You won't find key performance indicators (KPIs) in most discussions among retailers. Retail KPIs just aren't sexy like marketing or product assortment can be, so they can easily be left on a shelf.
However, your financials are the vital signs that can determine immediately if you are bleeding money or doing just fine.
Just like your temperature, blood pressure, and pulse are clear gauges of your body's good health, your financials, also known as your key performance indicators (KPIs), are black-and-white markers for the overall health of your retail business.
Know these and share them with your management team regularly.
Here are the six retail KPIs to track:
You could spend your time tracking countless KPIs, but your success boils down to tracking the results of these six.
1. Profit and Loss Statement
A business owner may often overlook losses as inevitable, but they can be seen as a failure to price right, manage categories, and cover expenses.
2. Average check
It is the best judge of how well your sales crew can move your products and the most immediate report you can affect to grow retail sales.
3. Number of transactions/customers
You might have fewer shoppers walking in, but if we aren’t tracking them, we may not pay enough attention to encourage them to return. The repeat customer is an incalculable retail metric.
Not every item contributes equally to your sales. The goal is to reduce inventory in categories that are not producing while increasing your best categories. This report helps manage sales to inventory, also called your open-to-buy.
5. Year over year to date
Like transactions, the past year could be as much as 20% lower than other years. But is it an anomaly or part of a larger trend?
6. Number of Units per Transaction
The profit comes from the second item. Tracking this is another way to measure how good a job your sales crew is doing and if the displays and signage in your retail store are tempting customers to add on.
Yes, most POS systems can slice and dice hundreds if not thousands of reports, but at the end of the day - who gives a hoot to read them?
The answer: Few.
You must see the big picture as much as possible and not waste time in minutia, which could allow you to miss the trends.
One final suggestion I make is to share the last five reports with your crew on a regular basis.
The more employees know how the average check is tracking, the more they respect the number of customers that purchase your goods.
The more they understand the top categories and products in those categories, the more they understand how all of that can be affected by the number of units they sell per transaction.
The more they can help both your year-over-year sales and, ultimately, your profit and loss statement.
Track and Share Your Retail KPIs With Your Team
Knowledge is power – and your KPIs are the knowledge your team needs.
Using data to inform your decisions will make you less likely to fall for a hunch or a gut reaction to a sure thing and more likely to predict your own future.