 Retail KPIs

Retail KPIs are essential in monitoring and evaluating the retail division’s effectiveness in achieving its objectives. The KPIs include sales per square foot, inventory turnover rate, gross margin return on investment, and customer conversion rate. These KPIs are crucial in identifying areas that need improvement and ensuring that the retail department’s performance aligns with the company’s overall goals. The retail KPIs help the retail manager, team, and senior management to make informed decisions, implement changes where necessary, and create an environment of continuous improvement.

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Retail – Sales Metrics

Sales are the quintessence of all retail businesses. The business cannot exist without selling its products and services. Therefore, this is a metric that must be measured and improved.

• Increase sales figures per square foot – Product display in a land-based store plays a significant role in influencing a customer’s purchasing decisions. Tracking the number of sales per square foot shows whether your product presentation is positively influencing customer purchasing decisions.
• Improve sales numbers per employee – The sales per employee metric will help you measure performance, investment, and revenue generated per employee. This measurement will assist with decision making with respect to compensation, promotions, hiring, and training needs.

• Improve conversion rate metrics – The customer conversion rate measures the number of visitors that pass through the door of a store, or visits to an eCommerce retailer’s site versus the number of sales transactions. Site visitors, both traditional and online, cost money. Therefore, this is an important metric to monitor.

Retail – Customer Metrics

Customer metrics are statistics that are used to measure the value between your business and your customers, and vice versa. They include metrics, such as customer satisfaction, retention, and loyalty, that are known to correspond with revenue growth and ROI.

• Improve foot traffic – The foot traffic measurement measures how many people walk into your store. This helps determine whether your store’s location, products, and ad campaigns are successful.
• Increase customer retention numbers – Returning customers are the foundation of any retailer, whether brick-and-mortar or online. The greatest cost to the business is converting visitors into returning customers. It is vital to track customer retention metrics; otherwise, you won’t know whether your customer retention strategies are working.

• Improve customer satisfaction metrics – This metric correlates with retention since the level of service and/or quality of goods sold will have a direct effect on retention and foot traffic.

Retail – Inventory Metrics

Retail inventory metrics are designed to track inventory control data. These metrics’ main purpose is to manage stock levels, identify and forecast trends, and gain insights into what stock sells and how quickly it sells. These outcomes will help you make improved inventory control decisions.

• Improve inventory turnover metrics – This KPI measures the number of times inventory has been sold and replaced within a given timeframe. Low turnover indicates that stock levels are too high or sales figures are too low.
• Increase Gross Margin Return on Investment – The GMROI metric determines the stock or inventory sales profitability figures after deducting the cost of the inventory from the total sales derived over a fixed period of time. This number helps determine whether your business is profitable or not.

• Reduce shrinkage percentages – Inventory shrinkage occurs where the actual stock levels are less than the recorded levels. Some of the reasons for shrinkage include lost or stolen, or damaged goods, and inaccurate record keeping. Shrinkage costs money; therefore, it is essential to reduce these numbers as much as possible.
• Increase Sell-Through Rate – The sell-through rate metric is the stock sold versus the total inventory at the beginning of the time period like a month. The higher the sell-through rate, the greater the sales of a particular product.

Retail – Growth Metrics

The retail growth rate is the percentage with which a company’s sales figures have grown over a specific time frame like a month, year, 3 months, or 6 months. This number is used to measure the company’s overall performance.

• Improve both online and brick-and-mortar sales figures – Most companies have both an online and brick-and-mortar presence. Therefore, it is vital to increase the sales figures for both the online and traditional stores.
• Increase online to real life traffic conversion metrics – The conversion of online visitors into repeat customers is one of the most challenging marketing aspects for any company. Ergo, this metric measures the number of visitors to your company website versus the number of people that convert into customers.

• Improve year over year growth numbers – Year-on-year growth metrics compare the statistics for the same periods over two or more years. The growth numbers for the first period last year to the first period this year are compared to determine whether the company’s sales figures have improved for the same period in different years.

Retail – Transaction Metrics

Transaction metrics are some of the most important metrics that a commercial company can measure. They answer the question of how many products did the company sell versus the number of returns, how much revenue did the company generate, and what the profit margins were during a specific time frame.

• Increase Gross and Net Profit margins – Gross profit is the sales minus the cost of sales that your business brings in over a specified time. Net profit is the profit after deducting all of the company’s other expenses. These calculations provide insight into your company’s expenses and earnings.
• Increase average transaction value – This metric tells you how much consumers spend on average. A high value shows that customers are buying more products or higher-value products, and vice versa. This number provides insight into how your customers are interacting with your business.

Retail Management Role Objectives

Retail managers play a vital role in the day-to-day management of the company’s operations. Their primary aim is to ensure that the retail sales transaction process flows smoothly from start to finish.

• Increase gross margin levels – Gross Profit is the total sales value minus the cost of sales. This metric is vital to measure as the higher the gross profit numbers, the greater the company’s chance of increasing its bottom line.
• Improve retail sell-through rate – The retail sell-through rate is the difference between the total inventory held by the company at the beginning of a period like a month versus the number of products sold during the same period. The greater the sell-through rate metric, the higher the sales, and the greater the profitability ratios.

• Improve retail conversion rate – The retail conversion rate is the number of customers who buy products versus the number of visitors to the company’s website or their brick and mortar stores. Therefore, the greater the retail conversion rate, the higher the sales numbers will be.
• Increase average customer purchase value – The average customer purchase value is also known as the customer lifetime value. It calculates the total value of the products purchased by a customer throughout the customer’s purchasing lifetime. In other words, this metric includes the value of every sale that the customer has made over time.

A retailer’s core business function is to sell merchandise in limited numbers to consumers. A retailer sells products to customers in individual units or in small quantities as per the consumer’s requirements. Consequently, the retail KPI list includes the measurement of sales and growth metrics, customer transaction metrics, inventory management metrics, and retail management objectives. Finally, KPI retail methodology is the best tool available to measure retail functional success.

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