Recognize which are the most important retail tracking KPIs to increase your store performance
Today, the retail sector is probably one of the sectors that lives the most accelerated transformation process of them all. The consumption pattern is changing, accelerated even more by the pandemic, the constant emergence of new disruptive technologies to be closer to each other and better understood by the consumer, and the pandemic itself, which has hit the sector hard, has plunged the retail industry into a deep process of change and transformation.
Using data in order to improve business decisions has gone from being an opportunity to a real need. In fact, according to Aberdeen Group, “Data Driven Retailers” are far more successful than other retailers.
In the heart of data, we find the KPIs (Key Performance Indicators), that allow us to track our business to improve decisions making and be able to carry out an excellent execution of a defined commercial strategy, increasing sales and maximizing the results of each sales point.
In this article we are sharing with you two retail KPIs that are composed of the basic KPIs which, from our point of view, are essential to measure and optimize, and which are not so commonly monitored. In order to talk about them, we will first review the four most basic KPIs to track and measure sales efficiency:
Footfall or store traffic
Footfall = Total store visits
One of the main basic KPIs, that help us to know other results of our business, is the Footfall, also known as the store traffic. It has to be with to all the clients that put a step on your sales point, whether they buy something or not.
Without clients, we are lost. That is why increasing our store traffic must always be within our goals.
Having a record of all the visits received in the last months and years allows us to predict the future traffic of the store, compare it in between periods and make decisions such us running campaigns during low traffic periods to increase the flow of customers or redistributing the schedule and task planning of our staff in order to improve productivity and business performance at peak traffic hours.
Conversion Rate = Number of tickets / Number of visits x100
The Conversion Rate measures the percentage of clients that visit the store and end up buying, in other words, becoming a ticket. Tracking this basic Retail KPI helps you to measure the efficiency of your sales methodology and clarity of the offering.
Reaching a higher number of people visiting your store does not mean that you will sell more. However, improving the Conversion Rate implies a direct increase of your sales, since a higher number of visits will be converting into benefits.
Average Ticket = Net sales in £ / Number of tickets
The Average Ticket corresponds to the average value of all the products sold to customers, in other words, the average amount of money a client spends every time he buys in your store.
In certain cases, there are businesses where there is a high Conversion Rate but a low Average Ticket. For instance, pharmacies, smoke shops and kiosks. Normally, the person who goes to this type of establishments has already decided to buy. In this case, our goal will be increasing the number of products that one customer buys in one purchase or improving the value of that purchase.
Increasing the value of the Average Ticket is bound to the sales increase because of a great customer service. The more a client spends, the more satisfied he is with your establishment and your staff. This connection means that that client will come back. Besides, this recurrent sale is a good indicator of our good job.
Sales = Footfall x Conversion Rate x Ticket Medio
Sales are the result of a combination of all the indicators previously mentioned: Footfall, Conversion Rate and Average Ticket. Increasing this data is every retailer’s main goal and the main indicator that proves that our strategy is working as it should.
Retail composed KPIs tracking
Once we see all the most basic retail KPIs that we should track, we are going to discover the two main indicators of this post, which are not that frequently measured or monitored. The first one we will call Sales Pace, which measures the capacity and ability of your store to convert customer traffic into increase sales. The second one, SWING, is an indicator that allows us to compare this use of the traffic between periods.
Sales Pace = Sales / Footfall = Conversion Rate x Average Ticket
The Sales Pace KPI equals the average value of each transaction (Average Ticket) times the Conversion Rate for a given period, I mean, it measures the sales value divided by the number of customers that visited your store.
In other words, it shows your store performance and shows the efficiency of your personnel getting the best out of customer traffic. Keeping this indicator rising clearly is a positive and an indication that you are taking advantage of the opportunity that generates that traffic.
Analyzing and understanding the Footfall evolution and the Sales Pace lets you easily identify where are the greatest opportunities of improving the efficiency with a notable impact on sales increase.
According to a Salesforce study, which indicates that 75% of customers say that it is absolutely critical or very important in their purchase decision to have interaction with the salesperson in the store, the moments of high traffic and low sales rate will be when we will have to pay special attention to have the right employees to ensure the best customer service.
Unlike the other KPIs seen so far, the SWING is a comparative indicator that allows us to measure and compare the traffic utilization of customers who decide to visit the store across two periods. The goal is to be able to compare traffic utilization while being transparent to the traffic itself.
How is it calculated?
Let’s imagine two periods that we wish to compare: period 1 and period 2. Taking into account these periods, we will first calculate the following percentages:
% increase in sales = sales period 2 – sales period 1 / sales period
% increase of traffic = traffic period 2 – traffic period 1 / traffic period 1
Once these percentages have been calculated, the swing is calculated as follows:
Swing = % of sales increase in a period – % of traffic increase in a period
If its value is positive, it means that we are making better use of customer traffic in period 2, generating more sales with respect to the previous period 1. If, on the other hand, it is negative, it means that we have taken less advantage of the traffic in period 2, losing sales with respect to the previous period.
Thanks to this indicator, we can know if we are taking more or less advantage of the opportunity generated by all the visits to our store, regardless of whether the traffic is higher or lower between the periods compared.
It is obvious that each new period should aim to obtain a positive swing with respect to the same previous period, thus indicating that we are being more efficient in the sale and we are doing things in the right direction.
KPI Management: how to track the main retail KPIs
Working on a commercial strategy requires us set goals that must be real and achievable. To meet these goals, it is essential to measure your sales point KPIs. Why? Because it gives you the opportunity to identify deficiencies and know your scope for improvement, being able to adjust your decisions to these needs and maximize the profitability of the sales point.
Measuring and analyzing each of these performance indicators seems like a long and hard task. That is why it is essential to work together with technology to make easy what is difficult, and bet always on efficiency.
At ORQUEST we put at retail company’s disposal KPI Management Freemium.
With the good intention of helping the sector during one of the most complicated contexts we have lived in the lasts years, even decades, we developed a new solution in our workforce management software. KPI Management is a dashboard built with the retail KPIs that allows the retailer, free of charge, to track and analyze his store’s performance in real time.
KPI Management Freemium gives you quick and easy access to the most important key performance indicators of your store, allowing you to easily identify problems and where and how it is necessary to act, what will guide you to making decisions and ensuring the best performance.
C007/20-ED. 2020 call for proposals on technological development based on artificial intelligence and other digital enabling technologies within the framework of the strategic action of digital economy and society of the state R&D&I program