3 Top KPIs to Measure your Retail Store’s Performance

by J.B. Maverick

3 min read

Retail, like most businesses, operates in an increasingly competitive marketplace. It’s important for your brick-and-mortar business to produce as much revenue and profit as possible if it’s going to survive and prosper in the long term. Key performance indicators (KPIs) provide ways to measure your retail store’s performance in a meaningful way and provide you with information to help you maintain a competitive advantage for your retail operation. As KPIs have become increasingly recognized as an important business evaluation tool, literally hundreds of KPIs have been developed, but some of the most basic ones are still among the most reliable indicators of how your business is doing.

Store Traffic

One of the simplest KPIs to measure is also one of the most important: the number of potential customers coming through the doors of your retail store. Without store traffic, people physically walking into your store, your retail business can’t survive. Tracking the amount of foot traffic your store experiences is a key indicator of how well your business is doing in attracting customers, and it can also be used to make evaluations with other KPIs, such as gross sales. Looking at store traffic figures year-over-year, comparing one month to the same month the previous year, can give you a quick indication of whether your business is growing. Month-to-month declines in traffic can serve as an early warning indicator that you need to work on boosting your store’s appeal.

Average Customer Spend

How much each customer spends on average each time they shop at your store is another key element to consider, since one of the most effective ways to increase your sales is to get existing customers to buy more. Calculating average customer spend can help you get a better profile of your customers and their spending habits, and you can then use that information to fine tune your sales and marketing efforts. An alternative metric to average customer spend is the average number of items per purchase. This may be a more meaningful analytical measurement for your store if it sells mostly lower-cost items, such as those found in a dollar store, as opposed to big-ticket items such as furniture. If your analysis shows customers buying fewer items per shopping trip, you can then analyze your inventory to see if there are specific items where sales have dropped off, or if your customers are just generally spending less, which can be the result of a general economic turndown. Average customer spend and average items per purchase can also tell you how effective your store personnel are at encouraging customers to buy. Doing a shift-by-shift analysis, you may discover a star employee who successfully increases sales whenever they’re working.

Profit Margins

Your net profit margin, the bottom-line profitability of your business, is still the most basic indicator of your store’s financial health. Going beyond just looking at your net margin can help you spot ways to increase that net margin figure. Analyze your across-the-board profit margins, including gross margin and operating margin, along with your review of your net margin. If your net margin is declining, looking at your gross margin and operating margin can help you identify the cause of lost profits. If, for example, your analysis shows that your operating margin declined significantly, then increased overhead expenses are the source of the problem. You can hone in on an analysis of your expenses and try to find places to cut costs and restore your net profitability to a healthier figure. Don’t just guess at how well your retail store is doing. Tracking KPIs gives you solid facts to work with that can help you in analyzing every aspect of your business and keep it performing at maximum efficiency.

References & Resources

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