Key performance indicators in retail
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The document discusses key performance indicators (KPIs) that are important for measuring the health and performance of a retail store. It describes several important KPIs including incremental sales, store traffic, shopper value, average shopper dwell time, conversion rate, sales per square foot, shopper to staff ratio, customer satisfaction, customer retention, profit margin. Regular analysis of these KPIs can help retailers optimize operations, staffing, promotions, and determine steps needed to improve performance and grow sales.
Key performance indicators in retail
- 1. MMS (17-19) Welingkar Institute Of Management
- 2. INTRODUCTION KPIs are the most important metrics in your business. They help you answer difficult questions so you can measure the health of your retail store and determine the steps you need to take.
- 3. Incremental Sales The Incremental Sales KPI measures the amount of sales you've gained as a direct result of marketing and promotional activities. Every retailer uses promotions to generate interest and increase sales revenue, whether that's through social channels, direct mail or advertisements. By measuring the success and reach of each campaign, you can determine which campaigns need tweaking and which ones you should invest more time and money on.
- 4. Store Traffic One of the simplest KPIs to measure is also one of the most important: the number of potential customers coming through the doors of your retail store. Without store traffic, people physically walking into your store, your retail business can’t survive. Looking at store traffic figures year-over-year, comparing one month to the same month the previous year, can give you a quick indication of whether your business is growing.
- 5. Shopper Value Shopper value= (total sales/ total shopper traffic) Do you remember a movie or a cartoon where a character would look around and see a dollar sign instead of people? Well, this is the way you can do it in real life. Find out how much a visitor is worth when they enter your store. Pair this number with conversion rate (CVR) and forecast how much your business can grow if you increase the CVR 0.5%, 1% or 10%.
- 6. Average Shopper dwell time Average shopper dwell time= (total minutes in store for all shoppers/ total shopper traffic) Using location analytics store managers can analyze how long shoppers tend to stay in the store on average. A high dwell time and low conversion rate may indicate that staff is unable to close the sale either or popular items are out of stock. Pairing dwell time with other metrics can yield interesting analysis that helps retailers make informed business decisions that will grow revenue.
- 7. Conversion rate Conversion rate (percentage)= (total transactions/total shopper traffic) *100 This data is simple to collect with a door counter and the sales information from your Point-of-Sale (POS) system. Analyzing conversion rate trends can be used to optimize staffing and test promotional offers. You can even see how well your sales associates perform across multiple locations.
- 8. Sales per square foot Sales per Square Foot = Total Net Sales ÷ Total Floor Area This KPI is important when redesigning or modernizing retail outlets
- 9. Shopper to staff ratio Shoppers to staff ratio= (total shoppers in time period/ number of staff members on sales floor in time period) Staff optimization metrics can help your store managers create schedules using hard data. No more guessing. No more estimating. Pair this data with conversion rate and you’ll be able to see right away when the store is understaffed and your sales associates cannot handle the volume of shoppers.
- 10. Customer Satisfaction Customer Satisfaction metrics measure the quality of your customer service and provide a reflection of the public's perception of your business. It's important to remember that, on average, happy customers will share their experience with 2-3 people, while unhappy customers will share their experience with 8-10 people.Collecting this data can be done by distributing forms at the point of purchase or by using your call center to conduct a formal survey
- 11. Customer Retention The Customer Retention KPI measures the ability of your organization to retain customers over the long term and to generate recurring revenue from existing customers. It's hard to overstate the value of customer retention for any organization, as research shows that a modest 5% increase in customer retention can increase profits anywhere from 25% to 95% In addition to that fact, generating revenue from loyal customers is considerably less expensive than acquiring new customers.
- 12. Profit Margin Profit Margin = Gross Profit / Total Revenue x 100 Profit margin is your main measure of profitability. Profit margin can indicate how much money is actually going into your pocket. You could be making additional sales, but if it’s costing you more than what you’re earning from those sales, then you’re not really making money. Your profit margin can help you see if you need to lower costs or increase efficiency in your business. To widen your margins, for example, you can find ways to cut the costs to make your products. Or, you can perhaps tweak your prices.
- 13. Conclusion Using the right data for your retail store will help you generate more revenue and grow the business. Analyzing the right mix of sales and shopper-based retail store metrics will help develop a systematic approach to key decisions, improve forecasting, and help you design a plan for growth and expansion.
Editor's Notes
- #9: Improve your store layout by de cluttering the store Cuz stores that appears messy can drive away customers 2) Invest in your staff 3) Encourage people to come in and stick around 4). Optimize prices or promotions 1)will be the ultimate indicator of whether that redesign was successful or not. 2)How much sales revenue you r able to generate over per square foot of space in retail storesLl
- #11: You don't have to ballpark anymore We humans tend to make abstract notions about whatever we see, hear, experience. That creates fluctuations about something whether it's good or bad
- #12: Attrition mean customers u didn't hold or lost for one or another reason
- #13: To widen profit margin 1) discount you can give 2) or taking discount frm supplies 3) Prevention of thefts etc
- #14: 1) there might be imperceptible changes that dormant right now that one can't see right now but with kip's one can figure that out