16 Metrics of Healthy Customer Service-Oriented Businesses: Part Three
Over the past two weeks, we have posted Part One and Part Two in the series that identify which key metrics you should track to assess operational and employee performance in the QSR and hospitality industries. Today, we’ll focus on the retail industry and conclude our series by reviewing six retail store metrics to evaluate a business’ health.
- Conversion percentage: The first step in finding out your store’s conversion percentage is tracking the number of footfalls (customer visits) to the store. To understand how effective your displays, promotions, and selections are, you’ll also want to know your conversion percentage (number of purchases / number of footfalls). If your percentage is low, gather customer feedback to find out where expectations weren’t met and make changes to correct them. Higher conversion optimization means more sales with less advertising and promotion, lowering your operational costs.
- Same-store sales: Calculating your store’s percentage increase in sales over its previous year’s performance (same-store sales percent) is one of the most-tracked metrics in retail. Evaluating this number allows you to see what new revenue sources might be affecting your sales or whether your store has seen increased productivity in sales personnel or management.
- Sales by category: If you’re not already tracking your best-selling items, there’s no time like the present to start. Use this metric to track which categories do well. Ensure your top-selling items are always well-stocked, and you might consider adding to the category with companion items or upgraded options. Conversely, you can remove poor-performing categories to free up floor space for faster-moving inventory.
- Wage per sale ratio: How cost-effective is your overhead? You can find out by calculating your wage per sale ratio, or annual sales divided by total employees. The higher your ratio is, the more efficient your store is; you’re doing more with fewer employees. When looking for companies to benchmark your ratio against, remember to find like-stores. A software firm will have a much higher ratio than a retailer with many chains, for example, though both could be performing highly efficiently compared with other stores in their industry.
- Number of complaints: Never underestimate what complaints can be doing to your store’s sales. For every poor interaction in your store, customers need 12 excellent ones to restore their faith. Complaints are also more likely to reach additional potential customers than any other type of feedback. Keep your complaints low by having a well-trained staff that understands how important customer loyalty is.
- Number of units per transaction: This metric is good to watch for two reasons. First, it can tell you how effective your salespeople are at getting people to pick up a second item. Use this metric to track upsell success for sales associates. Second, this key performance indicator lets store managers know if they’re overdoing in-store promotions. If your units per transaction are rising but your sales total is not, customers are likely stocking up on sale items without contributing to your bottom- line.
In a customer-facing industry such as retail, it’s important to accurately assess operational and employee effectiveness to track store health. The six metrics above will not only enable store managers and their associates to track performance, but also generate more sales.