Starting a retail business is an exciting venture. A key to rapid success lies in adopting retail sales performance standards. Implementing these best practices can potentially increase sales and profit by up to 30%.
Achieving sales objectives goes beyond attractive displays and store aesthetics. It requires a customer-focused approach driven by Key Performance Indicators (KPIs), providing staff at all levels with insights into the current market conditions and individual performance.
Think of retail sales performance like sports coaching. Coaches rely on statistics to guide their athletes. Similarly, in retail, KPIs provide crucial data for optimizing performance. These metrics reveal trends, behaviors, and opportunities for improvement, enabling businesses to understand their current position and future trajectory.
Measuring fundamental sales performance drivers is essential for any retailer. KPIs, tracked through spreadsheets, POS systems, dashboards, and scorecards, translate shareholder strategy into actionable insights for individual employees. Comparing forecasts with actual results allows for informed adjustments and strategic planning.
It’s crucial to recognize that high-level business indicators like profit margin and wage costs don’t directly drive sales on the shop floor. Telling a salesperson “We only achieved 80% of budgeted sales” offers no actionable guidance. Instead, break down team-level targets into individual goals, much like a sports coach. The coach identifies a few key KPIs, offering players specific areas for improvement. For example, tracking “number of times a player touched the ball” in soccer or “number of players on 3rd base” in baseball.
In retail, tracking five core KPIs provides targeted coaching information. More than five can overwhelm the reporting system.
Here are five essential KPIs for retailers:
* **Sales per hour:** Measures individual salesperson selling speed and customer engagement compared to peers.
* **Average Sale:** Compares the average selling price of each salesperson, indicating product knowledge and ability to upsell. Low averages suggest a lack of product expertise or probing skills.
* **Items Per Sale:** Reflects a salesperson’s ability to add-on to a sale, increasing transaction value.
* **Conversion Rate:** Tracks the percentage of store visitors who become paying customers, indicating the effectiveness of sales techniques and store environment.
* **Wage to Sales Ratio:** Compares a salesperson’s hourly wages to hourly sales, identifying top performers and underperformers, and their overall value to the company.
Many retailers don’t track these vital KPIs at the staff level due to the perceived difficulty in recording, calculating, and reporting the data. It requires tracking hours worked, setting goals, comparing planned versus actual performance, and leveling the playing field for all salespeople. This requires software which can automatically assign individual, weighted, sales targets to each salesperson, based on when they are working – then integrates with your POS (point of sale) terminal to instantly calculate the five (5) key performance indicators, and figure out the most deficient KPI – on demand! Furthermore, such a system could offer integrated sales behavior coaching tips built right into the system.
In sports, the playing field is level. In retail, salespersons who are working during lunch hours should be expected to sell more than a salesperson working early morning or late afternoon. Any reporting system must weight individual sales targets.
Focus on improving the most deficient KPI first, leading to the greatest increase in sales and staff motivation. To win in retail, measure these five principal KPIs using an affordable solution, implementing best practices for rapid success.
Good luck with your new store!