Retail Arithmetic
14.01.2015 77485

Retail Arithmetic

retail arithmetic Kazarinova.JPGEkaterina Kazarinova - Business trainer, consultant in retail technology. A practitioner with experience in building his own business, opening retail projects from scratch in various formats (from 100 to 7 000 sq.m.), actively developing in large cities of Russia, optimizing the business processes of existing companies.


Efficiency and Efficiency

Before you begin to solve specific problems, you need to find out how accurately all the leaders of your company understand the basic terminology of retail. For example, key performance indicators (Key Performance Indicators, KPIs) include two important concepts at once - efficiency and effectiveness.

Ekaterina Kazarinova at her trainings asks the students a simple question: “Is the company fulfilling the sales plan for 98% - is it good or bad?” In most cases, the audience is divided into two camps - half advocates for such high rates, the second interprets these results as unsatisfactory.

According to standard terminology, effectiveness is the company's ability to focus on results, that is, your ability as managers to achieve results by 100%! Thus, at lower rates, the operation of the store can be considered unsatisfactory. Efficiency is understood as the correlation between the achieved results and the expended resources, that is, the ability to get the maximum result at the minimum cost. Different content with the meaning of these terms leads to confusion in the work: you, as a leader, expect 100% of productivity, while your subordinates rejoice at lower results.

Control purchase

A key saying in management is that you can only manage what can be measured. Feedback is also valid: everything that cannot be measured cannot be controlled. This axiom does not require proof. Work on the effectiveness of the store, it is always work with numbers! If you do not know the numbers that were yesterday, a week, a month ago - you are unlikely to be able to improve the performance of your store.

The main indicator of retail is sales: the higher it is, the higher your profit.

How to calculate this indicator? The formula is simple:

Sales = the number of all visitors to your store (traffic passing) x flow rate (conversion) x per average check. Measured in rubles or units of goods sold.

Traffic passing - Consumer flow inside the store: how many people visit your store daily.

Flow rate - this is the ratio of the number of site visitors who performed any targeted actions on it to the total number of site visitors, expressed as a percentage. To obtain such data, the store is equipped with a customer flow counter at the entrance. Buyers are determined by the number of broken checks. Thus, the efficiency of 10% - means that every tenth makes a purchase in the store, 25% - every fourth entered.

Average check - the amount that the average buyer or client leaves in the store. This is an elementary arithmetic mean.

As can be seen from the formula, an increase in any of the three factors will lead to an increase in sales. And what resources we have for this. To understand the calculations and understand the relationship of these indicators, we will solve several problems:

Task 1

The store’s monthly turnover is 1 million rubles, the average check is 500 rubles, and the efficiency is 20%.

Questions: How many visitors does this store have every day, and how many checks a month breaks through?

Store turnover - total revenue for the period.

Average check - total revenue is divided by the number of checks for the same period.

Efficiency - the ratio of shoppers to visitors.

Number of checks per month = 1 000 000 / 500 = 2 000 (buyers per month)

Visitors per month (30 days) = 2000 * 100 / 20 = 10 000 people

Visitors per day = 10 000 / 30 = 333 people

Buyers per day = 333 * 20 / 100 = 67 people

Task number XXUMX:

You have 10 visitors per day and two of them become buyers, the conversion is 20%. With these indicators, your sales volume is equal to 1 million rubles. You have improved this result through staff training and merchandising. Today you have three visitors a day, that is, the conversion is 30%.

Question: how much will the sales volume increase if the remaining indicators remain at the same level?

Answer: 30 / 20 = 1,5! That is, sales increased 1,5 times!

How complicated were the puzzles for you? This is an elementary test of your knowledge of retail arithmetic! Even if all of your sales are automated, if you don’t know the basics of the account, you don’t have the opportunity to check why the indicators slipped and due to which you can increase your sales!

Why is it useful to compare indicators?

With indicators for yesterday: how much they earned this month, how much in the past.

With indicators of another point in your network. Often, it is enough to consider and analyze the work of outsiders in order to increase the profit of the entire business.

With competitors. The easiest way to find out the weaknesses and strengths of competitors is to invite their employee for interviews for hiring. This is a completely legal way to find out from the person who accepted the invitation what does not suit the current place of work, how the employee motivation system, conversion and average check of the store are built.

With overall market performance. This will help you understand exactly where you are compared to other participants in the trade.

What can increase all these indicators?

This is perhaps the most important question. We calculated, compared and made sure that our sales figures are far from ideal: effectiveness and efficiency have not reached their maximum.

There are strategic solutions to the problem, among them - increasing the trade margin, reviewing or optimizing the assortment. The first is possible only if you have a truly unique offer and there are no competitors on the foreseeable horizon. However, in reality, few trading companies can boast such an advantage. In the second case, you can attract category management to help and revise the principles of your procurement policy and the principles of merchandising. The matter is complex - and in itself is a separate topic for conversation.

But it’s much more important to start by implementing simpler tasks.

The number of visitors. The magic chain of transformations looks like this: passing by - shoppers - regular customers. And in order for this transformation to take place at every stage, it is necessary that something helps this. In order for a person passing by a store to have a desire to go into it, to have a desire to buy in a store, to have a desire to come here for shopping again and again. What, why, for whom and how are you doing in your store?

- The correct sign, consistent with the concept and idea of ​​the store. If you have a boutique of luxury goods, and the sign above the entrance is dirty or dusty, what impression does the potential buyer have about the store? Or when half of the lamps burned out in the light box at the equipment salon? Such assumptions can harm any store!

- An interestingly designed showcase. Do you want to stop at your shop window? And what's in it? The latest collection on mannequins, beautiful posters of the night city, bright lights, a soap bubble machine, bright ribbons curling in a stream of air. Presented? It’s not hard to guess that you will find a shop for fashionable youth clothes outside the door.

- Touch marketing. Music at the entrance, it is possible to alternate music and commercials. Of course, music should be a reflection of your store’s ideas.

- Work of promoters, distribution of flyers. Smiling, active and right promoters are a big part of success for local promotions. Therefore, the preparation of promoters should be given special attention.

- Increase store hours also creates the opportunity to enter into it in a day to a larger number of potential buyers. This is especially true on New Year's holidays. Is it possible that your product may be in demand around the clock? Information about this can be used for outdoor advertising - post a banner or an ad stating that "in connection with the New Year holidays, the store works from 7.00 to 24.00 hours" (instead of the usual from 9.00 to 22.00 hours). Some well-known supermarkets do this, and it should be noted that this affects buyers very positively. A lot of money is usually for those people who do not have time. And round-the-clock work at 2-3 of the pre-holiday day can bring not only good sales, but also positively affect the loyalty of people whose employment was treated with understanding.

- Seasonal accounting. It is important to take it into account in a timely and timely manner and inform its customers. Ekaterina Kazarinova gives a curious example: “For a month, hired agents, in the guise of ordinary buyers, went to markets and shops and asked passers-by:“ Do you know, is there a Sitronics pavilion here? No? Thank". This was done unobtrusively, without any attempt to start a conversation. The agents were given a clear instruction: "Asked - fled." Moreover, for greater certainty, many of them worked in two, under the guise of married couples. As a result, market visitors remembered the name of the brand, and many even started aleatherg for it in stores. ”

Average bill. In order to get + 100 thousand rubles to the store’s turnover per month, you need to increase the average check by 50 rubles each. How to do it? By increasing the number of lines in the check, the quantity of the same product, due to more expensive goods at a price than usual. How can this be achieved?

- Use complementarity. Many items suggest the possibility of additions. To the pan - lid, to the bag - wallet, to model boats - tights. You can change the principle of product display and teach sellers to tell customers which products can functionally complement each other.

- Focus on an expensive product. Can the sellers of your store name the most expensive items right away? And immediately find and show them in the store?

- Use “product history”. If your store operates through active individual sales, then it is worthwhile to teach sales consultants separately. When the buyer is already interested in something, very often the attitude to the seller’s product can influence the decision to buy. Legends and stories from life may come in handy.

- Conduct promotions by the principle: dial in the amount - you will get a prize!

- Offer gift wrapping.

Conversion rate. In this situation, it is necessary that the buyer was not every fifth, but a little more. Another 7 store visitors to become our customers every day. How can this be achieved? Of course - the most important thing - so that people entering the store have a desire to BUY! What to do?

- Get rid of the lines. Change the staff of the store and their work schedule. The redistribution of sellers and cashiers during the active hours of the store and the lull time gives a good result in efficiency. Given the seasonality.

- Greet everyone who comes in. The simplest thing is to say hello to EVERY visitor! When we are noticed - we are pleased when we are ignored - it causes negative emotions. And we don’t feel like going back to places where we felt bad. Interestingly, greeting is not necessary with words, sometimes a smile and a look are enough.

- Motivate employees to work efficiently. Wage system, personal motivating leadership of a particular manager, general attitude to work.

- Train sales techniques. All! And check the development of skills. Properly organize the trading process in the store: so that everyone knows and understands at what point in time, what and how he should deal with. So that three sellers do not curl around one customer when there are 5 buyers walking around the hall. In order to have enough calculation nodes, the queue in the fitting room did not have to wait for half an hour. So that from the moment the goods arrive at the warehouse, until it appears on the desired shelf, the hanger requires a minimum amount of time.

- Use the opportunities of PR promotions. What promotions increase the number of buyers? Discounts, sales, “each for a bonus”, “two for the price of one”, “for every tenth - a gift”, etc.

Before you begin to solve specific problems, you need to find out how accurately all the leaders of your company understand the basic terminology of retail.
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