retail kpi1Retail Metrics & KPIs to help you stay competitive.

In the fast paced world of retail having the right metrics and KPIs is essential for staying competitive. If you aren’t measuring it, you are likely missing key facts about your business and are losing out on important opportunities. Retail KPIs keep your business performance in perspective so that when you need to make a business decision, you have the right information to make sure your decisions improve the performance and profitability of your business.

To help get you started, we’ve put together a list of the top 10 retail KPIs and metrics our customers use to monitor their performance.

  1. Conversion Rate. This retail KPI is among the most important for any organization to monitor. If you formulate your conversion rate in a way similar to the example on the left, this KPI will not only tell you how people you’ve “converted,” but will give you an indication of the entire population you can draw on to create customers. As you dig deeper into this KPI, you will also want to know the rate at which people who are “touched” in your store make a purchase, so you can better utilize your resources.
    Audience: Executives, Managers
    Calculation: Number of Visitors / Number of Customers
  1. Sales per square foot. This retail metric measures your ability to sell a certain amount of product per square foot. There are many different iterations of this metric, and the example of the left compares sales per square foot for multiple store locations. However, this metric can be used on a website or single store location to determine how best to place items so that they sell at the best rate possible.
    Audience: Managers, Sales Associates
    Calculation: Total Net Sales / Total Floor Area
  1. Average purchase value. This retail metric tells you the average value of each purchase made by one of your customers and will vary depending on the type of products/service you are selling. This metric is commonly coupled with units per transaction (UPT) data to provide additional insight into the purchase habits of your customers. While the example on the left provides a broad example, you should segment your customers so you can better target key demographics in your marketing efforts.
    Audience: Executives, Managers, Sales Associates
    Calculation: Total Sales Revenue / Number of Customers or Transactions
  1. Cost of goods sold. This is one of the most important KPIs for any retail organization to monitor. Cost of goods sold is instrumental in determining markup percentage for products and for understanding your profit margin. Products may be flying off the shelves, but if operating, production, storage, and labour costs are eating away at your profits, your business may be in trouble. Monitoring this KPI is an absolute must for any retail organization.
    Audience: Executives, Managers
    Calculation: Beginning Inventory + Purchases – Ending Inventory
  1. Online purchases vs in-store purchases. This retail metric measures the difference between online and in-store purchases. In this day and age, even traditionally on-site retailers have an online store, so measuring this metric is important for comparing the value of different purchase sites. If your online store is generating significant revenue, then it may be worth investing marketing dollars into it to maximize your potential.
    Audience: Executives, Managers
    Calculation: Online purchases compared to in-store purchases
  1. Incremental Sales. This KPI is closely related to yourmarketing KPIs since it measures the amount of sales you’ve gained as a direct result of marketing activities. Every retailer uses promotions to generate interest and increase sales – whether that’s through social channels, direct mail, or in-store promotions, you need to measure the impact of those campaigns to determine if they are worth while.
    Audience: Media/Ad, Managers, Executives
    Calculation: (Revenue generated by marketing initiatives – Baseline sales)
  1. Customer Experience. This is a broad metric that can be used to determine what parts of your operation leave your customers satisfied and coming back for more, and what aspects could be improved. Voice of customer is increasingly being used to rate the quality of your website, too. If you don’t currently offer your customers a platform to provide feedback, you’re missing out on one of most important ways to measure your performance.
    Audience: Executives, Managers, Sales Associates
    Calculation: Rate the responses of customers for a given question
  1. Customer Retention. This retail KPI measures your ability to retain customers and demonstrates how viable your business is over the long-term. Measuring retention is becoming much easier with the wide-spread availability and adoption of customer loyalty programs such as points cards. When formulating this KPI, considering including data concerning your attrition and conversion rates as well.
    Audience: Managers, Executives
    Calculation: 25 / 100 = 25% customer retention
  1. Percentage of out of stock items. This KPI measures your ability to keep popular items in stock and anticipate customer demand. If a customer places an order that you cannot immediately fill, this can result in poor customer satisfaction. If it only happens once, your organization may be forgiven; if it’s part of a larger pattern, you need to be able to recognize it and address the problem. Retail organizations need to be on top of their supply-chain metrics and KPIs.
    Audience: Front-line, Managers
    Calculation: # of items out of stock / # of items in stock = % of out of stock items
  1. Inventory to Sales Ratio. This retail metric measures the amount of on-hand inventory versus the amount of sales over a given period. This metric is about striking a balance between sales and inventory. This metric, like the one above, demonstrates just how important communication between different parts of your organization can be.
    Audience: Executives, Managers, Sales Associates
    Calculation: Average Inventory Value / Average Sales Revenue