25 Retail KPIs Metrics to Track
A business may not appear as much as progressing as planned. Further, retailers need measurable metrics to understand the things that help in improving towards business goals to stay ahead of the curve.
Key performance indicators (KPIs) work as the litmus to accept objective data to assess the business performance. It optimizes operations to succeed by analyzing the industry turnover, customer lifetime value, net profit, and other KPIs.
Leaders can make improved decisions to plan more effective omnichannel strategies for better Inventory Management, net profit, retail leaders, customer lifetime value, and many more KPIs.
What is Retail KPIs?
Retail KPIs are measurable metrics to project a retailer's progress towards different goals. It acts as the mark for the decision-makers, opportunities, trends, and trouble spots regarding their inventory. Further, employees, customers, sales channels, e-commerce, and other things are effectively managed by your business.
KPIs are helpful in comparison to benchmarks, competitors, and previous periods to add realistic goals for future strategies. Retailers can effectively predict the forecast of future sales, create more accurate budgets, allocate resources, and drive long-term growth.
1. Inventory Turnover
Inventory turnover is a metric to measure how often a retailer sells and replaces its stock within a specific period. A high turnover rate indicates strong sales while a low rate may suggest overstocking or weak demand. This metric helps retailers manage their inventory levels effectively. It reduces carrying costs and minimizes the risk of stockouts. To calculate inventory turnover, you need to divide the cost of goods sold (COGS) by the average inventory during the period.
Inventory turnover rate = COGS / Average Inventory
2. Shrinkage
Shrinkage in Inventory Management shows the amount of loss of inventory due to damage, theft, or miscounts. This key performance indicator (KPI) makes retailers understand how much inventory is wasted. Further, it informs pricing strategies to reduce shrinkage. Businesses can identify issues related to quality control and theft prevention by tracking shrinkage.
Addressing shrinkage is essential for maintaining profitability. This is true for products that are more prone to loss during shipping mishandles.
Gross margin return on investment = Gross margin / Average inventory cost
3. GMROI
Gross Margin Return on Investment (GMROI) assesses the profitability of inventory by comparing gross margin to the average inventory cost. A GMROI above 1 indicates that a retailer earns more from sales than it spends on inventory, while a value below 1 suggests losses. Monitoring GMROI helps retailers make informed decisions about which products to carry and can signal when price adjustments are necessary to maintain profitability.
Gross margin return on investment = Gross margin / Average inventory cost
4. Sell-Through
The sell-through rate measures the percentage of inventory sold compared to the total received within a specific timeframe. A high sell-through rate indicates strong sales performance. However, a lower rate may suggest overstocking or decreased demand. Monitoring this KPI helps retailers align their purchasing strategies with sales trends. It avoids unnecessary inventory accumulation that could lead to increased carrying costs.
Sell-through rate = (Number of units sold / Number of units received) x 100
5. Spoilage
Spoilage depicts the kind of material in inventory management that cannot be sold due to spoilage, obsolescence, or lack of demand. Retailers must establish criteria for identifying "dead stock" to calculate spoilage accurately. This KPI is essential for businesses dealing with perishable goods leading to increasing spoilage rates that may indicate overordering or poor inventory management practices. Discounting items nearing expiration can help recoup some costs associated with spoilage.
Spoilage = (Amount of unsellable stock in period / Amount of available stock in period) x 100
6. Conversion Rate
The conversion rate tracks the percentage of visitors who purchase by providing insight into sales effectiveness. A higher conversion rate indicates successful marketing strategies and store layouts that encourage purchases. E-commerce platforms typically have more accessible data for tracking this KPI compared to brick-and-mortar stores. Understanding conversion rates helps retailers optimize their sales processes and improve customer experiences.
Conversion rate = (Number of sales / Number of visitors) x 100
7. Sales per Square Foot
Sales per square foot measures how effectively a retail space generates revenue relative to its size. This KPI is calculated by dividing net sales by the total square footage of the store. It allows retailers with multiple locations to compare performance across stores. Moreover, it assesses the impact of layout and available space on sales efficiency. Improving this metric can lead to better resource allocation and increased profitability.
Sales per square foot = Net sales / Store floor area
8. Gross Profit
Gross profit represents the revenue remaining after deducting the cost of goods sold (COGS). This KPI provides insight into a retailer's overall profitability from sales operations. Further, it is crucial to cover indirect expenses like rent and utilities in Inventory management. A decline in gross profit may signal the need for price adjustments or cost-cutting measures, such as finding more affordable suppliers.
Gross profit = Net sales revenue - COGS
9. Net Profit
Net profit is the total revenue left after all expenses are paid by reflecting overall business success during a financial period. This "bottom line" figure can be reinvested in growth initiatives or distributed to owners and stakeholders. While occasional negative net profit may not indicate a problem consistent losses can jeopardize a business's ability to meet financial obligations.
Net profit = Gross profit – Operating and other non-COGS expenses
Net profit = Total revenue – Total expenses
10. Average Transaction Value
Average transaction value (ATV) measures how much customers spend per purchase. Analyzing ATV over time helps retailers refine marketing strategies aimed at increasing customer spending during transactions. Understanding ATV can guide promotional efforts to enhance overall revenue generation by encouraging customers to buy more items per visit.
Average transaction value = Revenue / Number of transactions
11. Online vs. In-Person Sales
Comparing online versus in-person sales provides valuable insights into customer behavior and preferences. This KPI highlights revenue generated from each channel without requiring complex calculations. Retailers can allocate resources more effectively to develop targeted marketing strategies tailored to each sales channel's strengths by analyzing these figures.
12. Items per Transaction
Items per transaction tracks how many products customers purchase in a single order, also known as "basket size." This KPI helps retailers evaluate seasonal trends and assess marketing effectiveness based on product placement promotions. A decline in items per transaction may prompt retailers to adjust displays or bundle related products to encourage larger purchases.
13. YoY Growth
Year-over-year (YoY) growth compares total sales revenue from one year to the previous year, expressed as a percentage. This KPI accounts for seasonal fluctuations in sales patterns and provides insight into overall business growth trends. Retailers experiencing slow YoY growth should investigate potential issues affecting performance and consider adjustments to their strategies.
Items per transaction = Total items sold / Total sale transactions
14. Cart Abandonment Rate
Cart abandonment rate measures the percentage of online shoppers who add items to their carts but do not complete the purchase. Tracking this KPI in Inventory management helps identify potential barriers in the checkout process. This include processes such as complicated procedures or high shipping costs that deter customers from finalizing their orders. Addressing these issues can improve conversion rates and overall sales.
Cart abandonment rate = (Completed transactions / Started transactions) x 100
15. Customer Lifetime Value (CLV)
Customer lifetime value (CLV) estimates the total revenue expected from a customer throughout their relationship with a business. Understanding CLV helps retailers tailor marketing strategies aimed at improving customer retention by maximizing repeat purchases. This KPI is particularly important for subscription-based businesses that rely on long-term customer relationships for sustained revenue.
Customer lifetime value = ATV x average purchase frequency x average customer life span
16. Cost per Acquisition (CPA)
Cost per acquisition (CPA) calculates the average expense incurred by a retailer to acquire a new customer through marketing efforts. It is challenging to quantify precisely due to factors like word-of-mouth referrals. CPA provides insight into advertising effectiveness based on trackable campaigns. Further, Retailers must balance CPA against expected revenue from new customers to evaluate marketing strategy success.
Cost per acquisition = Total investment / Number of new customers
17. Foot Traffic
Foot traffic measures how many people enter a retail store within a specific timeframe, regardless of purchases made. This Inventory Management KPI helps assess brand awareness and evaluate marketing campaign effectiveness across multiple locations. While manual counting methods exist, many modern retailers utilize electronic tracking systems like motion sensors for accurate foot traffic measurement.
Foot traffic = number of visitors/unit of time
18. Retention
Retention tracks repeat business from customers who return after an initial purchase. It denotes how well retailers foster loyalty among their clientele. Further, Improving retention often costs less than acquiring new customers by making it essential for sustainable growth. Retailers can enhance retention through loyalty programs that reward repeat purchases while ensuring incentives do not erode profit margins.
Customer retention = (Customers at the end of a period – New customers during the period) x 100
19. Online Traffic
Online traffic measures how many visitors engage with an e-commerce site over time. It provides insights into customer interest and engagement levels. Retailers monitor this KPI using web analytics platforms that track individual visits or integrate data with broader business metrics through ERP systems. As online shopping continues to grow in popularity, understanding online traffic becomes increasingly important for strategic planning.
Online traffic = Number of website visitors / Unit of time
20. Return Rate
Return rate tracks how many products customers return after purchase due to defects or dissatisfaction with their orders. Monitoring this Inventory Management KPI is crucial because high return rates can impact revenue significantly when returned items cannot be resold easily. They do not always reflect poor customer satisfaction levels while returns can indicate quality control issues.
Return rate = (Total returns / Total goods sold) x 100
21. Net Promoter Score
The Net Promoter Score (NPS) gauges customer satisfaction by asking respondents how likely they are to recommend a retailer on a scale from 0 to 10. Customers are categorized into detractors, passives, or promoters based on their ratings by allowing businesses to calculate an overall score as a percentage. A positive NPS signifies more promoters than detractors by indicating strong customer loyalty and satisfaction.
Net Promoter Score = Percentage of promoters – Percentage of detractors
22. Shopper Dwell Time
Shopper dwell time measures how long customers spend in-store or online before making a purchase decision. High dwell time may correlate with increased sales; however, it could indicate difficulties in finding desired products leading to frustration. Retailers should analyze dwell time alongside other KPIs like foot traffic and conversion rates for comprehensive insights into customer behavior.
Shopper Dwell Time = Total Minutes in Store for All Shoppers (In-person or Digital) / Total Traffic
23. Sales per Employee
Sales per employee calculate the average sales generated by each worker within an organization by providing insights into workforce productivity levels. This Inventory management KPI informs staffing decisions such as scheduling needs and compensation structures based on performance metrics over time. A consistently high sales-per-employee ratio suggests effective staff performance while signaling when additional hires might be necessary.
Sales per employee = Net sales / Number of employees
24. Employee Satisfaction Rate
Employee satisfaction rate assesses how content employees are with their roles regarding responsibilities, compensation, and work environment factors. Although quantifying satisfaction can be challenging without standardized formulas many retailers conduct performance reviews or surveys similar to NPS assessments for customers. It ensures employee feedback is heard and addressed proactively before turnover becomes an issue.
25. Employee Turnover Rate
Employee turnover rate tracks how many workers leave an organization within a specific timeframe either voluntarily or involuntarily. It indicates workforce stability levels overall. A high turnover rate signals potential dissatisfaction among employees leading them toward other opportunities while incurring recruitment costs for replacements. Retailers should monitor this KPI closely since excessive turnover impacts productivity negatively along with team morale.
Employee turnover rate = (Number of employees who left / Average number of employees) x 100
Check All the Retail Related KPIs in One Place!
Retailers must check every advantage to maintain their competitive edge in the retail landscape. Businesses can deliver a seamless omnichannel experience to customers across various platforms with the help of NetSuite. Further, this solution also provides a comprehensive management platform by offering real-time insights into business performance. Retailers can effectively meet customer demand by managing inventory, optimizing processes, tracking sales, and monitoring key performance indicators (KPIs) to drive success.
NetSuite Financial Management is a cloud-based solution that centralizes financial information securely, accessible anytime and anywhere. Retailers can understand how operational changes impact profitability and revenue through detailed KPI reporting and analysis. Further, this visibility allows you to identify areas for improvement to plan effectively for business performance.
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