The performance of your retail store can be improved, but it’s like attempting to hit an archery target in the wind. Despite your best efforts, several factors, some of which are always shifting, can affect your odds of accomplishing your goal.
You must continually tweak your approach while maintaining a laser-like focus on the goal if you want to maximize your chances of success.
You need a precise image of the current situation before you can increase the sales or clientele of your retail store or reach another growth goal. Key performance indicators, or KPIs, come into play in this situation. Each of these crucial measures offers a precise evaluation of a certain aspect of your store’s success.
This post provides some retail KPIs for better business decisions:
- Sales per square foot
- Sales per employee
- Conversion rate
- Foot traffic
- Customer retention
- Customer satisfaction
- Inventory turnover
- Gross margin return on investment
- Sell-through
- Online and “Bricks and Mortar” Sales
- Online to Real Life Traffic and Conversion
- Year over Year Growth
- Gross and net profit
- Average transaction value
- Shrinkage
15 key metrics and retail KPIs for businesses
1. Sales per square foot
The display of their products is a top priority for retail business owners with physical sales areas. It is a good idea to keep track of sales per square foot because this may have an impact on the customer’s choice to make a purchase.
By dividing your net sales by the sales space, you may determine this. This can help you understand how much it costs to maintain your shop location and how much money it makes.
2. Sales per employee
You may monitor employee performance, company investment, and revenue production by tracking sales per employee. You can use the information from this measure to guide your decisions about hiring, promotions, pay, and training.
Net revenue is divided by the number of employees.
3. Conversion rate
Every customer who visits your website or comes through your door costs you money and has the potential to increase your revenue. It’s critical to monitor how many visits result in sales.
By dividing the total sales by the number of visits, you may calculate this. You can see how effective your sales process is by doing this.
4. Foot traffic
This counts the number of customers who enter your store. You can use foot traffic to judge the effectiveness of specific locations, marketing initiatives, or items. For instance, it could not be the optimal location for your business if you create a branch in a different area and it doesn’t generate as much traffic as other sites.
A lot of information about consumer behavior and responses may be gleaned from foot traffic. The many approaches to measuring foot traffic are thoroughly explained in this article.
5. Customer retention
The majority of business owners are aware that a retail store’s success depends on repeat business. The most expensive clients to obtain may not always make further purchases.
Because of this, it is crucial to monitor customer retention. It will inform you of your company’s ability to retain consumers and guide you in making the best choices to increase retention.
Formula: Divide the total number of customers at the end of a period by the total number of customers at the beginning. Then multiply by 100. In that time frame, don’t include new consumers.
6. Customer satisfaction
This indicator relates to retention since customer satisfaction and foot traffic are directly impacted by the quality of the goods and/or services supplied. NPS scores and/or frequent questionnaires sent to consumers after transactions can be used to gauge this.
To have a solid understanding of customer behavior, you may also look at your website statistics. On the platform, you may monitor things like bounce rates, dwell times, and other comparable variables.
NPS example: How likely are you to refer our business, item, or service to a friend or associate on a scale of 0 to 10?
7. Inventory turnover
The cost of goods sold/average inventory formula can be used to calculate inventory turnover.
This will help you understand how much stock is consumed over a specific period. If this number is too low, you run the risk of overstocking or dead stock since you aren’t selling enough of the inventory. If this number is excessively high, you might be running out of inventory and so selling out.
8. Gross margin return on investment
The real value of your inventory is provided by GMROI. It provides information on how much revenue your inventory has earned over a specific period, which can be used to assess whether your company is turning a profit.
It is simple to determine which products are lucrative and which are not because this statistic precisely evaluates various products and categories.
9. Sell-through
The sell-through percentage is calculated by multiplying the number of units sold by the initial inventory and dividing the result by 100.
This shows you how much of your inventory is being sold concerning how much was bought. Additionally, it will make it clear to you which goods are working effectively and which ones may benefit from more thought.
10. Online and “Bricks and Mortar” Sales
To stay competitive, the majority of firms have started to invest in online platforms. This is a crucial metric to monitor if you run both an internet marketing campaign and an e-commerce or brick-and-mortar store.
You can allocate resources by how well your brick-and-mortar and online platforms perform. Measuring this KPI will heavily rely on attribution.
11. Online to Real Life Traffic and Conversion
Monitoring the amount of traffic your offline stores receive from your online marketing campaigns is an excellent idea. If you’re conducting a local SEO effort, this is very important.
You can monitor calls made via click-to-call buttons, paid and organic leads, and other sources of traffic. You can effectively optimize your campaign with this assistance.
12. Year over Year Growth
Business owners desire long-term, steady growth. They want their business to grow annually in terms of both clients and revenue. A little insight can be gained by contrasting this year’s results with last year’s stats.
If you notice a declining tendency in growth, you might need to take corrective action to get the company back on track.
13. Gross and net profit
A business owner can determine their gross profit by subtracting their product development and sales expenses from their total revenue. The profit realized after deducting all necessary business costs is known as net profit.
Both of them provide insight into your costs and earnings. You can introduce business ideas and plan cost reductions using the information from these indicators.
14. Average transaction value
This indicator informs you of the typical price that customers pay for your goods. A high transaction value suggests that customers are purchasing more or more expensive items from your store. A low value suggests that customers are purchasing fewer things or products at lower prices from your store. This gives you information about the types of interactions your customers have with your company and can help you develop pricing and product strategies.
15. Shrinkage
Inventory shrinkage is a troublesome part of running a retail business. Shrinkage is, by definition, the loss of inventory that is not due to sales. Administrative faults and supplier errors (or fraud) can also be to blame, even though staff theft and shoplifting are commonly highlighted as causes. Your bottom line will ultimately be negatively affected as a result.
Shrinkage is calculated as the difference between the supposed stock value and the actual value of the inventory.
Conclusion
You could make money if you decide to use SWIL’s RetailGraph. Many reporting software programs are available on the market with a variety of offers, but RetailGraph gives you entire discretion over your options. It provides comprehensive business reports with both quantitative and qualitative firm data in one location for analysis. Additionally, it assesses a business plan for making data-driven choices in light of report analysis.
Based on your particular business needs, we then offer a distinctive business solution. You are completely entitled to a 45-day free trial of SWIL’s software. Check the website for additional details and a free RetailGraph software demo.
