The numbers every retailer should know
Retailing makes a mathematician out of anyone who sets up a shop. Worldpay’s James Frost tells us what numbers can help guide your business decisions
To be a successful retailer, being hot on your numbers is a prerequisite. After all, it’s the numbers that paint a true picture of how your business is doing.
It helps you judge what’s working and what’s not and paves the way for spotting trends so you can attract new customers while getting repeat business.
Here are seven metrics you should know by heart:
1. Daily sales
Your daily sales are the most reliable metric to vet the performance of your business. Cashing up each day will give you a clear picture of how many products you’ve sold and for how much.
You should conscientiously study your daily sales on a weekly and monthly basis to spot trends that are leading to your sales growth. Questions you should ask yourself include:
- Is there a particular day in the week that sales of particular products rise?
- Why is that and what can I do to milk that trend?
Payment providers should offer intuitive tools for analysing sales performance. Take Worldpay’s My Business Hub, for example.
It combines a cash register and receipt printer with a detachable Android tablet. The tablet can be used both as a mobile point-of-sale product – meaning shop assistants or waiting staff can take payments anywhere – and a handy dashboard to what’s going on in your business.
2. Average basket size
Want to understand your customers’ needs and preferences? Just look into their baskets. Calculate how much each customer spends on average for a given time period. This can be done by calculating the total sales revenue made in a given period and dividing that by the total number of customers to date. The number will then help you gauge various ways through which you could entice your customers to spend more.
Be it a special offer or a packaged deal, boosting the average basket size of your customers will automatically lead to an increase in sales. Come up with promotional strategies for your products, such as suggestions of other items bought by customers purchasing the same product.
3. Stock levels
Your inventory levels are crucial to the success of your business. There should ideally never be a situation where customers walk into your store and your products are out of stock. Your sales reports come in handy to calculate the stock you need to fulfil the demands of your customers and again, the My Business Hub enables you to order stock or answer customer emails.
Be very thorough with your inventory levels because shifting unused stock could lead to headaches including warehouse costs and depreciation of the value of goods.
That said, if time and again, you’re faced with such a situation, think about ways to sell stock including offering them at a lower price or running a promotional offer, such as bundles.
4. Gross profit
Gross profit is one metric that all retailers swear by. The gross profit on a product is calculated as: Sales – Cost of goods sold = Gross profit.
The concept of turning a profit is simple, keep your costs low and maximise your sales. Tight cost control will lead to hitting gross profit and net profit targets, which is key to you generating a proper income for yourself.
5. Peak trading times
Spotting sales trends is a vital activity that every business must undertake to grow their business. Your sales reports can help you identify everything from your target audience to your bestselling months. Relying on reports you’ve made previously could help you spot trends worth repeating or avoiding.
For example, as lunchtime is often the busiest period for retailers and restaurant owners, but also most understaffed, planning ahead would help avoid this re-occurrence.
6. Returning customers
The biggest mistake a retailer can make is chasing a new client and not servicing old ones. According to research by Adobe, 40% of a retailer’s revenue is created by repeat customers.
You need to give your customers a reason to come back to you. In this day and age, a good quality product isn’t the only reason a customer will choose you over a competitor.
You need to incentivise them by offering loyalty discounts and encourage them to refer your products to their friends. Also, capturing their email address and getting them to fill out surveys to understand their preferences will help you spot sales trends and give you the chance to let them know about special offers.
If your product is affected by seasonality, offer group deals to your customers that will encourage them to fill up their baskets. As seen in the case of big retailers such as Tesco and Sainsbury’s, offering a loyalty card or a reward system leads to customers choosing to shop with you over your competitors.
7. Sales per square feet
To calculate exactly how much bang you’re getting for your buck, you should calculate the total number of sales you’re making for the retail space you’re using.
This will help you do a cost-benefit analysis of how worthwhile your investment is proving to be. If your product is selling is like hot cakes but doesn’t cover the rent of your shop, you need to re-think your sales strategy.
By calculating your sales per square feet you could tweak your prices and volume to get the maximum return on your investment.
If you purchase My Business Hub, you will receive all the support you need when it comes to installing, getting set up for taking payments, and becoming PCI DSS compliant. Check out how it works by clicking play on the video above, call on 0808 278 1140, or visit our website http://www.worldpay.com/uk