As a professional in the retail industry you know this is one of the most competitive markets worldwide. Millions of transactions are made everyday and some of those belong to your business. How are you collecting data about these sales and using that data to help direct the decisions that will help grow your business?
By tracking your key performance indicators (KPIs) through your point of sale (POS) software, your business will have access to this information, as well as the ability to pull reports automatically that help you quickly and easily interpret the data. Here are five retail KPIs your software can be helping you track:
1. Average Customer Spend
Something most business owners want to know is how much customers are spending, which can be one of the most rewarding metrics to explore. This gives insight into not just how much customers are spending, but also the types of purchases they are making. Are they are spending high dollar amounts on a few products, or larger quantities of lower priced items?
Knowing how much your customers spend on average and the products they are buying can help you to identify small areas of improvement within your business. These metrics help direct what items could sell well as bundles or upsells, or need adjustment to their product placement.
2. Number of Transactions Per Customer (loyalty)
Retaining customers is one of the most challenging aspects of running a business. Being familiar with the number of transactions per customer helps you identify who your frequent and loyal customers are. Armed with this information, you can target those customers to join your customer loyalty program helping you keep your customers close while increasing sales for your business.
3. Sell Through
If you are wondering the rate at which your products are being purchased, a useful retail KPI to measure is sell through. The percentage is calculated for a specific time period with the following formula:
# of units sold / beginning inventory x 100
By tracking sell through, you can help manage inventory and make sure the proper amount of products are being ordered when compared to how fast they are being sold. This enables your business to ensure that you always have popular products in stock, and that slower selling products aren’t tying up vital capital by being included in the next inventory order.
4. Inventory Turn Over
Knowing how much product your business sells and replaces is key to managing inventory. This can be measured on a daily, weekly, monthly, quarterly, or even a yearly basis. It is calculated by dividing the number of sales by the average inventory for a product in this formula:
total # of sales of product / average inventory of product x 100
Being familiar with the retail KPI of inventory turnover rate, you can help make decisions of pricing, marketing, and purchasing more inventory. This gives you more control over managing the products you sell, helping save your bottom line.
5. Return Rate
We’ve all been there, you buy something and decide once you get the item home that you don’t like or need it and want to take the product back to the store. In measuring return rates on your products, essentially what you are measuring is customer satisfaction.
If certain products are returned more than others this can be an indication that the price or design of the product needs adjusted. Measuring return rate can also help to manage a return policy, creating a system that works best for your needs as a business, but also giving guidelines for the best customer service experience possible.
Know Your Data Points
These are just five of the retail KPIs you can track using your POS software. There are hundreds of metrics your business can track depending on what your needs are.
Take time getting to know your reporting capabilities so you can tighten up areas where you may be losing money unnecessarily, helping to build your bottom line. Paradise POS’s software has integrated reporting to help you get the most from your data and keep track of your most important KPIs. Contact us to find out how our iOS-based software can benefit your retail business.