By Pete Rizzo (@pete_rizzo_)
When lines become too long, conventional wisdom dictates that retail stores alleviate any negative business impact by opening additional checkouts or stationing additional employees at these locations. This seems like a well-reasoned approach. There are too many people waiting, so you allocate an additional employee or purchase a terminal to reduce the line. How simple could it get?
The flaw in this line of thinking, according to a 2012 research paper from Columbia Business School, is that such reasoning doesn’t take into account the influence of consumer perception on purchasing. For example, the researchers found through extensive testing that pooling multiple queues into one, longer line can lead to a substantial reduction in sales.
“The estimates suggest that, for queue lengths above the mean [about 5 customers in line] the effect is significantly negative,” the report authors wrote.
Further, the paper estimated that increasing queue length from 10 to 15 customers would reduce purchase incidence from 30 percent to 27 percent – leading to a 10 percent drop in sales. Even moderate increases in the number of customers in queue were found to generate a sales reduction equivalent to a 5 percent price increase.
Together, Columbia’s Yina Lu and Marcelo Olivares, Duke’s Andres Musalem and SCOPIX’s Ariel Schilkrut, say their methodology can be used to attach a dollar value to the cost of wait times experienced by customers. The result is new data that informs queue design, line-busting techniques and the value consumers attach to their time.
For more insights and analysis, we break down “Measuring the Effect of Queues on Customer Purchases” in this PYMNTS.com Data Point.
Gathering The Data
To assess the impact of waiting in a retail store on customer purchasing habits, the researchers conducted a pilot study at the deli section of a leading supermarket in a major Latin American city. Products sold by the deli were then divided into eight categories.
The study used digital snapshots analyzed by image recognition technology to track the number of customers waiting at the deli as well as the number of employees allocated to the area. Photos were taken every 30 minutes from 9 a.m. to 9 p.m. for a period of seven months. Point-of-sale (POS) data for all transactions was also assessed.
The Effects Of Customer Line Perception
On the surface, what the researchers revealed wasn’t entirely surprising: customers don’t care much about queue length when lines are short, but may be discouraged from making a purchase when lines are long.
However, the paper did suggest that shortening the line length from 12 to six customers could increased purchase profitability by 5 percent. Increasing staffing from one to two employees at a single queue, on the other hand, only increased purchase probability by 0.9 percent.
“Since both scenarios halve the waiting time, this provides further evidence that customers focus more on the queue length than the objective expected waiting time when making purchase decisions,” the study concluded.
Customers that were turned away from the deli by long lines were unlikely to convert on other purchases: Only 7 percent of lost deli sales were replaced by non-deli purchases.
Are Repeat Customers More Tolerant Of Lines?
To answer this question, the study divided participants into new and existing customers. Customers were considered to be new within the first two months of their original visit. Frequent customers were defined as those who made 30 or more visits in a study period.
Notably, the study found no significant difference between the behavior of the two groups when it came to line length and purchasing.
For the authors’ take on how these findings can be applied to queue design, retail staffing decisions and category pricing, download a full copy of “Measuring the Effect of Queues on Customer Purchases” here.