Measuring the Performance of Your Retail Operations

2. Measure Sales: 

Another important metric is to measure the sales of the retail business. Measuring sales help to direct the team’s focus, identify problems, and allow the team to improve. There are multiple ways of measuring sales, such as sales by category, sales by section, sales per employee, sales per associate, and more. Sales by category determine the amount of revenue generated for an individual product category. It gives an idea on the revenue categories generating the most revenue for your business. Sales per employee is a metric calculated by the mathematical formula net sales/number of employees. Sales per employee metric enables businesses to make better employment decisions, especially in hiring, compensation, and rostering. It can be improved by setting smart sales goals per employee, motivating the staff for better performance, and investing in training. 

3. Promotion Effectiveness:

Promotion is an excellent way to attract customers. However, it is essential to track all the promotions and measure their effectiveness. The promotion should be engaging, and every employee should be on the same page to market a promotion better. If the promotion is not working well, corrective measures should be immediately taken to ensure the promotion is a success. This is possible by gathering real-time data. Further, the data collected from the promotion should be used for the next up-coming promotions for better reach, and likewise, the older data should be used for the current promotions to avoid repeating the same mistakes. 

4. Customer Engagement and Loyalty:

 Retail businesses should track the purpose of the customers’ visits and try engaging them and follow them relating to the same purpose. For instance, if the retail business is about furniture or diamonds, the customer may make multiple visits to the store to decide. Try to keep them engaged by sending them relevant information and at the same time, not be pushy. A retail store may get many visitors, but it is crucial to know how many out of that turns in to retail customers. The mathematical formula for the retail conversion rate is the number of retail transactions/number of visitors. Specialty stores and luxury boutiques have a lower conversion rate. Also known as effectivity, this metric depends mainly on the type of retail business. 

The metric relates to the number of times stock is sold or used. The mathematical formula is the cost of goods sold/average inventory. A critical metric, the stock turn, determines the optimal inventory levels. Lower levels indicate dead stock, whereas higher levels indicate fewer stocks and unsatisfied customers due to the “out of stock” issues. If a product is not selling fast, piling up the inventory does not help and may lead to product loss due to damage or expiry date (food products). On the other hand, keeping limited stock shows a lack of coordination resulting in unhappy customers, who would probably buy other alternatives.  

Shrinkage relates to a loss of inventory not caused by actual sales but by other factors such as robbery, administrative errors, or frauds. The mathematical formula for calculating shrinkage is ending inventory value – physically counted inventory value. Tracking shrinkage helps businesses remain vigilant. If the shrinkage is witnessed, the business needs to take up security measures or address its issues.