Top 7 KPI Metrics to Track for Retail Business Growth

Key performance indicators, also known as KPIs, are efficient metrics used to measure and analyze business health. They help retailers to increase profits by identifying customer habits and problems within the purchasing process. KPIs are based on business factors such as customer satisfaction, sales, costs, inventory, and many more. This gives business owners valuable insight into where the business thrives and fails, allowing them to make positive changes for sustainable growth.

Different companies have different goals and growth strategies. Therefore, you must first identify your business objectives to create KPIs that accurately track business progress. Here are important KPIs to track for your ecommerce business:

Sales Per Square Foot

Maintaining a physical retail location can be expensive. Sales per square foot compare your net sales to the physical location’s square foot. It allows you to determine the cost of staffing and maintaining a space compared to the revenue it generates.

Studies show that product presentation and store layout can greatly influence consumers’ purchasing decisions. Products at an eye level are more popular than those on lower and higher shelves. Sales per square foot KPI shows the productivity of a store’s layout, excluding storage and fitting rooms. You can see if you are making productive and efficient use of the space, layout, and product displays. It also shows you whether to change locations, products, displays, or advertising strategies.

Customer Retention

Repeat customers are the key to a successful retail business. Every entrepreneur knows retaining an existing customer is more challenging than acquiring a new one. Customer retention rates reflect your business-customer relationship and your client’s journey with your company. As a retailer, you should ensure your prices, products, services, and customer services encourage return consumers. 

Understanding why your customers prefer your business over your competitors or why they don’t is crucial in improving your retention rates. Check online reviews to identify problematic issues and fix them. You can also use positive reviews to amplify your good deeds to boost sales and earn loyal customers.

Gross Margins Return on Investment (GMROI)

To calculate GMROI, you should divide gross profit by the average inventory. This metric indicates an inventory’s profitability, helping you understand how much money you make on a specific product. Based on this information, you can decide which products to continue selling and which to stop. 

To improve your GMROI, increase prices and improve inventory turnover rate. You can also switch your manufacturers or producers to lower the costs of merchandise and services.  

Inventory Turnover 

You need to divide the cost of goods sold by the average inventory to determine your inventory turnover. It reveals how much stock is sold in a given period. A low stock turn shows that you are not selling fast enough, and you risk deadstock or overstocking. However, you may not be stocking enough and therefore lose money if your stock turns too fast. The inventory turnover metric helps business managers to understand merchandise mostly affected by seasonality, allowing them to stock per customer demands.

Average Transaction Value

This metric determines the average money shoppers spend on your products per transaction by dividing total revenue by the number of transactions. High transaction value shows consumers buy higher-value products or more products from your store. A low value could indicate your customers are purchasing lower-value merchandise or fewer products.

With this metric, you can determine when your customers are more likely to spend more money, allowing you to adapt your marketing campaigns accordingly. You can also determine your customers’ favorite purchasing platforms, enabling you to adjust your online shop. For a brick-and-mortar store, you may need to change store layout and product placement and set better pricing for your products.

Conversion Rate

The conversion rate is the percentage of people visiting your store or business website and making actual purchases. You can determine how many visitors, leads, and prospects convert to sales by dividing total sales by the number of visitors. 

Conversion rate is an efficient measure of the success of an overall business strategy. It shows how much the service or goods appeal to customers and how your advertising campaigns perform. You can also determine how effective your landing pages and user experience are if you are an online business.

Foot and Digital Traffic

Digital traffic focuses on consumers visiting the company website and social platforms. On the other hand, foot traffic concentrates on customers entering your physical store. They provide insight into customer behavior and response. Foot and digital traffic are strong indicators of whether your marketing strategies and promotional campaigns positively impact your business. They also assess your brand awareness and the success of your store window displays and website’s user interface. 

Set Up Your Business For Success With Retail KPIs

KPIs allow retailers to track and measure their business performance from all angles, such as inventory, customer service, sales, and marketing strategies. These metrics provide you a complete view of your business, including its current position, its weak areas, and positive changes you can make to ensure it continues to grow.