How to Track Store Performance: A Retailer’s Guide

“Store performance can be best described as a physical for your business, in that it measures the key indicators that give a clear picture of whether or not it is healthy. Unlike isolated metrics, which cover one store or even one aspect in a chain, it measures performance across a broad spectrum, utilizing a dashboard approach,” says Yuvi Alpert, Founder, Creative Director, and CEO of jewelry brand Noémie.

While Alpert compares tracking store performance to a doctor’s visit, retail management consultant Amanda Fleischer offers a different analogy.

“These KPIs basically work like a report card, telling a retail[er] how efficiently they’re selling, and how well the selling strategy is working. That report card can tell you if your customer service behaviors are working well, or if they need to be improved or adjusted. It can tell you if your visual merchandising or social media marketing is working well, or if it needs improvement,” she says.

Tracking store performance can reveal potential problems and help you understand how to improve your business.

Importance of measuring store performance

• Influencing business decisions
• Identifying potential risks
• Improving forecasting
• Establishing benchmarks

Knowing how your business is doing is essential for several reasons.

Influencing business decisions

Tracking store performance “Helps drive decision-making. In a data-driven decision-making environment, it can help [retailers] understand what area of the business needs improvement, where to focus resources, or even, from an operational standpoint, how many employees do we need on a Saturday? How many employees do we need during the holiday season?” says Dr. Joseph Aversa, Assistant Professor at Ryerson University’s School of Retail Management.

Identifying potential risks

Monitoring store performance, “Allows [retailers] to minimize the risk of making bad decisions, because they’re being informed by data that’s being collected within their… spaces,” says Dr. Aversa.

Tracking performance gives you so much power. By understanding how well your business is doing, you can quickly identify any problems and fix them, which saves you time and money. It also helps you avoid making the same costly mistakes in the future.

Alpert agrees. “Businesses that fail to analyze store performance miss why some of their parts may under- or even over-perform, losing out on valuable data that can help them as a whole. Whether it is website visitor traffic, units per conversion, or even sales per employee, the analysis can determine whether there is mixed messaging affecting engagement rates, faults in training, or if sales can be increased through techniques such as bundling. A full store performance review can find the holes and provide the information to fill them.”

Improving forecasting

When you know key metrics, you can predict cash flow, inventory needs, and staffing needs. And, if you’re looking for investors, accurate forecasting can help seal the deal.

Establishing benchmarks

Data means nothing without context. Monitoring performance can help you establish context.

“All these metrics give you benchmarks for comparison,” Dr. Aversa says.

Knowing which numbers to look at is a good start, but if you don’t know what they mean, you won’t know how to respond. Context is important with these KPIs. Responding to what the ‘report card’ is telling you is the most important part.

She offers a practical example of how to use your average order value (AOV). “Whatever your daily AOV is, it must be compared to the weekly, and/or monthly AOV to know if it’s growing. You would have to compare it to what you’ve been averaging over all of last year to see if it is outperforming or underperforming and by how much. That will tell you exactly how much you need to increase sale[s] by.”

---

---

How to track store performance

Check these key performance indicators regularly to understand your business’ health.

Average order value

What it is: Average order value, notes Fleischer, tells you how much your customers are spending per order. Indirectly, AOV is also measuring how well leadership is keeping a sales team engaged, on track, and successful throughout the day. “If your AOV is inconsistent, it can be a sign that leadership isn’t keeping everyone focused, or there isn’t enough accountability built into the workflow and store policies,” she says.

How to find it: Look for AOV reports in your POS and ecommerce platforms.

How to use it: When you understand how much customers typically spend, you can set benchmarks and create goals to grow that figure.

“AOV can be influenced with more attentive customer service, by focusing on selling multiple items together, and through visual merchandising, like product placement and display design,” says Fleischer. 

Units per transaction

What it is: “Units per transaction (UPT) tells you how many items your customer is purchasing per order,” Fleischer explains.

How to find it: Most POS systems can generate UPT reports.

How to use it: “If you’re consistently selling multiple items together that can reflect… great customer service. If your UPT is low, it might mean you’re inconsistent with [upselling]—which is good to know, because there are things you can do to change that. Among them are improving your product placement and store layout, redesigning your website, improving your buying strategy, and floorset planning, along with having the leadership skills to set each team member up for success each day, and putting safeguards in place to hold each team member accountable,” Fleischer says.

Gross Margin Return on Investment (GMROI)

What it is: GMROI helps you understand how profitable your business is compared to what you spent on inventory. The higher your GMROI, the better.

How to find it: Divide gross margin by average inventory costs.

How to use it: Knowing your GMROI can help you set prices and influence promotions.

Foot traffic

What it is: Foot traffic measures how many people come into your store during a given period.

How to find it: Cameras and traffic tracking software are the best ways to measure this KPI.

How to use it: Typically, the higher your foot traffic, the higher your sales. Set a benchmark for foot traffic. If your sales are low compared to your foot traffic, then aim to boost conversions. For example, you might change the layout of your store to encourage sales.

Inventory turnover ratio

What it is: Inventory turnover ratio indicates the number of times inventory is sold and replaced during a given period.

How to find it: Divide your cost of goods sold by the average value of your inventory to find your inventory turnover ratio.

How to use it: This metric can help you forecast demand and identify supply chain issues.

Sell-through rate

What it is: Your sell-through rate is the amount of inventory sold in a given period relative to the amount you purchased during the same period.

How to find it: Find your sell-through rate by dividing your total sales for the period by the value of inventory purchased.

How to use it: Use this KPI to identify popular products, mitigate storage costs, optimize supply lines, and improve cash flow.

Customer lifetime value

What it is: This metric shows how much a customer spends with you over the lifetime of their relationship with your store.

How to find it: POS reports can help you find this information quickly. When you collect customer contact info, you can attribute online and in-store sales to them.

How to use it: When you know your CLV, you can show your appreciation to your most valuable customers to boost loyalty.

Sales per employee

What it is: This KPI shows the value of sales attributed to each employee of your business. “This can give an indication of employee effectiveness or a measure of the effectiveness of any individual employee’s conversion rates,” Dr. Aversa says.

How to find it: You’ll find this metric in your POS system’s staff reports.

How to use it: Sales per employee measures staff performance. Use this data to inform training and staffing decisions. For example, you could staff your best employees for holidays shifts or let the poorest performers go if you have to make cuts.

Sales per square foot

What it is: This metric measures how much your business earns per square foot of physical retail space. The bigger the number, the more efficient the operation.

How to find it: Divide your total revenue by your shop’s area to find sales per square foot.

How to use it: Because this KPI measures your store’s efficiency, it can inform real estate decisions. Boost your sales per square foot by filling your shop with more items or more expensive items.

Year-over-year growth

What it is: Year-over-year growth indicates how sales and profitability have changed this year compared to previous years.

How to find it: Your POS will let you compare your progress year over year. Comparing annual gross profit will be the most useful KPI.

How to use it: Growth is the ultimate measure of success, but it isn’t the only measure of success. You can run a profitable business that supports you and your employees without growing it into something bigger. But if you do want the business to grow, you’ll need to earn more revenue or improve efficiency by reducing expenses.

How to improve store performance

Follow these strategies to make your business more successful.

Collect data

“If you want to improve performance in a store, it starts with data. The more data you have on the consumer, the more you have on the store itself. The more data you have on your employees, the more data you have in terms of all aspects of your business,” Dr. Aversa says.

Data is only the starting point for improving performance.

We need data, but then we need the ability to mine that data into something that’s meaningful, that can help us understand what’s really happening. If you want to increase performance, [you begin] with understanding.

Improve staff training

You can use data to inform staff training and help employees improve where they need to. For example, you could identify weaknesses in upselling and give employees training in how to increase average order value. You could also equip staff with capabilities like email carts and line busting, to make them more efficient.

Increase marketing

Boost store performance with more meaningful marketing strategies. The more you know about your customers, the better you can target them with personalized emails and offers.

Enhance store experience

Changing the layout of your store or its window displays, implementing line busting strategies, and offering interactive workshops are just a few ways to enhance the customer experience and improve performance.

Unify the online and offline customer journey

An omnichannel shopping experience that combines online and offline shopping can increase sales. Implement email carts, in-store pick ups, and in-store returns to deliver convenience and keep customers coming back for more.

Improve performance at your store

There are many ways to measure store performance, such as average order value, foot traffic, and others we’ve discussed here. Use these figures to set benchmarks, then compare your metrics on a regular basis to monitor the health of your business.

Shopify POS’ reporting features make it easy to track store performance. Start your free trial today.

Source