The implementation of a data-driven culture in a retail company is a transformation project that requires the definition of Key Performance Indicators (KPIs).
KPI is a performance measure that effectively monitors retail processes. These measures are monitored by retailers to enable them to increase their profits by identifying consumer habits or barriers during the purchasing process.
Facilitating access to this information allows retail managers to better understand what works or does not work in the sales funnel.
The retail industry has the specificity of producing a very large amount of data. Among all the information at your disposal, tracking the “right” measures depends on your sales organization, your sector of activity, and your company. However, these 9 KPIs are the most important to track for sales managers throughout the retail sector.
What Are the 9 KPIs Every Retail Manager Should Track?
KPI tracking linked to sales activities helps to increase the performance of your store. Also, these measures are essential because they are predictive. Their monitoring over time allows retail managers to predict future sales performance and identify trends.
Furthermore, allowing intuitive access to this data allows retail managers to better analyze consumer behaviors and communicate it to the company’s other departments (marketing, visual merchandising, etc.)
- Sales by Department or Category
A comparative sales volume dashboard by department or category is a beneficial tool for retailers offering various product categories. Communicated to the merchandising department, this data is valuable for:
- Product strategy
- Shelving Organization
- Product Promotion
For example, the manager of a sportswear store analyzes the sales levels of the sneakers. If they represent the majority of global sales, merchandising decision-makers will be able to reorganize the space to place these items at the entrance of the store – and thus obtain a good transformation rate paired with increased customer satisfaction.
- Average Purchase Value
This KPI measures the average value of each purchase made by customers. Integrating this measure allows retail managers to easily analyze historical trends. This is an effective strategy to increase the average purchase value of each sale.
Thanks to data storytelling software, you can easily observe the evolution of this KPI over time. Furthermore, thanks to the cross-referencing of several data, you can also better segment your customers according to their demographic characteristics, for example.
- Amount of Sales Reduced or Promoted
This KPIs is an excellent tool to measure the effectiveness of promotional campaigns. As a store manager, this measure allows you to identify and report customer spending behavior. In addition, reviewing this type of data is essential to compare the locations of promotional items. A very useful measure to improve merchandising and therefore your sales performance.
Retail inventory management allows store managers to offer customers excellent service through a clear understanding of their requirements. The lack of a good inventory management process decreases your ability to track product status and location.
Moreover, optimizing inventories leads to convincing savings by avoiding ownership costs and unnecessary product depreciation. In addition, savings can also be made by reducing the time previously spent on manual inventory management.
Yet, inventory optimization poses significant challenges due to the volume of information to be analyzed. How much of each item is in stock? What should I order again and when? Do you order too much or too little inventory? What are your best-selling and worst-selling items?
To address this issue, data storytelling software provides a complete understanding of inventory management at a glance. It is indeed possible to incorporate figures easily and to obtain visualizations that can be understood by everyone. There is no need to make calculations and the data are updated automatically. All in a single app!
Here are some inventory-related KPIs that you can track from your dashboard and that will be very useful:
- Inventory Turnover
The inventory turnover rate is used to determine the number of times your entire inventory has been used up over a given period of time.
If you have a high turnover rate:
- Your store is performing well
- Your sales teams sell high rates of goods
- Your inventory is not excessive
If you have a low turnover rate:
- You have difficulty translating stock into profits.
- Look for bottlenecks at any level in your supply chain process
This KPI is an excellent piece of information to share with retail managers and decision-makers. This data helps to determine which item inventories are worth expanding or shrinking in each store’s inventory. Also, this KPI reflects the good management of your store, a rewarding element to communicate with your management, to support the quality of your work.
- Gross Margin Return on Investment (GMROI)
Gross Margin Return on Investment is an essential KPI to track because it enables the evaluation of each dollar invested in inventories. In short, it evaluates how many dollars your company has been able to recover.
As a retail manager, tracking this key performance indicator provides a more accurate picture of inventory strategy profitability. This is the most appropriate way to make better decisions about which products to store or which items to no longer store.
- Product Performance
How fast are items selling? Which products are making the most money? Such questions can be answered by tracking the product performance KPI.
This measure is based on the number of items sold over a given period.
This results in an inventory of the best-selling items for this period (by week, month, year).
Knowing the best and worst-performing products allows the store manager to determine which items are worth investing in and which ones shouldn’t be re-ordered. In this way, they anticipate customer needs, increase customer satisfaction and sales volume.
CUSTOMER ENGAGEMENT ANALYTICS
Retail managers must ask themselves the following questions on a daily basis:
- How many customers can we expect in the stores?
- How long will they stay?
- Which way will they go?
- Which products are they most interested in?
- Will they make a purchase?
To answer these questions, managers are the only ones able to provide such varied and accurate information about clients. They can communicate customer service goals across all company levels for a fully consistent and targeted, even personalized experience.
However, due to the lack of tools and the mass of data they encounter, it is not easy for managers to report this information. What information should be prioritized? How should it be communicated to the entire company? How often?
Here are some essential measures that can be aggregated in a data storytelling application to organize and facilitate the communication of information related to purchasing behavior in stores.
- Foot Traffic
Foot traffic refers to the number of people entering your store. It is measured using people counters and retail sales analysis software.
Tracking this KPI is essential for the retail manager. Indeed, monitoring this metric over time allows them to identify hours or seasonalities when it needs more or less staff.
In addition to serving in-store managers, the efficient tracking of this KPI is very useful throughout the company. For example, foot traffic allows marketing teams to evaluate the success of a campaign. With this data, merchandisers can easily evaluate the success of their window displays designs.
- Conversion Rate
The conversion rate refers to the percentage of conversions made possible based on the total number of visitors.
A conversion can be:
- A purchase
- Registration to a loyalty program
- The purchase of a product on promotion
For retail managers, monitoring this KPI is essential to measuring effectiveness. From a comparative perspective (between several stores in a given region, for example), measuring this data makes it possible to identify good practices and extend them to all your stores.
- Customer Retention
Customer retention measures the rate of customer return to your store. This measure is an excellent indicator of customer experience, the diversity of your offer, and the performance of your products.
Communicating this information to your stakeholders will allow your company to develop marketing and event offers at strategic times.
This KPI also serves as a strategy for loyalty programs, to further encourage customers to return to the store.
Toucan Toco: a solution that allows retail managers to easily track and communicate these KPIs
If retail managers track these KPIs, they can positively influence their company revenues by identifying opportunities to improve shopper traffic.
They gain valuable insights for strategic planning, they receive actionable reports that track KPIs they need, providing your team at headquarters with valuable information about the customer experience their businesses generate.
How to facilitate the tracking of retail KPIs?
Thanks to your Toucan Toco applications, the decision-makers in your retail company have access to a dashboard that allows them to track pre-selected data in real-time according to your global strategy and the specificities of your industry.
For retailers obsessed with performance who want to deliver key insights in real-time to their sales assistants and sales managers, Toucan Toco is a software platform that allows you to easily mix multiple data sources and deploy impactful data visualizations that frontline employees will understand and truly use.
Unlike Excel or other BI solutions tailored for analysts our product focus on storytelling, simplicity, true mobility, and unique collaborative features: It’s like reading the newspaper every morning, not like reading a dictionary.