6 Retail Metrics You Absolutely Need to Track for Your Store
Growing a retail business requires expanding: Expanding in terms of increasing physical store locations or getting more customers into the store. But there are several other ways of boosting profits, though these are often overlooked by most retail store owners. While you must be keeping up with figures like total sales, cost of goods sold and overhead costs, having tabs on the following retail metrics will ensure that you are in control of the other elements of your business that ultimately impact your profit margins.
We’ve classified these metrics into two parts: revenue side and cost side, on the basis of their influence on either of the two.
Revenue side retail metrics:
Tracking the number of visitors to your store is a basic metric that every retailer should absolutely track. Whether it’s the shopping season, a new store location, the new display window design, or that loyalty program that you recently launched, footfalls will provide you with the cognizance of what’s working and what needs to be improved. Once you know your footfalls, it’s important to track whether these are generating dollars for your business.
Wouldn’t it be great if you could earn more revenue without incurring additional promotional and advertising costs? Conversion optimization is a great way of achieving that. Analyzing the elements that influence a visitor’s purchase decision and taking steps to make sure that all their considerations are taken care of is crucial. Studies show that only ~30% of retail store visitors actually make a purchase, which means that at least 70% of the customers can still be influenced to buy.
Evaluate whether your store layout, product range, promotions and checkout processes are in line with what the customer is expecting. You can do this by collecting first-hand feedback and aligning changes in that direction to ensure superior user experience.
Conversion percentage is calculated as this: (Number of purchases ÷ number of footfalls) x 100.
Average basket size and Average ticket size
Average basket size refers to the number of items getting sold in a single purchase. It is the equivalent of total units sold ÷ number of invoices. Depending on the kind of business, average basket size can be a very important metric. For instance, this metric is more relevant to, for example, a pet store selling small-ticket items as opposed to a jewelry store selling distinguished merchandise.
Average ticket size is just the amount of money that each buyer spends on average per visit. This figure can be influenced by offering volume discounts, point of sale promotions, and personal recommendations by the sales person (up-selling/cross selling). Keeping a variety of products and having all the sizes available also contributes in increasing the average ticket size.
Cost Side Retail Metrics:
You might have heard of this earlier: happy employees lead to happy customers- which means a thriving business! The key is proper employment management. But employee attrition is severely counterproductive to this equation. Recruiting and training a new employee costs huge resources in terms of money and time, though retaining an existing employee is usually much cheaper.
Here are some additional downsides of losing an employee:
- Reduced Output – It may take the new employee several months to a couple of years (depending on the nature of your business) to reach the same level of productivity as the existing employee.
- Service Quality – Customer service suffers due to errors committed by new (and therefore initially less-proficient) workers.
- Loss of Personal Touch – Especially in the case of small retail stores, employees hold the key to healthy one-to-one relationships with customers. So losing an employee can possibly lead to lost customers!
- Affects the culture – Other employees who see turnover around them often lose productivity and may even reassess their plans of carrying on
There’s an opportunity cost for the stock that remains unsold on the shelves. If you have some SKUs that are somewhat high-ticket and taking up valuable display space for weeks or months, consider replacing them with products with more sales. Prior to the recession, small retailers seldom felt the need to achieve efficiency in operations. Back then, sales figures more than made up for such operational inefficiencies. The economic downturn was a wake up call for small businesses. They realizes that they could no longer focus only on their products and customers- they had to pay attention to the ‘geeky’ stuff such as data analytics as well.
Point of Sale (POS) Solutions
Apart from the cost of owning and maintaining a POS, software subscription costs can also be a significant drain on your resources. Instead of using multiple tools for the purpose of checkout, inventory management, customer data management, in-store analytics, online storefront and so on; consider going for an integrated, iPad based point of sale system (like us!). You can save yourself the hassle of managing multiple software tools and also ensure that your shop always stays ahead of the competition with free, continuous software updates by your iPad based POS.
If all the buzz about big data in retail is to be believed, tracking these metrics (preferably in a customized dashboard) will go a long way in ensuring your store’s sustained success. What retail metrics do you use to track your store? Share your thoughts in the comments below!