well to answer your question- no, observation is not the only tool to measure consumer behavior, there are lot more methods.
to explain a few- due to technology innovation growing day by day we are able to track a consumer's behavior in a 360 degree view. which means we will be able to track the consumer's spends, visits, interests, family, hobbies...etc. you have to name it and you can have it. all thank to business intelligence software.
there are other methods like having an interactive mail system with consumers, online surveys.
research on the data available-which is nothing but secondaryv research.
rather than spending time on just observation, you can talk to the consumer to understand his/her viewpoint, which gives a better insight than observation.
we have interview procedures to talk and ask questions to consumers.
we have opinion seekers to judge consumer feedback anf behaviour.
there are lot more.. but the baove are the most i can think of now.
hope this was helpful.

Well to analyse a customer the first and foremost is to find your customer,that is the target group.Most of the companies dont do the basic analysis of finding the target group.A customer classify needs and demands according to his/her perception. There may be rational and irrational buying as well. So

First objective find the target group.

Find the factors which affect the target group and lead to final purchase.

Read the mind of customer by using different ways and methodologies of study.

Finally make a strategy which primary effects these buying factors.

And your sales is done..:)