It’s an age-old precept that if you don’t measure something, you won’t be able to improve it. This adage applies perfectly to the retail industry, where proper use of the right data really can transform the bottom line.
If you know how many visitors you had in your store, how many were converted into customers, and the average basket size, you can make data-driven decisions. Key retail performance metrics can also uncover strengths and weaknesses in your business while ensuring efficiency.
With that said, here are the most critical metrics retailers should monitor.
Foot Traffic
Foot traffic refers to the specific number of people who enter the store. While this is one of the more basic metrics to collect, it’s exceptionally valuable when it comes to customer conversion rates.
By knowing how many people enter your store, you can determine how many are purchasing products and how many are leaving. With this, you can make efforts to target potential customers more effectively.
Conversion Rate
Conversion rates explain the percentage of people who enter your store and make a purchase. This metric is calculated by dividing the number of sales by the number of total store entrants. You might think you could look at the stores’ sales to determine performance, but conversion rates provide even more insight.
Average Transactional Value
The average transactional value metric is the average value of each transaction at the register. This metric is calculated using the total value of sales over a certain period and divided by the total number of individual transactions over the same period of time. This metric allows you to see how much each sale is worth.
Units Per Transaction
Units per transaction refers to the number of units per sale. This metric provides similar but more in-depth insight than the average transactional value metric. A higher number of units per transaction indicates that each customer purchases more from your store.
Dwell Time
Dwell time is often an overlooked metric in retail, although it is exceptionally valuable to improving store performance.
Dwell time refers to the amount of time each customer spends wandering around the store and deciding whether or not they are buying anything. If customers are spending a lot of time making a decision, you might need to adjust pricing, displays, or other details. Nevertheless, knowing the dwell time metric will allow you to optimize the store to encourage sales.
Sales Per Employee
Sales per employee is a valuable metric for store performance. This metric provides insight into how efficient each member of your team is. At the same time, it will also help you decide how many employees you need per shift and more.
Other valuable metrics retailers should monitor include year-on-year growth and gross margin return on investment, or GMROI.
While there are many efficient and effective ways to improve retail store performance, the most successful approaches use metrics to drive decision-making. Instead of guessing where you should start making changes to boost sales, using metrics will identify areas that can be improved.