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Choosing Retail Analytics Software Based on KPIs
by Bizom
"Consumers have taken control of the shopping process, and there is no sign that they plan to let go,"
The retail industry faces significant challenges as it navigates an increasingly competitive landscape. According to a McKinsey study, traditional grocery and hypermarket retailers are grappling with 1-1.5% margin pressure, while specialty clothing and department stores endure a higher 3-3.5% pressure. This intense competition among retailers and distributors vying for the same consumer base has led to a relentless battle to entice shoppers to their stores.
The good news is that advanced data analytics, driven by Key Performance Indicators (KPIs), can help retailers deliver a personalized customer experience (CX) and expand their customer base.
However, failure to adapt to these advanced analytic capabilities could prove detrimental. Gartner’s research highlights that retailers who do not incorporate these capabilities into their operations will struggle to remain competitive in an increasingly digitized market.
In fact, over 70% of organizations rely on KPIs specifically for customer segmentation, making it a crucial component of their operations. Companies like PepsiCo have successfully harnessed real-time frontline data based on multiple KPIs to boost sales and minimize order cancellation rates.
In this blog post, we’ll dive into the benefits of using retail analytics software based on KPIs and how it can help retailers improve their bottom line.
What are retail KPIs?
Retail KPIs, or Key Performance Indicators, are specific metrics used to evaluate the performance of a retail business. These metrics can vary depending on the goals and objectives of the business. By tracking KPIs, retail businesses can gain insight into their overall performance, identify areas for improvement, and make data-driven decisions to improve their operations and profitability.
Note- Bizom’s Retail Intelligence platform tracks and monitors your business’s KPIs, giving you a data-driven approach for quicker and smarter decisions, effective planning, and accurate forecasting.
How retail KPIs can help the growth of a retail venture?
Walmart, an American retail giant, tracks the point-of-sale data patterns to offer personalized product recommendations to customers, thereby improving the overall customer experience.
"Our ability to pull data together is unmatched."
Retail KPIs play a significant role in a retail venture’s growth by clearly understanding the business’s performance and identifying areas that require improvement. The above-mentioned case study of Walmart demonstrates how retailers can utilize KPIs to drive business growth.
Here are some ways retail KPIs can help in the growth of a retail venture.
1. KPIs measure business performance
Measuring business performance is critical for retail success, and KPIs provide the necessary quantitative data to make this possible. Retail companies gain a comprehensive understanding of their operational strengths and weaknesses by evaluating key metrics such as sales revenue, customer satisfaction scores, and inventory turnover rates. This holistic view enables them to make informed decisions and implement strategic improvements. Accurately measuring business performance through KPIs empowers retailers to adapt, innovate, and maintain a competitive edge.
2. KPIs identify business opportunities
Identifying opportunities is crucial for retail businesses to stay competitive and foster growth. By utilizing KPIs, businesses can uncover potential areas for improvement, encompassing marketing initiatives, customer service efforts, and product assortment enhancements.
By analyzing KPI data, retailers can detect trends, customer preferences, and market shifts, enabling them to make informed decisions and seize new opportunities. For instance- Wendy’s and Starbucks leveraged geospatial data analytics to identify lucrative new locations. Their algorithms take into account various factors, including traffic patterns, average income, and neighboring businesses, to determine the areas with the highest potential.
These proactive approaches help retail companies maintain a strong market presence, attract new customers, and retain existing ones, ultimately driving growth and profitability in an increasingly competitive landscape.
3. KPIs set businesses’ goals and targets
“Our Key Performance Indicators help us to measure our progress against each element of our strategy.”
By leveraging KPIs, businesses can create attainable and practical objectives that act as a yardstick for measuring success. KPIs enable retail manufacturers to evaluate their current performance, track progress over time, and adjust strategies as needed. This data-driven approach helps businesses stay focused on their priorities and allocate resources effectively, ultimately promoting a culture of continuous improvement. By setting and monitoring clear goals and targets using KPIs, retailers can maintain a strategic direction and strive for excellence in a competitive market.
4. KPIs minimize operational inefficiencies
KPIs serve as essential tools for identifying areas of operational inefficiency, allowing businesses to refine processes and make the best use of available resources. By examining key metrics, retailers can uncover bottlenecks, outdated procedures, or resource imbalances that may hinder growth or customer satisfaction. These include inefficiencies, such as slow-moving inventory, low-performing sales channels, or inadequate staffing. Addressing these issues through continuous improvement and innovation helps retail companies stay agile and adapt to market demands. In turn, this fosters a more efficient, customer-centric, and resilient business better equipped to navigate the challenges of the retail landscape.
Pro tip- Bizom’s Retail Intelligence helps businesses identify areas where they excel or underperform, enabling them to focus on areas that require attention.
But why choose retail analytics software based on KPIs/goals?
KPIs hold significant value, much like strategic planning and goal establishment. Without KPIs, assessing progress over time becomes challenging, leading to decisions based on intuition, personal biases, or unsupported theories. KPIs offer valuable insights into your business and customers, empowering you to make well-informed, strategic choices.
Furthermore, KPI-related data can be shared with the entire team, fostering education and collaboration for addressing crucial challenges.
However, the true worth of KPIs stems from the actionable knowledge gained through data analysis. This enables you to create effective strategies to boost online sales and identify potential issues within your business.
Here are a few reasons why retailers should choose analytics software based on KPIs/goals.
Here are a few reasons retail companies should choose analytics software based on KPIs/goals.
1. Goal-Oriented Approach: KPIs enable retail businesses to set specific, measurable, achievable, relevant, and time-bound (SMART) objectives, ensuring a focused and goal-oriented approach to business growth and performance improvement.
2. Performance Tracking and Benchmarking: KPIs help retail manufacturers track their progress against set goals and industry benchmarks, enabling them to identify areas where they excel or underperform. This insight helps retailers prioritize areas that require attention and allocate resources more effectively.
3. Enhanced Customer Experience: By monitoring KPIs related to customer satisfaction, retail businesses can gain valuable insights into their customers’ needs and preferences. This enables them to tailor their offerings and services, leading to better customer experiences and increased loyalty.
4. Competitive Advantage: Utilizing KPIs helps manufacturers stay abreast of industry trends, monitor competitors, and rapidly adapt to market changes. This level of agility offers a significant competitive advantage, enabling businesses to stay ahead in the ever-evolving retail landscape.
10 Retail KPIs you should be tracking
Undoubtedly, understanding how to compute different metrics and KPIs is essential. However, in practical scenarios (especially when managing a comprehensive retail business), it’s advisable to utilize a retail software solution that handles calculations for you. This approach not only saves time, but also accelerates the acquisition of crucial insights.
Now, let’s delve into the metrics!
10 important retail metrics
For understanding sales metrics
1. Total sales value: It is also known as Gross Sales and represents the total revenue generated from the sale of products or services within a given time period.
Formula: Quantity Sold x Average Price per Unit
2. Total sales volume: This metric reveals the total number of products or services sold within a given time period.
Formula: Total number of units sold x Average price per unit
3. Unique sales percentage: It measures the percentage of unique customers who have purchased from a company.
Formula: (Number of Unique Customers / Total Number of Customers) x 100
For understanding customer metrics
4. Daily visits: Daily visits denote the number of individuals entering a retail store. It can be measured using people counting devices and retail analytics software.
5. Customer retention rate: The customer retention rate indicates the number of customers who revisit your store or buy again from you. This metric serves as an outstanding measure of customer service, product effectiveness, and customer loyalty. Numerous methods exist for determining your customer retention rate, but here’s a relatively straightforward formula provided by Inc.com:
((CE-CN)/CS)) x 100
CE = number of customers at the end of the period
CN = number of new customers acquired during the period
CS = number of customers at the start of the period
For Understanding Inventory Metrics
6. Inventory turnover: Also referred to as stock turn, this metric relates to the number of times the stock is sold or utilized within a specific time frame.
Formula: cost of goods sold / average inventory
7. GMROI: Gross Margin Return on Investment (GMROI) evaluates the profit generated from the capital invested in inventory. It addresses the query, “For each dollar invested in stock, how many dollars did I earn in return?”
Formula: gross profit / average inventory
8. Total penetration: It is also known as market penetration and represents the percentage of potential customers within a target market that a business has reached.
Formula: (Number of Customers Who Have Purchased a Product in the Category / Total Population) x 100
Retail KPIs for understanding transactional metrics
9. Gross and Net profit: Gross profit indicates the amount earned after subtracting the expenses associated with producing and selling the product.
Formula: sales revenues – the cost of goods sold
Net profit represents the amount earned after deducting both the cost of goods and all other business expenses, such as administrative costs and operating expenses.
Formula: total revenues – total expenses
10. Average transaction value: This metric reveals the average spending by customers in your store.
Formula: total revenue / total transactions
Streamlining your retail operations with retail analytics software
‘Retail is detail’ is often heard in the retail domain. Customers remember their shopping experience more than the product itself. Thus, seamless retail operations are crucial for optimum business growth. Retail analytics software delivers a frictionless experience to customers and drives value for the retailer in terms of throughput. This provides a dual value proposition for both.
Bizom’s Retail Intelligence platform elevates this value for retail companies, optimizing their retail operations with real-time data, advanced analytics, and actionable insights. Embracing Bizom’s solution ensures an unforgettable customer experience, leaving a lasting impression that drives loyalty and revenue growth.
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