Key Performance Indicators (KPI’s) are metrics that are used to evaluate the performance and growth of a business. For a retailer it enables you to understand what is happening with your business every day. Often these numbers are a way to measure the achievement of company goals and determine the right strategies moving forward.
KPI figures are often collected through POS reports or can be setup by talking with your finance department. The best retailers measure both store and staff performance. By measuring the performance of your store and staff on a regular basis, the measures can provide an early indication of areas of concern and improvement.
When analysing KPI figures you need to remember that these metrics only tell part of the story. There are times when numbers can be deceptive, so you have to look beneath the numbers at the reasons for the results and what other factors are contributing to it.
For example, when analysing staff sales figures there may a top salesperson that performed average for a week. But if you look beyond the numbers you know that this person only worked in quiet periods that week.
We call this analysis Art versus Science, where you need to combine your experience and knowledge with the facts and numbers.
Here is a list of some of the most important KPIs for retail businesses.
Sales: Total amount of money received for goods sold or services provided during a certain period of time. This can also be referred to as revenue.
Sales per square metre: the average revenue a retail business generates for every square meter or foot of sales space. (Store KPI)
Conversion Rate: the percentage of customers who make a purchase (transaction count) compared to the total number of customers who enter your store (traffic count).(Store KPI)
Stock turns: the number of times inventory is sold and replaced over a period of time. It is also known as inventory turnover. (Store KPI)
Average transaction value: Measures the average dollar amount sold to each customer. You can measure this on an individual level as well as the overall store performance. (Store & Salesperson KPI)
Items per transaction: Measures the average number of items that a salesperson sold per transaction. You can also measure this on an overall store level (Store & Salesperson KPI)
Sales per hour: Measures the averages dollar amount of sales that a person processes within an hour period. This measure takes into consideration that not all sales
people work the same number of hours a week. So instead of reviewing the total sales for a period, we look at the average sales per hour so we can measure each person on an equal level. (Salesperson KPI)
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