Retail store customer tracking is required to understand and analyze your business’s performance. It generates actionable insights for your teams to boost revenue. It works by keeping track of retail key performance indicators (KPIs).
You can think of KPIs as quantifiable goals for your business. For instance, you may want to raise the average sales volume per employee or your conversion rate.
Try to track as many of these KPIs as possible to get the most out of your retail tracking initiative. Whichever ones you choose depends on your store’s unique needs. You probably don’t have to track everything, but here are some starting metrics to consider.
Average Transaction Value
How much does the average customer spend in a visit? You can calculate average transaction value by dividing the dollar amount in sales by the number of transactions in a given time period. Finding new ways to upsell or cross-sell will increase this value. The statistic in general hints toward the lifetime value of your customers, which we will discuss later.
You might hear this term referred to as Average Order Value (AOV). It works essentially the same way by calculating the revenue divided by the number of total orders.
Customer Conversion Rate
Here’s a critical metric to look out for. Customer Conversion Rate is the ratio of visitors that your business can turn into customers. In other words, it’s the total number of sales divided by the number of visitors.
Customer Conversion Rate is a measure of the performance of your store and how effective the employees are at finalizing sales. If this figure is not to your liking, that’s a sign it’s time to work on retention strategies or better customer service.
Conversion rate can be more complicated when applied to eCommerce. While you can divide the number of purchases by the total page visitors to calculate it, you also want to find out where the traffic is coming from as well. For example, is the traffic coming from a search engine or a social media post? Is the device being used a smartphone or a laptop?
Omnichannel tracking is another factor to consider. Conversion rate tells you which marketplaces are giving you the best results. Are you selling more on Amazon compared to eBay, for instance?
Another way to approach eCommerce segmentation is to distinguish the conversion rates between new and returning visitors, the latter of which are more likely to purchase again since they already have experience with your brand.
Customer Retention Rate
This is the percentage of customers you have retained over a period of time. This essential metric will tell you what strategies are working best for your business. After making any change to the store, compare the retention rate before and after to see the effect.
The formula for customer retention over a period of time is ((E – N) / S) * 100, where:
- S is the number of customers at the beginning
- E is the number of customers at the end
- N is the number of new customers in total added during the period
Gross Margin Return on Investment
Calculate this one by dividing gross margin by the average cost of inventory. This data shows how much you are making from your inventory after paying for it. Not only can you find the best items that give you the best return on investment but you can also find new ways to increase gross profit.
Divide sales by average inventory to obtain turnover, which measures how many times your business has managed to sell and replace its inventory over a period.
Inventory turnover allows you to make better decisions regarding your inventory stock. It can determine how you market and price your purchase orders.
Lifetime Value of the Customer
Lifetime Value (LTV) is a well-known metric that measures the total amount of revenue you gain from a single customer in its lifetime. LTV can be difficult to track as you cannot predict future purchasing activity. However, most eCommerce platforms and retail tracking softwares do make a solid estimate using multiple data points, artificial intelligence, and consumer tracking algorithms.
Sales Per Employee
Sales per Employee, as its name suggests, is the total sales divided by the number of employees. It’s easy to calculate and gives you a glimpse into the productivity of your staff as well as the general cost to operate the business.
Retail tracking should also look to predicting future business growth. By taking the current year’s total revenue and subtracting the previous year’s, you get the performance from year to year.
The main benefit of Year-Over-Year is that it bypasses the seasonal spikes and lulls in demand and gives you a general overview of how the company is progressing.
Interested in learning more about how retail tracking can work for you? Click here.