You Can't Manage What You Don't Measure
The Christmas holiday shopping season has just officially begun. This is one of the year's busiest and most critical sales periods for retailers. Many of our clients will do half their trade this year in the next two months. But you can't manage what you don't measure. Going into your biggest sales event blind is a recipe for disaster. It would be to examine the key metrics (KPIs) to understand the impact on your bottom line.
Here, we'll explore two essential key performance indicators (KPIs) to measure this Black Friday to show you how they are used going forward:
Foot Traffic
Understanding how many potential customers walk through your doors is crucial. Converting that foot traffic into actual sales is the name of the game.
You have a few options to monitor your store's foot traffic:
People Counters
If you have followed this blog, you will know that a simple people counter is an inexpensive way to determine how many shoppers entered your store. It should be positioned near the entrance and recorded at the start of each day. A basic, manual counter for a shop is cheap nowadays.
Centre Foot Traffic (If Applicable)
If you are in a shopping complex, you will find that many of these do monitor the foot traffic numbers. You can use this, but remember, in our experience, these centre traffic numbers are rarely reliable. Use them as directional guidance only.
Daily Sales & Profit
While foot traffic shows customer interest, your sales and profit figures reveal actual spending and earnings.
Your point-of-sale (POS) reporting will tell you the net daily sales and profit.
Focus on two key profit metrics and compare them to last year's Black Friday. That will give you an idea of how you are travelling.
Number of Transactions
How many sales transactions did you ring in for Black Friday?
Total Daily Profit
Gross daily profit is ultimately what pays your bills.
Use KPIs to Assess Performance
Armed with foot traffic and profit data, you can now calculate store performance metrics to measure Black Friday's impact.
KPI-Foot Traffic Conversion Rate
Divide your number of transactions by the total foot traffic.
Rate = (Number of Sales) / Traffic
This conversion rate reveals how well you translated store visits into actual sales.
Professional marketers commonly do this sort of analysis.
Benchmark to last year's Black Friday. If conversion drops with higher foot traffic, you may need help with sales, e.g., understaffed or poor shop windows.
KPI-Average Transaction Profit
Here, divide your total daily profit by the number of transactions. The result helps you determine the average profit margin per sale. Now, is Black Friday pulling down your averages due to heavy discounting?
Average transaction profit = Profit / Number of sales
Doing Sales Performance Analysis
Now you have POS Software, so you can do most of this and more automatically. I find analyzing sales data by department, product category, and customer segment can help retailers identify areas for improvement and make strategic adjustments.
You will find it here:
Main Menu > Cash Register > Register Reports > Under the Select Report tab, expand the Stock folder > select the report “Dissection Family Class Period Sales Comparison”.
Then you will see this screen.
Now, put in the dates to compare. Now, it will pop out a wide range of KPIs, including quantity, cost, sales, profit, and GP%, with a breakdown by amount and percentage. I think besides the two KPIs above, you will find many others useful. Note that these are your actual figures, not what your suppliers tell you.
I would also suggest that you look at your
Retail department optimization
Consider tracking your sales performance across different departments to identify the most profitable channels and allocate resources accordingly.
Summing up
Implementing key performance indicators is critical for effectively managing your business during the hectic holiday shopping season. At a minimum, start by tracking the metrics of Foot Traffic and gross profit.
Compare these KPIs to prior years.
Don't fly blind - measure performance daily. Spot shortfalls early so the course can be corrected quickly. There's no better tool for managing through the wild ride of this holiday sales season than your POS System.
