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Determining Your Key Performance Indicators

You can’t run a successful business operation without data. In the retail world, this data often comes in the form of KPIs, or key performance indicators.

KPIs help you monitor progress, set goals, measure goals, and more. If you don’t know what your KPIs are (and if you don’t track them) your business will likely suffer. Here are the performance indicators that every retail business owner needs to monitor.

Measuring retail’s most important KPIs

If you use point-of-sale software, you’re familiar with the sheer amount of metrics that these solutions provide. The good news, though, is that you don’t need to pay attention to every single piece of data. Here are the key KPIs to focus on:

  1. Sales and gross margin
    You’re in business to sell, and that’s why measuring sales and gross margin performance is so necessary. Measure sales over a period of time to identify trends across different stores, trends with different products, and more.

    Your gross margin is the difference between revenue and the cost of goods sold. The number is calculated by taking the cost of goods sold and dividing it with revenue, and it’s expressed as a percentage. This KPI gives you tremendous insight into your business’s financial performance.

  2. Returns
    Knowing how many, and how often, items purchased in your store have been returned is another metric to track. It can give you a clearer picture of a store’s revenue and overall profit margins.

  3. Profits and losses
    Profits are important, but so are losses. Your profits and losses report is an important KPI that will help you determine whether any losses are inevitable (or not), and this information can also help you manage expenses and price products correctly to avoid losses.

  4. Average customer spend
    How much, on average, does each customer spend? This metric shows you how much product is purchased during each transaction and can be useful when segmenting customers and planning marketing efforts. Measuring this KPI will also give you insights into how well your sales associates are selling.

  5. Number of customers and transactions
    In order to determine whether your business is growing foot traffic you’ll need to track how many customers enter your store. There’s even software that can do the counting for you.

  6. You should also count the number of transactions that take place, because this is another great way to assess how well employees are performing. When you combine this information with data on average customer spend, you’ll get even more useful information about your store’s performance.

  7. Year over year to date
    While tracking transactions, foot traffic, and average customer spend is great, you also need to compare performance across years. That’s where this handy metric comes in. Comparing profits from year to year allows you to identify long-term trends and take corrective action if needed

Knowing your KPIs isn’t enough

Just knowing how your key performance indicators are looking isn’t enough. If you want to make sound business decisions it’s important to look at this data in the proper context, which is why you’ll often need to compare different figures side by side.

Some businesses accomplish this with software, others track performance in Excel spreadsheets. But, the one thing they all have in common — they know how important it is to determine their key performance indicators.

Which KPIs do you measure in your business? How has measuring KPIs improved your business? Don’t forget to tell other readers about your experiences in the comments!


About the Author — Christie Acker

Christie is responsible for helping Envysion’s enterprise clients in the retail and restaurant spaces understand the best ways to use video-based business intelligence to deliver on their brand promise and drive profitability. With over 15 years experience in building and supporting world-class sales organizations, Christie is an accomplished and tenured leader in the enterprise software sales market. An avid traveler, she has visited over 60 countries and uses her diverse experiences to help understand clients' needs to design and implement solutions to help achieve their goals. Christie holds a Bachelors degree in Economics from Vanderbilt University.


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