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The Top 13 KPIs Any Retailer Should Measure

The Top 13 KPIs Any Retailer Should Measure

November 13, 2019

The Top 13 Most Important KPIs for Retailers

The retail industry is more competitive than ever, and businesses that want to stay in the game must stay on top of the numbers…analyzing data to determine important decisions. Without the ability to get to and work with that data, they are at a serious disadvantage.

The common problem today is not the data itself. There is plenty to work with—in fact, some would say there is too much. It is easy to become overwhelmed without knowing the things you should be measuring. Which Key Performance Indicators (KPIs) will be the most help in keeping your business on target?

Every business is different, so the KPIs you should be monitoring might vary some, but there are 13 KPIs (in this case, 13 is a very lucky number!) we recommend for any retailer. Implement them as soon as possible so you’re ready for 2020.

KPI #1: Average Purchase Value

It’s important for retailers to know on average how much each of your customers spends with you. To help you optimize pricing and sales strategies, analyze average purchase value and determine the average dollar amount per transaction in a given time period.

KPI #2: Total Sales Count

The total sales count measures the total number of transactions processed in a store (or other location) within a specific time period. This is a simple metric to calculate, but don’t underestimate its importance; it helps determine how much product you sell and how busy that location is throughout the time period, which helps you schedule employees, build a marketing strategy, and tailor customer service.

KPI #3: Profit Margin

This is a metric everyone is aware of, but again, don’t underestimate its importance. You need to know how much money you are earning after deducting the costs of goods sold. This KPI also helps you determine if sales are costing you more than you’re making so you can adjust your operational costs and prices.

KPI #4: Gross Margin Indicator

Unlike gross profit, which varies drastically depending on the size of the company and therefore is not a “universal” KPI, gross margin, measures gross profit as a percent of gross sales, taking COGS into consideration. This KPI helps you set reasonable markup prices.

KPI #5: Retail Sell-Through Rate

The sell-through rate measures the ratio of the number of items sold in a given time period compared to the amount of items that were available. It gives you the percentage of inventory of a product sold over a specific time period, which shows you how your products are performing. This KPI is very important for seasonal marketing and re-ordering. However, order accuracy throughout the year can be difficult due to fluctuations in sales, so try to have a solid set of historical data for comparison.

KPI #6: Year-Over-Year Sales

Another important KPI to be sure, but don’t depend on it alone. It’s much more informative when combined with other KPIs to understand why you sold more this year than last. This gives you the information you need to change or implement new strategies for marketing, ordering, or pricing.

KPI #7: Sales Per Square Foot

Every retailer with brick-and-mortar locations should use this KPI to track sales per square foot, which is the store’s average revenue for every square foot of sales space. It helps you understand if your space is being used efficiently and pinpoint areas in which you can be more profitable. It also enables you to align sales and marketing efforts based on revenue by location and determine how well staff is performing. If you have multiple locations, this KPI can help you learn about social or cultural variations that might be impacting sales.

KPI #8: Average Spend

This KPI encourages you to look at ways to get customers to spend more—through creative product placement, layout, POS marketing, and upselling. It identifies target areas, especially when measured against the average number of items sold. This KPI is all about finding little ways to improve the store, which add up to big results over time.

KPI #9: Customer Conversion Rates

Once you get customers in the door (this goes for online as well as brick and mortar), you need to do everything you can to entice them to buy. This KPI helps you determine the success of in-store components, such as customer service, customer experience, and layout, to identify your goals and keep them current. Be sure you look at this KPI on a regular basis and specifically when you have made any big changes. It should be evaluated often, especially when there are changes in personnel or merchandising.

KPI #10: Inventory Turnover Rate

Chronic issues with under- or over-stocking can be costly not only financially but also in terms of lost customers. This KPI, also known as stock turn, measures the rate at which a product is sold by dividing COGS by the cost of the average amount of inventory on hand. It helps you determine when you should be ordering and how to optimize stock levels and orders. The goal is to have similar products with similar turnover rates.

KPI #11: Product Returns

This simple KPI is very critical. A high rate of return provides insight into how your business is operating, helping you uncover and address areas that can hurt business. It is also one of the easiest ways to evaluate customer satisfaction…something all retailers should be doing continuously.

KPI #12: Shopper-to-Retail-Staff Ratio

One of the most challenging tasks for retailers is staffing. This KPI takes the guesswork out of it, keeping your staff and customers happy while optimizing labor costs. Pair it with your conversion rate metric to find periods in which you might be under- or over-staffed and help you determine when it’s worth the investment to increase staffing.

KPI #13: Gross Margin Return on Investment

Perhaps the most powerful KPI you can track, GMROI provides you with the most complete picture of a store’s performance by measuring profit return on the dollar amount invested in inventory. This metric is critical because it allows you to analyze how your business is performing overall, and how you can optimize inventory, pricing, and merchandising.

We can help you help you put the pieces in place to start tracking these KPIs as well as others you might need for your business, so you can start off strong in 2020…and keep it going throughout the year. Contact the experts at ArcherPoint Retail to discuss your analytics needs.

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