A sales drop isn’t generally the kind of thing a business sees coming; if it could see such a thing coming, it’d be working to prevent it.
But a new report suggests that, with a little attention to Foursquare, it might be possible for some businesses to predict a sales slump coming.
Chipotle managed to spot its sales slump after the fact, but Foursquare saw it coming 10 days in advance. A study of foot traffic patterns, drawing on 1,900 Chipotle locations throughout the United States, compared the same times a year apart.
The study’s goal was to see if Foursquare actually could predict sales spikes and dips at Chipotle, and what was found was a bit of a shock.
After checking the foot traffic, and noting that period in October 2015 where the restaurants were hit with issues of novovirus and E.Coli outbreaks should be marked by a 30 percent drop in sales against October 2014’s numbers.
The sales were expected to spring back after February, when the Centers for Disease Control and Prevention (CDC) gave Chipotle locations a solid report.
Foursquare, reports noted, called it almost exactly. A 30 percent drop in sales, and Chipotle’s first-ever quarterly loss.
This isn’t the first time Foursquare called a sales slump, either; Foursquare predicted sales on the iPhone 6s and 6s Plus of between 13 and 15 million, a measure that proved accurate in the end.
While the notion of Foursquare as business predictor is a bit shaky, and depends mainly on foot traffic as measured by Foursquare, these two successes give it some clear credibility in the field. It’s not going to work near so well for online-only ventures, but those with physical locations may do well here.
It’s based at least somewhat on the oldest of sales adages: “sales is a numbers game.” The more people come in, the more sales there are likely to be.
For restaurants this is particularly true; why go into a restaurant if not planning to buy? Few go to a restaurant to window shop.
The relationship between foot traffic and sales is at least somewhat valid for retail operations, and with Foursquare’s ability to measure that foot traffic, it could be that Foursquare is set to be the ultimate in retail forecasting agents.