Every retailer will have its own set of key performance indicators (KPIs) that are used to assess the company's development and success. Retailers must choose the appropriate KPIs depending on the desired outcome or strategic objectives for a certain time period. For instance, if a shop wanted to better manage its inventory, it may utilise KPIs like the stock to sales ratios or inventory integrity. Another retailer, on the other hand, may wish to improve the customer experience by focusing on KPIs such as customer happiness and retention.
Setting objectives isn't difficult; it's accomplishing them that is difficult. Choosing relevant KPIs and trying to improve them will be crucial in developing a solid retail business case. Here are five of the most significant KPIs for retail business cases, as well as some suggestions for how to improve them.
Measure sales per employee
When it comes to managing your staff's schedules and objectives, sales per employee is a useful metric. This equation may be used to simply calculate it:
net sales/number of employees
Why are retail sales per employee measured?
This statistic can assist you in making better employment decisions, notably in terms of hiring, rostering, and remuneration.
Go beyond the method above and measure the income produced by individual employees to have a deeper understanding of your revenue and staffing. The most straightforward method is to use your POS system. Find a POS system that records sales per employee and utilise that information to set sales goals and identify the top colleagues.
How can you boost sales per employee?
Getting your employees to create more sales is the greatest method to enhance this measure.
Depending on your shop, this might entail things like:- Creating sensible sales targets for each staff
- Putting money into sales training
- Encouraging your employees to work harder
- Running friendly competitions to make the sales process more gamified
- Giving employees the tools they need to produce sales (such as a robust CRM)
Use effective ways to increase average customer spend
This indicator informs you how much money your customers spend on average in your store. Use the following formula to locate it:
total income/number of transactions
Why should you calculate your average transaction value?
This measure provides a rough estimate of how much individuals spend. A huge dollar figure might indicate that customers are buying your more costly items or in larger quantities.
This KPI might provide you with some useful information and recommendations. For example, a relatively low dollar per transaction may indicate that you should reconsider your pricing strategy. It might also involve using new sales strategies like retail display stands, promotions, combos, or other offers to encourage customers to spend more.
How can you raise the average order value?
Consider cross-selling or upselling. When used correctly, both strategies may help you grow sales while also assisting customers.
Upselling or cross-selling is only successful if it is done appropriately and at the right time and location. You would not only struggle to convert the buyer, but you may also lose the initial transaction if you promote a product that is unnecessary or if you sell in a way that you come off as aggressive.
The first guideline is to always add value. Yes, convincing someone to improve their purchase or purchase an extra item will help you, but the offer must also benefit the buyer.Conversion rate
The conversion rate is the ratio of store visits to the number of customers that bought something. Use the following formula to compute it:
total number of purchases/total number of visitors
Why should you monitor your retail conversion rate?
Your conversion rate indicates how well you convert browsers into purchasers. Driving traffic to your shop is excellent, but if your visitors don't convert, your bottom line will suffer.
What can you do to increase your conversion rate?
Your staff are the key to increasing your conversion rate. Ensure you train your employees to:- Improve customer relations
- Develop into "likeable experts" who can share product knowledge and thoughts
- Persuade without being aggressive
- In-stock percentage
In-stock percentage
Because every retailer wants to keep their stores as empty as possible, in-stock % is a particularly helpful KPI. When customers are made to wait for shelves to be refilled or look for sold-out products at a different location, the bottom line and consumer experience suffer. However, most merchants don't start replenishing until inventory at a given shop starts to run low.
This method is backwards-looking and incapable of increasing in-stock percentages. While waiting for orders to arrive, predictive analytics helps merchants more correctly compute demand estimates, order amounts, and ideal safety stock levels so that their most profitable goods are in stock 98.5 percent of the time, as is the industry norm.Marketing ROI
Do you know how much money firms across the world spend on marketing, advertising, and communications each year? Over a quarter of the whole yearly budget! How can you tell whether a large sum of money is well spent? ROMI stands for Return on Marketing Investment.
Gross profit from the marketing effort/marketing expenditure
Return on marketing investment is a critical measure to discuss if you're a marketer planning a marketing plan.
It's a means of calculating how much money your firm makes for every dollar spent on marketing. It's a computation that determines whether or not your marketing campaign was successful. If it is not working, you need to dive deep and figure out the cause or employ a new strategy.
Hopefully, these KPIs will assist you in launching and tracking your retail business's progress. Look for additional information on KPIs for efficient marketing strategies and efficient sales teams if you need help increasing interest in your items or converting customers into sales. Are you prepared to start evaluating your data and establishing the correct business goals?
