3 Primary Benefits to Using Key Performance Indicators
Key Performance Indicators (KPIs) in retail help businesses plan and budget for the future. You should have KPIs for each aspect of your operation, but it helps to understand the benefits to having KPIs in the first place.
Here are three primary benefits to planning your store budget around specific key performance indicators.
- Increased Productivity – Setting specific performance objectives means you can increase the productivity of your staff. Not only are we talking about more sales, but we’re also talking about higher productivity in the areas of buying merchandise, stocking shelves, pricing your products, and receiving merchandise into and from your chain warehouses. When your employees have well-defined goals to stretch for, they will work harder to achieve your objectives.
- Reduced Costs – KPIs also reduce the cost of doing business, which goes hand in hand with more productivity. Your staff will guess less often about key objectives and the best way to achieve them and establish their own personal goals for increasing productivity.
- More Sales – The bottom line is this: Key Performance Indicators increase sales. When you have more product on the shelves because your buyers were able to make better buying decisions in a shorter period of time, you’ll sell more product. When you can price and display your merchandise more efficiently, you’ll sell more of it. It’s a cause and effect equation. Increase productivity and reduce costs through KPIs, which will in turn lead to more sales and higher profit margins.
5 KPIs to Keep an Eye on This Year
So, when it comes to key performance indicators, you want to define them specifically and pursue them aggressively. Here are five key performance objectives to establish for your retail store in the coming year:
- Average Dollars Per Transaction (ADT) – Increase your ADT and you’ll see higher profits.
- Average Units Per Transaction (UPT) – The best way to increase ADT is to sell more product per transaction, so get your employees to upselling.
- Average Dollars Per Hour (ADH) – You don’t even have to have more customers. Increase your UPT and ADT and ADH will go up too.
- Wage Cost Percentage – How much are you paying your employees compared to total expenses? An important part of retail is optimizing employee hours so that you sell more product for each employee on the floor. Schedule your employees for peak traffic times.
- Weekly Workforce Hours – How many hours are your employees working each week? You can drill this down even further by measuring how many average hours per employee your workforce is working each week.
There are other key objectives you can measure. This is just a start.