Retail KPIs

KPI Performance Key

Foundational

Your business may just be beginning to track this metric, perform this business function or identified this as a problem. Improved execution in this area should be a high priority.

Competitive

Your business is competitive in this area, but there’s still room for advancement. Consider investments to improve related operations to achieve better results.

Your performance in this area is considered best in class and is superior to the average company in your sector. You’ve laid a solid foundation in this business function, and the next step is optimization.

Transformative

You’re achieving the optimal results for this metric. Your business processes in this area are highly efficient and stand out against competitors. Keep investing in this area to maintain these results.

Sales Per Square Foot

Sales per square foot has been a common benchmarking metric in the retail industry for decades, and although the introduction of ecommerce has made it less so, it’s still critical for retailers offering successful omnichannel experiences that include brick and mortar locations. The metric helps retailers make the right resourcing decisions and understand the proper mix of ecommerce to physical location investments.

< $223

$336

$510

> $595

42%

Consumers Willing to Pay More for Personalization

Source: Wakefield, NetSuite

32% of sampled retailers are using multiple currencies in their day-to-day operations.”

To learn more, check out this article.

Customer Satisfaction

Providing an exceptional in-store customer experience can make or break your retail business. More satisfied customers results in return visits and increased sales. To track these experiences, retailers are using new and innovative technology like QR codes on receipts linking to online surveys, survey kiosks, and the increasingly popular HappyorNot machines. Better access to this data gives you insight on how your customers view the in-store experience and provides suggestions on areas for improvement.

< 70%

73%

86%

> 86%

Inventory Turnover

Inventory turnover is a critical metric in determining a retailer’s inventory efficiency and sales effectiveness. A higher merchandise turnover indicates more sales in a given period, resulting in lower storage costs and more effective purchasing. Inventory turnover for retailers varies greatly depending on the type of product sold (perishable v. non-perishable, hard v. soft goods, etc.), and as seasonal demand changes. Another important component to consider when defining inventory turnover goals is the gross margin on the sale of your products. Keep in mind that lower margin items require more frequent turnover to meet revenue targets.

< 5.9 turns

5.9 turns

7.3 turns

9 turns

Foundational

Competitive

Best in class

Transformative

Gross Profit Margin

< 28%

30%

41.4%

> 58%

Gross Profit
Margin

Percentage of revenue after cost of goods sold. This metric signifies how efficiently your company uses its resources to deliver products profitably.

Sales Per
Square Foot

< $223

$336

$510

> $595

Sales Per
Square Foot

The average revenue a retailer generates for each square foot of sales space. The higher the sales per square foot, the better and more efficient the retailer’s use of store space.

Marketing as a %
of Revenue

> 4.2%

4.2%

2.9%

Marketing as a %
of Revenue

Marketing is one of the largest expenses for retailers. Smart use of marketing dollars means efficiency and higher profit margins.

Order Fulfillment
Cycle Time

> 60 hours

36 hours

24 hours

< 8 hours

Order Fulfillment
Cycle Time

Represents the time from receiving and authorizing a customer’s sales order through the customer’s receipt of a product. This determines the amount of time a customer must wait to receive a placed order. The lower this cycle time, the better customer satisfaction tends to be.

Spend Under
Contract

Decentralized buying

40-60%

60-85%

> 85%

Spend Under
Contract

The percentage of procurement spend managed by a contract. Purchasing goods and services using pre-negotiated contracts typically allows for better price negotiation. The higher this percentage, the more likely that your company is saving money on goods and services.

Warehousing Cost
as a % of
Revenue

> 0.9%

0.9%

0.6%

0.3%

Warehousing Cost
as a % of
Revenue

Percentage of sales that goes toward the cost of warehousing products. A reduction in warehouse costs will increase net profits without having to increase sales.

Inventory
Turnover

< 5.9 turns

5.9 turns

7.3 turns

9 turns

Inventory
Turnover

Ratio showing how many times your company’s inventory is sold and replaced over a period of time. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. A low turnover ratio signifies weak sales and excess inventory. A high ratio suggests either strong sales or large discounts.

Customer
Satisfaction

< 70%

73%

86%

> 86%

Customer
Satisfaction

Retailers capture customer satisfaction in a variety of ways including online surveys, survey kiosks, happy or not machines, etc. The higher the customer satisfaction scores, the more loyal customers become.

SG&A Cost as a %
of Revenue

43.4%

25.3%

19.8%

14.3%

SG&A Cost as a %
of Revenue

General and Administrative Expenses as a percentage of sales is an indicator of efficient operations. The lower this percentage, the better.

IT Costs as a %
of Revenue

> 2.5%

2.5%

1.5%

IT Costs as a %
of Revenue

Dollar amount spent on IT infrastructure and IT teams as compared to total revenue. The lower this percentage, the higher the IT efficiency.

Source(s): APQC, WERC, IR 500, Finlistics

Other Categories

Gross Profit Margin

Percentage of revenue after cost of goods sold. This metric signifies how efficiently your company uses its resources to deliver products profitably. The higher the percentage, the better.

Sales Per Square Foot

The average revenue a retailer generates for each square foot of sales space. The higher the sales per square foot, the better and more efficient the retailers use of store space is.

Marketing as % of Revenue

Marketing is one of the largest expenses for retailers. Smart use of marketing dollars means efficiency and higher profit margins.

Order Fulfillment Cycle Time

Represents the time from receiving and authorizing a customer’s sales order through the customer’s receipt of a product. This determines the amount of time a customer must wait in order to receive a placed order. The lower this cycle time is, the better customer satisfaction tends to be.

Spend Under Contract

The amount of procurement spend managed by a contract. When you purchase goods and services, using pre-negotiated contracts covering a year or more typically allows for better price negotiation. The higher this percentage is, the more likely that your company is saving money on goods and services.

Warehousing Cost as % of Revenue

Percentage of sales that goes towards the cost of warehousing products. A reduction in warehouse costs will increase net profits without having to increase sales. The lower this percentage, the better.

Inventory Turnover

Ratio showing how many times your company’s inventory is sold and replaced over a period of time. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. A low turnover ratio signifies weak sales and excess inventory, while a high ratio suggests either strong sales or large discounts.