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Starting a retail business is exciting. By
adopting best practices in retail sales performance standards, you can
increase your sales and profit expectations immediately by as much as 30
percent!
This is true because achieving sales objectives is about more than what
you have on your shelves and what your store looks like. It's about
having a customer focus that is driven by key performance indicators
(KPIs). Using these indicators, staff members at every level of the
organization are informed about the condition of the playing field.
It may sound complicated, but it’s not. Like sports coaching, retail
sales performance indicators provide feedback. Would sports coaches be
able to focus their athletes without statistics? Would racing car
managers know how to fine-tune their engines and performance without
statistics? When was the last time you watched a game on TV without
them? Statistics inform us of trends, behaviors, and opportunities to
increase performance. By forecasting the near to medium-term future,
they help us understand where we are heading and whether any adjustments
need to be made.
Statistical measurement of fundamental sales performance drivers is
vital for all retailers. With the use of various spreadsheets, POS
system reports, Dashboards and Scorecards, KPIs communicate the strategy
of the shareholders to the individuals in the company. Feedback systems
are used to report the results. What has been forecast is commonly
compared with what actually took place so that judgments, changes, and
new plans can be made.
It must be recognized that senior-level business indicators such as
profit margin and wage costs do not drive bottom-line sales on the
floor. You can’t just walk up to a salesperson and say, “Since we did 80
percent of budgeted sales, you must improve your performance.” That's no
more helpful than the manager of a football team telling a player, “We
lost the past few games so you must do better.” This information is
useless to a salesperson or player because they can’t see a clear reason
for their inadequate performance, much less conceive of what actions to
take to improve it.
Sports coaches take the team manager's expectations of winning and pass
them down to each player on the team so that players can win for both
themselves and the team. The coach measures performance in specific
areas and relays these KPIs to the players to let them know the exact
areas in which performance needs to be improved. For example, in soccer,
KPIs may involve recording the “number of times a player touched the
ball,” or “the number of attempts at the goal.” In baseball, the coach
could track “ the number of players on third base,” or “the number of
strikeouts.”
The Five KPIs
In retail it is a common practice to use only five KPIs to track
individual performance and deliver on-target feedback for coaching, as
more than five KPIs makes the reporting system unnecessarily complex,
confusing, and ambiguous. For retailers, the five KPIs are sales per
hour, average sale, items per sale, conversion rate, and wage-to-sales
ratio.
Sales per hour is a statistic that reveals the speed at which each
salesperson is selling or attending to customers. Each individual
salesperson can be compared to everyone else on the shift.
Average sale refers to the average selling price each salesperson
achieves compared to everyone else on the shift. A higher average shows
that the salesperson has a greater knowledge of product and is able to
sell higher-ticket items as a result. A lower average reveals that the
salesperson lacks product knowledge or effective probing skills.
Items per sale reflects the ability of the salesperson to add items to
individual sales.
The conversion rate tracks the number of visitors to the store that are
turned into buying customers.
The wage-to-sales ratio compares the salesperson's hourly wages to
hourly sales. This KPI clearly identifies your best performers and
underperformers and the value of individual salespersons to your
business.
Given that this information is extremely useful, why do many retailers
not obtain it? The most common reason for not tracking the five KPIs at
a staff level is the inability to record and calculate this data easily
and quickly and then create meaningful reports. After all, there is a
great deal to track, including hours worked, the goals set, planned
versus actual performance, and more. The playing field must somehow be
leveled for all salespeople. It can involve a lot of work.
Resolving the Complexity
At a sports match, the playing field is always level because everyone is
on the field at the same time. In a retail environment, some salespeople
work during busy periods and others work during slow periods. A
salesperson working during the lunch period is expected to sell more
than a salesperson working in the early morning or late afternoon. A
realistic reporting system use weighted factors in individual sales
targets or the data becomes ambiguous.
Being able to determine the most deficient statistic of the five KPIs is
critical to achieving a retail sales management solution. This is
logical because improving the worst KPI first will have the greatest
effect in increasing sales and staff motivation.
How can you simplify tracking the five KPIs? Imagine you have a staff
roster time-and-attendance software that is easy to use and
automatically assigns individual weighted sales targets to each
salesperson based on their shift. Imagine that this staff roster is
integrated with your POS terminal to instantly calculate the five KPIs
and determine the most deficient KPI on demand! Imagine further that
this software has built-in integrated sales behavior coaching tips. How
much easier could it get?
Playing the retail sales game to win not only means knowing the score,
but why and where you are losing and how you can fix problem areas. It
also means learning from what you are doing right. It's easier to help
salespeople improve their retail sales skills than it is to re-stock new
products or brands. If you want to win in retail, measure the five KPIs
using an affordable software solution and put best practices in place
for a fast track to success.
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