Business Valuation: Predicting Company Performance with Consumer Foot Traffic
June 9, 2021
Traditional business valuation methods often include comparable company analysis, DCF analysis, and precedent transactions. While these analyses along with quarterly earning reports are beneficial for investors, they might not necessarily provide the complete picture of company performance. Investors should go a step further by enriching this data with consumer foot traffic data.
Consumer foot traffic data is often overlooked as a potential resource for business activity. This type of real-world data has great potential for investors looking to predict how a company is performing.
To understand how foot traffic data can measure company performance, let’s take a look further at market and brand specific trends.
Competitive analytics is a type of comparative analysis which looks at how businesses within the same market are performing against each other. In this case, analysts can compare foot traffic of similar businesses to determine the differences between consumer preferences, find overlaps within their respective customer journeys, and understand which stores owned by each business are driving the most footfall (or even the least). This can greatly enhance overall market research by adding an understanding of where consumers go in the real world, and enhance any online consumer data.
Another way to analyze competitive intelligence is to compare a particular sector as a whole against the company of interest. At Gravy, we have overall categories that can serve as a comparison for a sector or industry as a whole. For example, if a business analyst or investor is trying to understand how a wholesaler like Costco is performing, you can compare their store foot traffic against the overall shopping category or even a specific subcategory, such as wholesale retail.
Using the competition as a benchmark ultimately provides investors with data to determine if the company that they are investing in (or potentially investing in) would make a good contribution to their portfolio. They can also use insights gathered from this data to predict how the company might perform in the future against its competition.
Brand Specific Trends
For an analysis of brand specific trends, investors would want to solely focus on a single company’s performance. Whether it’s a small business or even a large chain, a company with low foot traffic might indicate that consumers aren’t interested in the product. If consumers aren’t interested in the product, then they are more than likely going elsewhere.
Investors can also use foot traffic combined with other data sets to understand why consumers are visiting the brand’s stores. Was there a BOGO sale that drove up foot traffic during the weekend? Did the company recently advertise their new curbside pickup options? These are some factors that will need to be considered to understand the “why” behind the store foot traffic.
Another question for investors to think about: are consumers spending enough time at the store? Another metric that is tangentially related to foot traffic is dwell time. Dwell time is the measurement of how long consumers spend in a particular location of interest. If dwell time at a store is long, this could mean that consumers are spending more time with the product and are more inclined to purchase. A fast dwell time may reflect that consumers quickly found what they were looking for, but it could also show that customers couldn’t find their desired product and left the store without making a purchase. When dwell time is paired with consumer foot traffic, then a business analyst can understand how effective marketing and advertising is at driving store traffic.
Context is also important for investors analyzing foot traffic data. Contextualization can include metadata, such as event information or time stamps. If there is an event happening at a brand’s store like a meet-and-greet, then this would typically drive up foot traffic, depending on consumer interest in the specific event. Timestamps can provide investors with information on when foot traffic peaks or ebbs. Take for example, a clothing store might be more busy during the afternoon on weekends than on weekdays during that same time period.
Investment Valuation with Gravy Footfall
Investors can prove business valuation by analyzing foot traffic data. This data ultimately reflects real-world consumer behavior and provides an extra layer of insight to online consumer data. In a post-COVID world, consumer trends are going to continue to greatly impact business performance. With Gravy Footfall, investors can quickly get the visit data they need to predict fluctuations in business activity. Visit data can be accessed for thousands of locations for a scalable analysis. Consumer foot traffic is an economic indicator that investors should incorporate into their predictive analyses now and in the future.