How To Measure Sales Performance In Retail

How To Measure Sales Performance In Retail

Being a retail sales manager, you keep on thinking about growth.  In addition to the operational performance of the firm, a retail manager should focus on total net sales, the number of sales made by each employee, sales key performance indicators (KPIs), and other factors, to improve retail productivity and performance.

To drive the continuous development of retail performance and productivity, it is very important to measure sales performance in retail.

Now the question is “how to measure sales performance in retail?”.

Commonly general sales metrics and KPIs are used for measuring sales performance. But the measurement of sales performance in retail doesn’t only depend upon these sales metrics & retail kpis. It also involves many other factors to provide you with a complete and advanced picture of your business’s performance.

Considering all the required retail metrics to do this measurement at a single time can be very hard for you. But using 4 to 5 primary and necessary components of sale performance measurement can provide you with a real-time and quick overview of where you stand. This blog will explain how it is done by explaining four essential sales metrics for this measurement.

Importance of foot traffic to measure retail performance

The number of people coming to your stores either just for visiting or purchasing something is considered foot traffic (number of customers).

It can be an important aspect to consider when you measure store performance in terms of sales . It is particularly the scenario at retail stores because the greater the foot traffic is, the better the sales performance.

Foot traffic is an important indicator while measuring sales performance in retail. You can do this either by manually counting the people visiting your place or by a survey can be done (in the case of outsourcing). It is one of the very straightforward retail metrics to evaluate overall performance in retail because it is obvious that a store full of customers is doing excellent in sales.

Imagine you have to choose between two restaurants, one crowded with people and the other doesn’t seem to capture many customers. You surely will choose the crowded one considering that it is good if more people like it. That is why better customer relationships are very important. 

Customers are the only source that will make you money in every business, but this is especially the case with retail businesses. More foot traffic will give you a greater chance to convert visitors into potential customers (conversion rate).

Successful retail businesses count the foot traffic to improve their strategies accordingly, in return it will improve the sales performance in retail.

Note : This measurement is tricky at the E-commerce level, as you have to go through deep analytics that needs experience.

Number Of Buying Customers (Conversion Rate)

Not every visitor purchases from you. The ones who do is basically a “buying customer”. It is another important metric to measure sales performance in retail.

This rate is the number of customers who bought something from you divided by the number of visitors your business had at a particular time. The number of buying customers depends on the type of marketing campaign you are running. 

It will be true if we say that the sole purpose of every organization or business is to convert cold visitors or leads into potential customers who purchase from them.

Being a retail sales manager, you must know how to measure conversion rates. You must have the ability to understand the data collected and interpret it. It is like the backbone of a retail business, and its measurement is crucial to measuring sales performance.

The total number of people visiting/number of people who purchased x 100 = Conversion rate.

For example, if 1000 people came to your retail store in a working day, and only 150 of them bought something; your conversion rate will be 15%.

Keeping track of the conversion rate help you design strategies and offers and change the layouts of your business to keep on growing the rate of converting visitors into buyers. All things apart, the customer retention rate is the key factor for growth. Besides converting them to purchase from your, retaining them as regular buyers is also important.

Number Of Items In One Purchase (Units Per Transaction)

Sometimes a customer buys one thing, and others may buy ten things in a single purchase. Measuring the number of items and the sales amount of average transactions (units per transaction) is another essential key metric in sales performance in the retail business.

The higher the UPT (units per transaction) is, the greater will be the sales performance. Higher UPT indicated that people are purchasing multiple items in a single purchase. This is only possible if people enjoy shopping at your store and have a positive shopping experience. The amount of time they spend in a retail store is determined by your sales strategies and offers. The more time they will spend in your store, the higher will UPT go. The stores that better understand the needs and base of their customers, usually have higher UPT.

Measuring UPT is very easy as you have to go through all the transactions and calculate the average number of items per transaction. For example, if 10 people go shopping in your store in a day, they buy 5 items. The UPT of your store for that day will be 5. The average transaction will have a sale of 5 items (say a total price of $100). 

That is where upselling, cross-selling, and related recommendations come into play. You have to be strong in all these aspects to increase your store’s units per purchase.

It can assist you in calculating the number of items an average customer buys from your store. The more items you have per transaction, the higher the profit margins. 

Total Sales Vs Total Employees (Sales Per Employee)

Every employee plays an important role in improving retail store performance. To measure the sales performance in retail, it is essential to measure the sales per employee. It means how much sales one employee is contributing to total sales. The time period needed for this calculation is one year (measured annually). It also gives you an idea about how expensive one employee is for a business and how much your business’s operating cost is.

Aspects like inventory turnover are as identical, but they include different parameters. For example, sales per square foot (inventory turnover) are also important.  

Calculating the revenue per employee ratio is very straightforward. It is usually calculated on an annual basis. For example, if the total annual sales of your retail business are $10 million and you have 100 employees. Your sales-per-employee ratio will be $100,000 annually. It provides you with a precise estimate of the cost and revenue per employee, and it is essential to measure the sales performance in retail.

Related: What should a sales manager do to drive performance?

Bottom Line

Calculating the above metrics can give you a good start to measuring the sales performance of a retail store. However, there is more to sales performance management than you think.

After the pandemic , retail stores have been investing in sales performance management solutions to adminstrate and manage incentive compensation plans. With the help of a robust SPM solution, companies can analyze, plan and rapidly adjust compensation for short-term demands that impacts employee priorities.

Surprisingly, many companies are unware of what an SPM solution is, how it helps them to make data-driven decisions.

Retail Industry Data-driven decisions

Learn how a sales performance management solution can take your sales performance efforts to the next level

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