Most retailers will look at sales and use this as a measure of how well the business is performing. Whilst sales is important it might be a lot harder to pin-point where things have gone wrong if sales volumes start to decline. Consider including the below 5 Key Performance Indictors (KPI’s) which are easily measured once you have the correct process and systems in place.
Footfall
Measurement begins at the door. Most small retailers believe that measuring footfall is reserved for larger organisations with multiple outlets. The truth is nothing provides a better overall view of the health of the business than footfall. You can ascertain the efficacy of various forms of marketing and where the best return on investment lies. You can utilise the data to optimise store opening hours and staffing levels providing the greatest degree of efficiency. Footfall counters can be obtained for as little as €200. More expensive models can also connect to online giving real time data to the operators
Conversion Rate
The conversion rate simply shows how many of those people who walked through your doors purchased goods. For example if a store had 50 customers through the door on a given day and 10 purchased stock the conversion rate would be 20%. By focusing in on the conversion rate you can look at key aspects of your business like merchandising and customer service and target specific initiatives with measurable results.
Basket Size
Basket size measures the average of how much each customer spends in an individual transaction. Offering bundles, up-selling at the point of sale or training staff to offer complimentary products can boost the overall basket size leading to higher overall sales revenue.
Gross Profit
Perhaps the most common metric in the list is gross profit is one that most retailers are familiar with and measure at least annually in line with the financial statements. In reality this should be measured at least monthly to establish seasonal patterns and trends. This way you can spot negative trends early and take corrective action sooner rather than waiting until after the year end.
Stock/Inventory Turnover
Stock turnover is a measure of how efficiently stock is managed. It is a ratio between the cost of goods sold over a period of time against the cost of the stock on hand. It can quickly flag potential problems like over or under stocking or potential slow moving stock which will allow you to make smarter buying decisions. The average stock turnover for a typical retailer is areound 4 times. Meaning they retailer sold its current stock holding 4 times over the period of 12 months.
Here at New Energy Chartered Accountants we use cloud technology to allow us to focus more on KPI management and reporting rather than simply inputting data into spreadsheets. We see ourselves more as business advisors than merely keeping you compliant. Contact us today to find out what we can do for your business.