View From Within: Russian Malls Opt for Buyer Counting Systems

The Mall 2006 exhibition featured stands of well-known Moscow companies and operators from other parts of the country. Taking part in the show were developers, investors and property management companies. This year, the showroom comprised a variety of stands representing companies who offer high-end technologies for shopping centers and stores. Such as, for example, automatic people counting systems. On the face of it, those devices are mere sensors, similar to fire safety or burglar alarm systems.

New Market

The market of automatic people counting systems – devices widely used both in retail and any other fields where data on visitor flow is necessary – is only being formed in Moscow. Some two years ago delegates attending retail real estate conferences either totally ignored presentations by producers and suppliers of such equipment or listened to them mistrustfully.

Nowadays, almost all new shopping centers in Moscow and in the province are equipped with all sorts of sensors, generating automated reports on the number of buyers entering, leaving or staying on the premises at the moment. But many operators, in particular managers or owners of retail centers still do not know or do not understand the entire set of tasks such systems are able to tackle, notes Alexei Knyazev, head of marketing at Watcom, the company involved in the development of people counting systems. However, many have come to realize that those devises are necessary, at least at the entrances to the building.

As regards the growing tenant market and competition between the chains, lately they have been more fastidious in choosing properties for their outlets. Increasingly often they opt for malls and shops, which survey visitor flows, experts at the company Detex Line, developer of people counting sensors, say.

The very first visitor counting sensors were installed in Moscow in 2002 by Ecco, the shoe shop chain, Alexei Knyazev says. In those days, his company received few orders from retailers but in Ecco’s case the initiative belonged to the chain itself. Also in 2002 sensors were installed at Rublyovsky shopping center, making it the first shop in the capital equipped with the system. Almost simultaneously, a counting system was installed at Mega Mall.

Companies that develop or supply counting systems in Russia today did not specialize in those technologies from the very beginning. As a rule most of them began with development and installation of burglar and fire alarm systems. Watcom for example supplies those systems to shops and parking areas. Detex Line, too, became famous as the developer of burglar alarm systems.

Today in Russia there are four leading companies active on that market. Those are Russian companies Watcom and Detex Line, the Dutch firm Telsec and Sweden’s Actron. Also, there are many smaller suppliers and developers. Systems produced by Europe’s leading company Irysys are imported from Great Britain by Watcom. Still, that niche of the Russian market may be considered vacant by 50 percent.

What Counting Systems Are For

The primary concern of owners of professional shopping malls today is how to boost effectiveness of their ‘money-making machines’, as shopping centers are often referred to in professional circles, and to make their projects more appealing to investors, so that later the project could be sold at a profit. Effectiveness of mall management is becoming an increasingly pressing issue, raised practically at every property industry show.

Many operators still need time to get used to intellectual systems as such. But the market is growing faster than they are getting used to them. Experts believe that if mall owners are to attain their ambitious goals they should launch a thorough analysis of operations in their shopping centers and supermarkets.

Natalia Korotayeva, commercial director at RosEuroDevelopment, believes that the retail market in Russia is still based largely on its participants’ intuition. Few are aware of the significance of intellectual systems as being the most efficient component in the process of managing the project. RosEuroDevelopment delegated its team on a raid across Europe to examine the situation in Western malls. Now the company is set to introduce new technologies throughout the Russian regions, as part of its regional expansion plan.

Any expert report on the issue provides a description of how on the basis of data generated by people counting systems it is possible to judge on the operations of the mall on the whole. Sensors register all people who enter and leave the building (where bi-directional sensors are installed at the entrances). On the basis of those reports an analyst may judge on visitor flow in different days, months or seasons. The degree of precision and depth of analysis depends on the quantity, quality and location of sensors, which may be installed at all entrances and exits along the mall’s perimeter. It is also possible to install sensors on all floors and at the entrance to each shop. “The more sensors there are, the fewer questions shop owners and managers have to ask,” notes Alexei Knyazev.

Upon obtaining a statistical report generated by the counting sensors, the manager can make first conclusions on the reasons of low or high attendance. The analysis of customers’ behavior helps detect the core buyer. The manager can go further and develop various loyalty programs for buyers. Nowadays, many retail companies in Russia pursue loyalty programs as a means of encouraging shoppers to return, says Tatiana Aster, market analysts and head of Real Estate Marketing. One of the examples is the Malina project.

Installing a sensor at the entrance is possible at any moment. Where the owner plans to examine operations in each part of the complex combination of systems within the building is required and additional communication lines must be put in. Those features should better be foreseen in advance, at early stages of the project, all developers polled by Vedomosti agree.

Sergei Budylin, general direct at DS Development, which is part of Don-Stroi Group, says that company includes people counting systems in the projects of its shopping and leisure complexes at design stages. Those technologies help forecast attendance and determine factors that influence customer flow, plan publicity and marketing strategies and even evaluate effectiveness of such campaigns. Importantly, sensors help detect the so-called dead zones within malls.

Svetlana Grishkina, brand manager at the Metromarket retail chain of Capital Group, says that there are not so many methods for evaluation. “I would divide them into qualitative and quantitative methods. Qualitative methods concern location, correct construction, size, parking facilities, concept, composition of tenants, etc. Quantitative methods deal with the size of rent, tenant turnover and customer counting. Most of those factors help evaluate the project from the standpoint of a broker. In terms of appeal to shoppers, the project’s success may be assessed only with the help of people counting systems.”

Data analysis assists in strategic and tactic marketing planning (analysis of retail operations, determining the best timing for advertising campaigns, assessment of effectiveness of marketing campaigns), holds Grishkina. It is also possible to optimize the work of staff on the basis of data as to when buyer activity is on its peak. Customer flows may be adjusted, distributed more evenly across the mall. Rental payments may be differentiated depending on popularity of tenants with shoppers, also on the basis of reports generated by people counting systems. Another advantage is that people counting systems are a perfect instrument that helps prove to would-be tenants and shareholders how attractive and popular the brand is.

Natalia Korotayeva believes that such systems are helpful both to managers and tenants. For example, when a manager is able to see that while customer flow is the same at several shops but some of them have higher sales than the others he can figure out where the problem lies. On the other hand if a tenant was promised a bustling spot but it turned out that shopper turnout there is lower than expected, the tenant may file a complaint using the data generated by counting sensors.

Alexei Knyazev cites an example. A certain shopping mall held an advertising campaign. If the mall had not equipped with counting systems the increase in buyer attendance would have remained almost unnoticed, judging by sales checks. Let’s assume the sales were low. But sensors would show for example, that the attendance was high on that date, though some of them did not make any purchases. Then the manager will have to examine why the shoppers abstained from purchases. There could be plenty of reasons, such as dead zones, low effectiveness of certain shops, poor performance of shop assistants, etc. Analysts have made an interesting conclusion. Sometimes, a problem in the operation of shopping centers can only be detected with the help of automatic people counting systems.

Experts at Detex Line have reported that on the basis of analysis of people counting reports retail managers are able to plan operations differently on the days of higher and lower shopper activity, forecast attendance rates and avoid unnecessary expenses in the form of salaries to the staff or overtime payments. This is especially important for supermarkets where as a result of erroneous distribution of working hours between cashiers people have to stand in lines.

Artificial Observer

Detex Line, according to the company’s reports, has installed counting equipment in 3,000 stores in 237 cities throughout Russia. Watcom has equipped 70 retail chains in Moscow and 35 in other Russian cities, as well as 54 shopping centers in the capital and another 32 in the province.

Detex Line is the manufacturer of Detex Line Count systems. Depending on the size of the retail project there are systems that use no software or network systems installed in remote retail outlets, wherefrom data is forwarded automatically via the Internet (TCP/IP protocol). Detex Line offers three standard packages Easy Pack, Standard Pack and Network Pack. Easy Pack is the cheapest. That system provides bi-directional counting of visitors and is installed at one entrance to the complex. The second system services two entrances and is designed to be used in combination with a PC, equipped with Detex Line Count, Standard version. The third system is designed for companies running a chain of outlets at different locations. That system forwards data to the head office through TCP/IP (WAN/LAN) protocol.

Watcom Techlogies offers complex automated people counting systems. Today, the company sells four main packages – CountMax Standard for small retail outlets, such as boutiques, CountMax Pro for larger stores, small department stores and retail complexes, CountMax Mall for large malls and CountMax Net for retail chains. One of the latest projects of Watcom is aimed at developing the so-called consumer activity index, which helps assess the structure of customer flows, dynamics of attendance and correlate them with macroeconomic parameters. Watcom will develop the index in cooperation with the Moscow city hall’s consumer market department.

Tatiana Aster says that the authorities in Moscow and in Russia have no such instrument as a single index. The market is growing but it is difficult to evaluate its structure, as data acquisition standards are obsolete. In European cities such data is available to every mayor, she says.

Demand and Its Structure

The shopping and leisure complex Shchuka, to be launched by the end of the year near the Shchukinskaya metro station, will feature infrared sensors for registering visitors entering the mall, Sergei Budylin has reported.

RosEuroDevelopment, currently building a 90,000-square-meter Planeta shopping center in Krasnoyarsk, plans to go even further, says Natalia Korotayeva. Given the size of the future mall, sensors alone will not be enough. The developer plans to install various counting systems across the complex – in common areas, shops and in the parking area, she says. The project will require tens of thousands of dollars but the company is convinced that in the future those systems will help cut costs arising in the course of retail operations.

“There are many counting systems but the price is not the only factor that matters,” says Alexei Knyazev. “The quality is what matters most. Different shops need different systems. The main parameters that determine the choice of a system are the width of entrance, ceiling height, type of doors and other engineering characteristics of the building.”

Modern people counting systems use infrared, laser or thermal sensors. Sensors maybe either horizontal, installed on the right and on the left of the entrance, or vertical, installed on the ceiling. Vertical systems use all three types of sensors. Horizontal systems use only infrared sensors.

Counting systems at modern shopping centers and retail outlets must be bi-directional. Unidirectional counters, which were common in previous years, have a serious disadvantage as infrared sensors often register all sorts of objects, not only visitors. The margin of error is large and at the end of the day managers have to divide the number of visitors registered by such sensors by two. That is why lately Moscow shopping centers have been switching to bi-directional counters. At smaller shops unidirectional sensors are often enough.

Horizontal systems are less effective as their margin of error is greater in the peak hours. Vertical sensors provide work with higher precision. They are usually installed at the height of 2 to 3 meters. Thermal detectors perceive a person as a thermal spot. But thermal systems in Russia have seasonal problems. Experts advise against installing them at entrances to the building.

Developers believe that it is more reasonable to include all intellectual systems in the project at design stages and install them in different parts throughout the complex, especially if the project is a large mall, holds Knyazev. The examples are RosEuroDevelopment’s project in Krasnoyarsk, Druzhba in Moscow and Gorbushkin Dvor. Thermal cameras are very popular abroad, besides they may be installed higher than infrared sensors. The price of the infrared bi-directional horizontal system is 420 c.c.u. Vertical systems are sold at 650 to 5,000 c.c.u., depending on entrance width. Thermal cameras are available at 1,400 to 18,000 c.c.u. per 1 thermal sensor. Laser systems are rare in Moscow, being most expensive – 5,000 c.c.u. and over. Laser equipment is the most bulky (up to 30x40 cm), covering a wider space and may be installed at the height of 15 to 20 meters. Laser systems are suitable for large retail centers. One of such devices is installed at the entrance to the celebrated Gorbushka shopping center.

As a rule, companies who install the equipment provide after-sale maintenance services, which cost approximately 20 percent of the cost of equipment per year. The price of installation amounts to 20 to 30 percent of the price of equipment. Experts believe that shopping centers must have sensors installed at every entrance.

Most orders for installation of traffic counting systems are made by retail stores, mostly, furniture stores, according to manufacturers. Computer shops and book stores, too, generate a high demand. Luxury stores, where goods are expensive and attendance is low, rarely order counting systems. In terms of retail format, retail chains account for the larges number of orders. Many of them run large marketing analysis departments. Orders from shopping centers are still rare.

Some apply for counting systems pursuing some specific goals. For example, Real sought to control operation of the ventilation systems depending on the number of people on the premises. The Krasny Kub chain hopes with the help of counting systems to stimulate staff to improve their performance.