Retail Analytics – Measuring and Calculating Retail KPIs

Just like Target, RadioShack, Mexx, and Sony, countless Indie Retailers will close their doors this year. But do they really have to? I think the answer is NO.
Retailers continue to make the age old mistake of neither measuring nor responding to their Key Performance Indicators. Here are a few important retail KPIs and how to calculate them:

  • Average Sale: Defined as the average purchase each buying customer makes in your store. To calculate divide your total sales dollars by the total number of transactions. This number should be tracked weekly and your goal should be to increase your average sale to consequently increase your total sales.
  • Conversion Rate: This is measured as a percentage and represents the number of people who enter your store and buy (or don’t). A store that focusses on customer engagement can operate at a greater than 80% conversion rate, meaning that 8 out of 10 people entering the store BUY.
  • Maintained Markup: Another way of saying gross profit on merchandise sold. To calculate this, divide the cost on all items sold by their total selling price after markdowns. Depending on your specific industry, your benchmark MMU will vary slightly. CRS can help you define an accurate benchmark for your store.
  • Inventory Turnover: In retail, turnover is generally calculated over a one year period since a shorter period of time can be misleading. To calculate your Turnover, divide your annual sales by your average inventory value. Turnover must be calculated retail to retail, or cost to cost, but never retail to cost.

There are many other Key Performance Indicators that you can be measuring AND improving in your store. Small improvements to your retail KPIs can make for big changes in your top-line sales performance. If you would like more information about these retail analytics metrics or the KPIs mentioned above at a no cost, no obligation analysis, contact us.

Dan Holman is a certified Winning@Retail™ consultant with twenty-plus years of success in diverse business development, new ventures, business expansion and strategic sales planning.