As long as retail has existed, so too have key performance indicators (KPIs). They have always been our most effective tools for measuring success, spotting problems and revealing opportunities that may impact the short- and long-term success of the business.
However, while metrics like total sales and same-store sales still have some relevance today, these KPIs don't truly align with the evolving role and purpose of stores, especially as retailers begin to completely reinvent their brick-and-mortar experiences.
Rather than merely four concrete walls built to house and sell products, the new store is fast becoming a true experience center, augmented by the latest and greatest technology, personalized merchandising and promotions, lifestyle experiences, entertainment, knowledgeable store associates and so much more.
Alongside this evolution, we must also evolve the way we measure the store's effectiveness as an integrated — and integral — part of the omnichannel journey.
With the help of several respected industry thought leaders, we introduce here seven new KPIs that we believe effectively measure the true value of the modern store…
The notion of having separate P&Ls by channel "contradicts the very core of the omnichannel concept and perpetuates siloed behavior," reports analyst firm Kurt Salmon. Retailers must "elevate KPIs to drive overall cross-channel brand performance." Having an omnichannel P&L also helps address the all-too-common question: "Who gets credit for the sale?" This will ultimately help mitigate any store associate concerns around fulfilling online orders or helping consumers select items they'll inevitably buy through the e-Commerce site.
While store traffic is admittedly not a "new" metric, we believe that it has new relevance and importance to measuring store performance. As retailers reinvent their experiences and roll out new technology, tools, events and other elements to their store experiences, foot traffic metrics can help ensure that customers are actually visiting the stores and engaging in these new experiences. Additionally, traffic metrics are an important foundation for other conversion and engagement metrics that we will discuss shortly.
Typically thought of as an online metric, Revisit Rate measures the percentage of people who revisit specific locations several times in a week, month or specific period. It helps gauge a consumer's reliance on or loyalty to the store, which arguably ties to the efficacy of that particular store's experience. This metric, however, is especially valuable for retailers that invest in special events, in-depth product tutorials and other forms of in-store entertainment. A retailer can track whether these events consistently drive customers to revisit a specific location once the events have concluded.
Nikki Baird of Retail Systems Research introduced "sales per engagement minute spent" as a way to mitigate the confusion around the store's influence on omnichannel engagement and purchase activities. The primary goal of this metric is to better identify shortcomings and key drivers of conversions, while addressing the issues of "final touch" attribution. "This metric enables a breakdown to identify causal factors," she explains. "Where are the engagement minutes coming from, and where are they delivering value vs. detracting from value?"
KPIs like "staff stretch" or "staff-to-associate ratio" refer to the total number of shoppers each employee has to serve at a specific time. But as retailers roll out new technology to augment associate-shopper interactions, they should be able to measure whether associates are successfully influencing the omnichannel buying journey — from awareness to fulfillment to loyalty, according to a Kurt Salmon report. "A more holistic set of retail metrics should include the number of product recommendations per visit and the conversion rate on these product recommendations. Not only will these new metrics allow a retailer to assign a value to all brand-building activities, they also help create incentives for the entire organization to push consumers down the path to purchase regardless of the channel."
Whether you're a department store retailer or specialty sporting goods retailer, you know that product testing significantly influences buying decisions. And now that retailers are creating merchandise displays and store formats that encourage product testing, they require technologies and corresponding metrics that allow them to determine how many product trials actually led to conversions.
Radio Frequency Identification (RFID) and fitting room management solutions can help track how many people visit a fitting room, which items they try on and which items they end up purchasing.
In-store analytics and heat maps can create a bird's eye view of store traffic patterns and where — and for how long — customers are gathering in a store.
Many retailers offer in-store pickup as a fulfillment option, but few motivate their associates to further engage with shoppers and make additional product recommendations. Having a KPI dedicated to tracking this assisted selling, and whether it leads to additional sales, can motivate associates to ramp up their selling skills. By tracking fulfillment upsells, as well as overall fulfillment efficiency, retailers can track how profitable their omnichannel fulfillment offerings are.