10 Essential KPIs for Retail to Keep in Mind
KPIs, or key performance indicators, have long been a fundamental part of business operations. These metrics enable employees, managers, and leaders to monitor and keep track of their workflows, project progress, sales targets, and other important processes to evaluate overall business performance.
In a hyper-competitive industry like retail, businesses have no choice but to collect and analyze silos of data. Fortunately, the influx of powerful data analytics and management platforms, such as ClicData, has made this sales optimization less challenging than it was in the past.
Today, most modern retailers understand the importance of KPIs. However, the challenge lies in determining which KPIs to track to maximize performance and growth.
Therefore, in this post, we’ll share ten essential types of KPI retailers need to keep in mind for 2023 in beyond.
10 Essential Types of KPI Retail Stores Should Keep in Mind in 2023
Foot Traffic and Digital Traffic
Foot traffic and digital traffic are perhaps the most important KPI in the modern age as it tracks the number of customers or prospective buyers visiting your physical store and/or website. Most eCommerce stores, apps, and business sites use tools such as Google Analytics, Clicky, and Matomo.
Similarly, brick-and-mortar stores can use manual and electronic tools to track traffic, including thermal sensors, counters, surveillance cameras, etc. By leveraging this metric, retailers can tweak their marketing campaigns to increase the number of visitors. Or, they can use this to optimize their inventory and supply chain.
Average Customer Spending
Next, we have the average customer spending, another essential retail KPI both brick-and-mortar and digital stores use to track their sales and inventory. For example, high ACS indicates customers are buying more products, meaning sales managers need to ensure they have sufficient stock.
On the flip side, low ACS is a warning sign for retailers. It prompts them to limit stocking and tweak their promotions to raise the numbers. Many retailers also use average customer spending to determine which products sell better and bundle them with other products.
Customer Acquisition Cost
Customer acquisition cost is one of the most important types of KPI retail stores of every size and scale that need attention, especially in the post-pandemic age with intense competition, limited budgets, and other micro/macroeconomic factors.
CAC simply measures how much you’re spending on attracting new prospectus buyers and turning them into paying customers. It combines all important costs, including employee salaries, tech stack costs, ad spending, content production, inventory maintenance, etc.
Using this metric, retailers can improve the visibility of their workflows and operations and make necessary adjustments to reduce and manage their expenditures.
Check this article if you want to know more about how to calculate and reduce customer acquisition cost.
A retail store’s conversation is the ratio of the number of people purchasing from a store or website to the total number of visitors. The higher this ratio, in terms of percentage, the better your sales, bottom line, and overall performance.
As a result, most modern retailers actively compare conversion rates at different intervals or locations to make quick strategic or operational changes.
Total orders are one of the most straightforward KPIs retail businesses use in the modern landscape. This metric simply measures the total in-store and/or physical transactions during a specific period (daily, weekly, monthly, quarterly, semi-annually, or annually).
By actively tracking this KPI, sales managers and owners can determine how well their business is doing from several angles. For example, they can compare sales at different times of the day or seasons to plan their marketing and operational activities accordingly.
Gross and Net Profit
As a business, you need to understand that profit is an umbrella term that can be split into two broad types – Gross and net profit. Gross profit refers to a store’s total revenue after subtracting the cost of goods but before additional expenses (distribution, marketing, salaries, etc.)
In contrast, net profit is a store’s total profit after subtracting all expenses related to selling goods. The higher the net profit, the more money retailers make. Therefore, most retail stores use these KPIs to restructure their operations to generate more sales, increase prices, or decrease expenditure.
Average Shopper Dwell Time
Average shopper dwell time is another crucial KPI for retail businesses. Simply put, this metric shows how much time customers or visitors spend in a physical or digital store. The math is simple – the more time a buyer spends in a store, the more likely they are to spend on different products.
Many modern physical stores leverage this metric along with foot traffic to design their layout to increase the average shopping time. From a negative viewpoint, high ASDT could also suggest customers are experiencing difficulties finding what they’re looking for. To reduce churn rates, retailers can rearrange their layout, hire more in-store employees, and add more signs.
Sales Per Employee
Sales per employee is another important KPI that helps stores determine if they have enough staff to help customers. It’s simply the ratio of a store’s net sales and the number of employees.
Another use case of this KPI is to evaluate employee performance, especially in competitive sales environments. They use SPE to determine raises and rewards, among other perks. On the flip side, they also use it to help poor performers via training and better incentives.
Backorder rate is a double-edged sword for retail stores. Thus, sales managers must track this KPI as it helps them keep track of demand and plan future purchases proactively. On the flip side, it can also indicate supply problems and prompt them to look for alternatives to minimize wait times or unavailability of certain products.
Inventory Turnover Rates
Finally, the last KPI on our list is inventory turnover rates. It tells store owners and managers how often they’ve restocked their inventory over a specified period (week, month, etc.). Businesses can use this metric to determine if they’re ordering the right amount of goods per their storage capacity, product shelf life, and overall demand.
A high ratio of costs of goods sales to average inventory cost is a sign of strong sales. However, it could also signal insufficient inventory. It can alert sales managers about proactively procuring what they need.
Track your KPI with ClicData
Retail KPIs are crucial for sales managers and stores looking to get a clearer picture of their inventory, processes, and customer behavior. These metrics (and more) can be tracked manually or using powerful business intelligence and data analytics platforms like ClicData.
So, whether you run a brick-and-mortar or eCommerce store, equip your infrastructure with this advanced solution. Use it to connect, extract, authenticate, analyze, visualize, and share data and leverage all the major KPIs retail stores commonly use to automate or streamline their processes.
Get in touch with our team to learn more about what we can do for retailers.
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