How do you measure the success of your retail business?
If your answer is just revenue and sales, then I have news for you- you’re leaving money on the table!
Although revenue and sales are important metrics that illustrate the overall success of your business, they are not the end of all when measuring the how of your business success.
Why is that?
Because there are many steps to the acquisition funnel. Before you ever see a dollar added to the bottom line, there are a series of activities that help lead the customer to that final sale. Let’s illustrate by sharing a story that could apply to any retail business:
The Retail Story: How a passerby becomes a customer
Jessica is walking down the street when she see’s a gorgeous dress in your window display. She’s never been in your store before, but the layout of your display catches her attention and she enters. Once in the store, Jessica realizes that the price of the dress is more than she is willing to pay, and she saw a similar dress across town for 20% less.
But now that she’s in the shop she discovers some candles that she likes and brings them up to the counter. The clerk compliments her current attire and mentions that, if she signs up for the loyalty card, she’ll save 25% on her next purchase. Jessica’s eyes light up! That would make buying the dress here cheaper than purchasing it from the other store. Not only that, but the cashier leans in and quietly reveals an upcoming 10% sale.
Excited about this opportunity, Jessica signs up for the loyalty card, makes her purchase, and adds the date of the future sale to her calendar. And sure enough, when that sale date arrives, so does Jessica – card in hand and ready to shop!
She picks up the dress and a matching pair of shoes, and heads to the counter. While checking out, Jessica learns that she can receive a 10% coupon for her next purchase if she spends just a little more. Not one to pass up a great deal, she adds several candles to her order before leaving the store.
Over the course of a few days, Jessica has gone from a passerby to a customer. Congratulations!
Why KPIs matter: Increase sales by improving all of your metrics
If you take a moment to reexamine our story above, you’ll discover that there were multiple touch-points that played a pivotal role in bringing Jessica on as a customer.
Had the window display not been up to par, she never would have entered the store. If the clerk had been rude, she may have purchased the candles – but never returned. Had the sale, and loyalty card, not been available she would have bought the dress from someone else.
Each one of these activities represents a Key Performance Indictator (KPI) that you want to track.
Let me tell you why:
If 5% of people who walk past your store enter, and 25% of people who enter make a purchase, you have two metrics you can improve. You can figure out how to encourage more people to buy, AND you can find ways to motivate more people to enter your shop.
After all, if you maintain a 25% purchase rate for visitors, but convince 10% of passerbys to enter your store (instead of 5%), you’ve just doubled your sales!
But we’re still only looking at two metrics. What about loyalty cards, window displays, and customer service? These are three more KPIs that can play a huge role in boosting your bottom line.
This is why it’s essential to consider multiple KPIs for your retail business. If you focus on one or two aspects of the sales funnel, you’ll limit your growth.
Meanwhile, by tracking multiple metrics you can determine where your business is truly excelling, and what areas need additional support.
To help our readers improve their retail businesses we’ve developed a report that shares ten of the most important retail KPIs – and how to calculate them.