Owning or running a business such as a supermarket or convenience store can get quite hectic. There are lots of things to consider each day, and with numbers moving all the time, it can be difficult to understand where or how to improve. Yes, may be you are able to get reports from your point of sales system, but the difficulty lies in understanding the most relevant information in the time you have available to manage your future operations.
This is where your Key Performance Indicators (KPIs) come in.
KPIs can assist you in monitoring and measuring business performance, by emphasising the most relevant information in a way to align your business goals with the actual operation of your business.
A KPI allows the financial data from your business to be standardised -meaning you can compare and contrast against different locations, different employees, different department or even different products on a like-for-like basis. To create an effective KPI, you want to focus on a specific process within your business that contributes to the overall goals you are looking to achieve. For example, if you were a call centre and had the goal of achieving great customer service, then a suitable KPI to track would be your average call waiting time.
Not every business need or should use the same KPIs. As mentioned above, they should be tailored to ensure the goals of the business will be met. Saying that, certain KPIs can be used with relative safety across many different businesses within the same industry. In regard to businesses in the grocery, supermarket or FMCG sector, the team here at Abbotts have put together what we believe to be an essential list of KPIs, to assist you in understanding and improving your business. Below are the first three KPIs. Please look out for future blog posts within this series, where we will provide details on KPIs 4 through to 10.
1. Sales per Square Metre
This indicator is a good measure of how efficient you are with the sales space available to you. It is calculated by simply dividing your total sales by the total square metres of sales floor space. Knowing and tracking this KPI can be important to your decision making regarding the purchase of shelving, how you decide on the layout of the store and location of inventory within it.
2. Foot Traffic Amount
This indicator is obvious; it refers to the number of people entering your shop during a certain period. Using something like an electronic people counter at the entrance of your store can be a simple method to achieve this. Information from those counters can provide a surprisingly large insight in to your customers – you can track what is the busiest day of the week or go down to the level of what is the busiest time within each day. You can use this information in a variety of ways. The information of the foot traffic KPI is most commonly used for making decisions regarding staffing requirements. You are able to ensure there is the right amount of staff available to run the business and assisting your customers. Similarly, if the level of foot traffic over a certain time period is lower, you are able to use the information to decide if you should roster on less staff or staff can utilise the quite time to stock shelves instead of being in customer-facing roles.
3. Conversion Rate
A performance indicator such as your customer conversion rate can help inform both you and management about whether in-store marketing or customer service is adequate in completing sales. To calculate the customer conversion rate, find the percentage of customers who have purchased from you (found by using the total number of sales at the till), and divide by the amount of foot traffic (a separate metric which we have discussed above).
In the context of a supermarket, a low conversion rate over a time period can be interpreted to give insights on multiple issues, including issues with stock control or in-store merchandising.
To provide a relevant example of the effect stock can have upon a supermarkets conversion rate, see the impact of baby formula. Baby formula is a product that does not require advertising to be a desirable product. Depending on the brand, it can regularly disappear from the shelves the same day it is added. Customers may come to your business specifically to purchase baby formula. However, if the amount of stock is limited – and that limited amount sells out quickly – the customers that miss out may leave the store without purchasing anything. This will provide a negative impact to your conversion rate.
If you have any questions, or would like to learn other tactics to gain a deeper understanding of your business, please contact us today.