trying to tell people the world’s round and not flat when it comes to traffic,” he admits the distinction has its advantages. “The shield of steel is the book,” he says, tapping on the hardcover he’s brought along on our interview. “We are the established authority.”
Counting retail traffic is nothing new. In fact, according to Adam Finn, a University of Alberta business professor whose research includes retail strategy, companies have been electronically monitoring customers for nearly 30 years. The value of these counts, says Finn, depends on what you do with the data. Many retailers manage, quite successfully, on year-to-year comparisons, with help from Statistics Canada or the Retail Council of Canada, and, of course, by relying on instinct. Finn points out that some retailers can monitor their own traffic, although effectiveness depends on the attentiveness of managers. Even so, he says, “people are not very good at integrating diverse sources of information, therefore they are going to rely on simple comparisons and rules of thumb. That works, but it’s not going to be optimal given the variability and fluctuations in the average retail environment.” Even if a company does its own counts, says Finn, time and some expertise must be invested in making sense of the results.
Every week, using inexpensive beam-of-light counters fundamentally unchanged from the one Ryski developed at Softwarehouse (aside from now being linked to the Internet), HeadCount gathers numbers from about 25 clients across Canada. Many, such as Urban Barn and London Drugs, are chains. The information is graphed and returned to the client with a report detailing trends and anomalies in traffic and conversion. For some clients, those attractive “areas of opportunity” jump out.
Looking at HeadCount’s reports, Ted Hutchinson, the director of sales and operations for Staples stores in western Canada, wondered why sales at an Edmonton outlet were significantly higher compared to the same time the previous year. Traffic, he noted, really hadn’t changed, nor was it very different than at other locations. After a closer look, Hutchinson discovered that one individual manager was increasing conversion rates as much as 5%. The next step, he says, was obvious: instill those same sales-generating skills in managers across the chain’s 238 stores.
Chains are a key part of HeadCount’s future plans. They dominate the landscape at South Edmonton Common, which Ryski calls the “crème de la crème” of the 220,000 retail establishments in Canada. “Those are the people we’re talking to,” he says. “You work with a chain that has 400 stores. You’re doing a 12-store pilot and they say, ‘Let’s go for it.’ When somebody signs on, it makes a big difference. Oh… I didn’t tell you about the U.S. That’s where we go next.”
HeadCount’s annual revenue last year was $330,000, but Ryski is convinced it will jump to about $800,000 this year, assuming the company is ready for competition. For now, other than a similar operation in the United Kingdom called SPSL, that competition is limited to companies selling counting technology and interpretive software packages, not analysis services. That the situation could change is something Ryski almost seems to welcome. It would, after all, force HeadCount to develop, adapt and grow.
As his mentor and former employer, Bruce Johnson would say, bricks-and-mortar-retail isn’t going anywhere, e-commerce be damned. The sprawling, frenetic South Edmonton Common appears to prove he’s right. Consumers might find Ryski’s retail Shangri-La a nearly overwhelming chaos of comings and goings. But in an office across the street, more of that chaos is being resolved into clarity all the time.
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