Measuring retail stores’ performance is critical to any business. Though there are quite a few ways to do so, two fundamental metrics have been frequently used by retailers to quantify store performance. These are:
- Sales per square feet
- Store income statement
The first one tells you how a store is performing irrespective of its size. And it has proved to be an excellent measuring tool, especially when it comes to comparing different retail stores. The second, on the other hand, helps you assess each store as if it’s a separate business entity that has its own profitability.
But, the retail landscape has changed a lot over the years. In the past, the sole purpose of the stores was to display products and sell them out. Today, they are doing less of that and more of other tasks, which can’t be measured through sales per square feet or store income statement. Considering the changing environment, it’s imperative for retailers to ask themselves how on earth they can evaluate store performance when old measurement tools can only lead to wrong conclusions.
What are the Essential KPIs for Tracking Retail Stores Performance?
What are the Essential KPIs for Tracking Retail Stores Performance?
Unfortunately, there isn’t a definitive list of essential KPIs to track retail store performance and there are quite a few reasons for that. First of all, retail is still changing at an unprecedented rate, so it’s hard to predict which metrics will prove more useful in measuring success once the changes are complete.
Secondly, future retail stores won’t be anything like the ones we have seen in the past. In fact, the future performance of stores will be measured by keeping the type of stores and retailers in mind.
Here are the three areas that will stand out when you enumerate retail store metrics in the foreseeable future.
- The Catchment Area
- Buy-Online-Pickup-Instore (BOPIS)
- Buy-Online-Return-Instore (BORIS)
The Catchment Area
The catchment area is a zone of influence that generates online sales in the immediate area around the store. It is observed that in the area of influence online sales are usually on the higher side than other places. That is because the store works as a billboard which creates awareness and lures consumers. Today, it isn’t unusual for customers to place their orders online while standing in a store or strolling on the sidewalk right in front of the outlet or the instant they get home.
In each situation, the sales don’t count towards physical stores’ sales figures. And that needs to change. The sales allocated to brick and mortar stores should cover both the sales in-store and online in the immediate area where the store influences buyers.
To make this right, retailers must define a geographical area around each store so all the online sales should show up as the immediate store’s revenue. Of course, you can change the radius of a store depending on consumer habits and population density. This could be more like drawing the map of congressional districts than simply sketching a circle around every store because every zone is different. Sure, this isn’t a perfect solution to attribute sales to a store but it will certainly give them the credit for the work they are doing beyond those four walls.
However, embracing this solution won’t be that easy for multi-line retail stores like Macy’s and Target. For example, the zone of influence for dairy may differ completely from candy or blouses. That’s because of their expertise, market share, collection, and several other factors. So the way in which the success of a store is measured and given credit for online sales will largely depend on what it is doing and where. An easy way out would be to draw different catchment areas for different products.
Buy-Online-Pickup-Instore (BOPIS)
The curbside pickup isn’t something new for restaurants. Eateries like Applebee’s and Red Robin has this service around for some time now. But in recent years, you may have noticed leading retail chains like Walmart, Kroger and others have reserved an entire section of their parking just for customers who are opting for buy online and pick up instore.
Not only this phenomenon has proved to be a lifesaver for customers, but it has also widened the appeal of brick and mortar stores. The customers can get what they want instantly without waiting for long shipping times.
But why retailers are in love with BOPIS? For them, it’s not just a way to make a sale, rather it’s an opportunity to get their target customers into the store and sway them to buy something more. That’s why the buy-online-pickup-instore should be considered as an important KPI for every retail outlet.
Buy-Online-Return-Instore (BORIS)
Many retailers are selling through traditional as well as online stores and they are offering different incentives to customers to see more sales. For example, they offering customers free delivery and easy returns, which means they can buy online and make returns in-stores. This has allowed the customers to avoid the hassle of returns by mail, which requires them to repackage the purchase, then bring it to a courier, and eventually pay for the return cost out of their own pocket.
For this reason, the buy-online-return-instore should also be accepted as a key performance indicator.
Concluding Thoughts
By no means, we at FootMetrics believe it’s a complete list of KPIs to measure the success of retail stores. But, it’s not a bad start to add these to your long list of things and analyze how your stores are performing
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