Looking for ways to increase store performance? Are you wondering what you can do to squeeze more dollars out of your retail store? We’ve compiled a list of 10 metrics (KPIs) for retail stores that you should start using today to find new opportunities for growth.
The metrics are separated into two types: sales-based metrics and shopper-based metrics.
Here are four sales-based metrics that we think you should be using right now:
#1. Year over year percentage change in sales.
= ((sales for time period this year/sales for time period last year)-1) *100
This one may be a bit too obvious, but you should track how much your sales grow year over year. A common misconception is to use this metric as the single source for performance measurement.
Although a good indicator, it does not adjust for economic fluctuations, shopper behavior changes, or other external factors.
We list this metric first, but it should be the last indicator you look at once all other KPIs have been analyzed.
#2. Average sales per transaction (AST)
= (total sales / total transactions)
AST is a great metric to measure effectiveness of your advertising and promotion campaigns. It can also help identify shopper’s spending behavior.
Examining this type of data is essential to benchmarking locations against each other.
#3. Units per transaction (UPT)
= (total units sold / total transactions)
Obviously you want to measure how much inventory to have on site at any given time. Pair this KPI with seasonal adjustments and you can help reduce inventory costs significantly. Store managers and merchandising specialists especially benefit from this metric. Additional training for store associates to sell add-on merchandise can also help increase UPT.
#4. Gross Margin (GM)
= ((total sales – total cost of goods sold)/total sales) * 100
Retailers know this metric well, but we though it should be listed anyway. Operating at a healthy margin indicates that your store managers are optimizing their performance squeezing more out of every dollar and making more money for you to grow the business.
A key element that many retailers fail to analyze is their shoppers. Learning about your shoppers’ patterns and identifying peak times at your store can help uncover opportunities that are hidden in plain sight.
In fact, only 36% of retailers in the US were using shopper analytics in 2014. This means that over 60% of retailers are guessing when it comes to their brick-and-mortar store.
Here are the 6 shopper traffic based metrics that you can use to get ahead:
#5. Year over year percent change in shopper traffic by time period
= ((traffic for time period this year/traffic for time period last year)-1) *100
Just like sales data, this is a high level metric. However, change in shopper traffic percentage YoY can steer analysis in a direction you never thought to look. Did the local economy change and drive shoppers to frequent your store? Did your local SEO agency deliver the results you had hoped for? Shopper traffic analysis even at a high level can yield surprising results that can help with budget allocation for next year or other important business decisions.
#6. Shopper value
= (total sales/ total shopper traffic)
This is one of our favorite metrics. 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%.
#7. Average number of shoppers per transaction (estimated size of shopping group)
= (total shopper traffic/ total transactions)
Let’s face it. People often don’t shop alone. Parents take their children to go shopping, friends go shopping together, couple shop together. Estimate the group size of each transaction with this metric. This information could be used to change your in-store promotions or even adjust merchandising strategy.
This is also a similar number to conversion rate, in a way that it shows, on average, how many shoppers must pass through your door to convert into paying customers.
#8. 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. In fact, many counting solutions feature POS system integration to display this metric live in your analytics platform. 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.
#9. 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. Average shopper dwell time
= (total minutes in store for all shoppers/ total shopper traffic)
Your digital analytics measure how much time a site visitor has spent on the website. 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.
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.