Retail Metrics: What Are The Most Important KPIs You Should Be Tracking?

Ever heard of the phrase, “the numbers don’t lie?” If something feels “off” in your business, the first order of business is looking at your retail metrics.

When it comes down to brass tacks, for any retailer big or small, your numbers don’t lie. Your numbers give you the cold hard truth (good and bad) and if you know how to track them, analyze them and implement action based on those numbers, you’ll always have a roadmap to growing your business.

Every retail is business is different, so your retail KPIs may differ from others. Some retail metrics like inventory, sales and customer data relate to all retail businesses.

The big question you should be asking yourself right now, “what retail metrics should I be tracking?” A great question, right? If you don’t know, this guide is going to teach you. If you do know, heck, you may just learn something new. Regardless of your level of experience, there’s no denying the fact that your numbers are everything. You’re either growing, stable or you’re down.

With that being said, let’s take a look at the most important retail metrics you should be paying attention to.

(1) Sales

While this is an obvious first choice, you’d be surprised by how many retailers don’t consistently track their sales. Sure, you have a general idea of how much sales you have but do you really dive deep into your sales? The bigger concern, retailers are not using their sales data to make better informed decisions as it pertains to their business.

If you want to improve your sales, you have to know what’s driving sales in the first place. There’s a ton of insights you can get from your sales data, a few examples would be;

  • Product A is consistently selling out in our Dallas store, let’s get more product there to make more sales.
  • Product B is selling 40 units per month online. Let’s see what’s driving those sales so we can replicate it for other products.
  • Our YOY is up 140 percent, what did we implement to achieve that type of growth?

Now, these are just a few examples but the ultimate goal is to use your sales data to improve…… “sales.”

(2) Conversions

Your conversion rates are going to tell you exactly how good you are at turning prospects into paying customers. Fortunately, there’s a ton of ways you can improve your conversions.

    • Reviews (The More You Can Add, The Better)
    • High Quality Images On Product Pages
    • Get Your Audience Excited About Your Products And Brand
    • Use Security Badges And Seals On Your Website
    • Make Sure Your Checkout Is Simple And Easy

A small boost in conversions can make a huge impact on your bottom line. You should always be looking for ways to get higher conversions. High conversions is going to allow you to sell more without having to grow your current audience, I’ll take that any day of the week and twice on Sunday.

(3) Gross Profit And Net Profit

Your gross profit is going to tell you how much money you’re making after deducting the costs of producing and selling the product. The formula to determine your gross profit is simple, it’s:

  • sales revenues – cost of goods sold

Now, your net profit is going to tell you how much money you made after you deduct your cost of goods along with any other business expenses you may have, which may include, operating expenses, administrative costs, etc. To get that total, just use the equation below:
all revenues – all expenses

Why should you analyze gross and net profit?

Another good question, your gross and net profit is going to tell you if you’re putting money into your pockets or putting it into your business to stay afloat. Generating sales and revenue is good, but at the end of the day, you need to make money out of those sales.

Tracking these KPIs will help you make smarter decisions in various aspects of your business. For instance, if your gross profit is on the low side, then you may want to look into product sourcing and determine if there’s a way to lower your cost of goods.
Not netting enough profit? Perhaps you should find ways to lower your operating expenses.

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How do you improve your gross and net profit?

You can try several profit-increasing strategies in your business. Here are some quick ideas:

  • Streamline your operations to reduce expenses
  • Raise your prices
  • Increase your average order value
  • Implement savvier purchasing practices
  • Optimize your vendor relationships

(4) Year-Over-Year Growth

Year-over-year (YOY) is one of the most commonly used retail metrics, used to measure a company’s growth over an annual period. YOY is one of the fastest calculations you can do to see if a company is experincing growth, staying still or declining.

How do I measure year-over-year growth?

The goal for any business is to see continuous improvement. One of the best ways to see if that’s the case is by measuring your current results versus your past results. This will give you clarity on your company’s progress and as long as you’re tracking this every period, you’ll be able to make adjustments as needed to ensure you see continuous growth.

How can I improve YOY growth?

First, you need to make sure you’re tracking this every period. Furthermore, you should be documenting everything you do in your business. Some small merchants are selling millions in products, you may not have a team to help with tracking. To my point, every business has a different scenario. Even so, you can’t improve your YOY if you’re not tracking it.

(5) GMROI

Gross Margin Return on Investment (GMROI) measures your profit return on the funds invested in stock. It answers the question, “For every dollar invested in inventory, how many dollars did I get back?”

The formula for GMROI is:

  • gross profit / average inventory

Why should I measure GMROI?

GMROI tells you how much money your inventory has made. You use this metric to figure out if your stock is turning a profit. It’s typically measured for specific products or categories because it can give you a good idea of which types of merchandise are worth carrying in your shop.

How can I improve my GMROI?

To increase your GMROI, ask yourself, how can I get more money out of my merchandise? Accomplishing that can mean:

  • Increase The Price Of Your Products
  • Increase The Profit Margin Of Your Products
  • Lower Your Cost Of Goods
  • Improve Your Inventory Turnover

(6) Sell Through

Sell through is the percentage of units sold versus the number of units that were available to be sold. It’s expressed in percentage form using the formula:

The sell through formula is as follows:

  • number of units sold / beginning inventory x 100

Why should I measure sell-through?

Sell through is an awesome way to evaluate the performance of your merchandise. Sell through can also help you figure out how fast products are selling, allowing you to make the appropriate decisions when making future purchases.

For example, let’s say you’ve stocked up on a new style of athletic shirts and you saw that you’ve sold through 90% of your inventory in the past 7 days. For your store, this is super quick and unusual. Now, you can use your sell through formula to determine how much to order so you don’t run out.

How can I improve sell-through?

Improving your sell through can be a little tricky because every scenario is different. Honestly, it all depends on your specific situation.

If you have a high sell through rate, this could mean you need to stock up on that specific product.

If you have a low sell through rate, you may need to figure out how to sell more of that product.

Truth of the matter, there’s many retail metrics you should be tracking consistently. Doing so is going to allow you to grow your business and make better informed decisions on matters that relate directly with your business.

*Accelerated Analytics publishes resources like this to provide insights to different analytical metrics, data points and formulas. Please be aware, we’re not claiming that our POS reporting services will offer this example or any other metric, data point or formula. To learn exactly what our reporting covers, please feel free to schedule a demo or give us a call. Thanks for understanding.