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How to define key numbers to make your retail business efficient and profitable
06.09.2018 3720

How to define key numbers to make your retail business efficient and profitable

In the era of mass insanity on the MBA and foreign business formats, it has become incredibly fashionable to count everything. We consider efficiency in all its manifestations: conversion, correlation, sales plan, payback and financial ups and downs due to the changing economic situation in the country ... This is a big step forward - not just living today as a business, but trying to figure out various options, which means - minimize risks. However, the situation is often not so rosy. Either the mentality lies in our mentality, or the habit is in force, but often entrepreneurs turn to large-digit methods not in advance, but at the last minute, when “It is important, urgent, burning!”. We look at the situation in business, we see that something is going wrong (sales are not good enough, customer flow has decreased, conversion and the average check are not satisfied) and we understand the need for change. It is not always clear to us what to change, because we begin to sort through all key indicators and randomly strengthen each of them. SR expert - business trainer Kristina Wojciechowska - recommends identifying key numerical indicators that will make your business successful.

Kristina Morozova (Wojciechowska) Kristina Morozova (Wojciechowska) - Certified business coach, Fashion retail expert, general manager of KEDDO in America (New York, USA).

We offer to pause and calculate everything.

We highlight 4 of the main numerical indicators that make the retail business successful:

  1. The number of incoming customers.

  2. Conversion from incoming to those who bought.

  3. Average bill.

  4. Repeated purchases.

To increase, say, the gross sales turnover, it is worth understanding which criteria are most important to us and which are responsible for the most effective business development. For this, it is worth considering external factors and internal guidelines.

Example 1. The company has a partner who has several shoe stores of the “middle +” segment in a small town, shoes are quite expensive, plus high competition. It is quite obvious that being “one of the usual shoe stores in the city” is a losing concept in advance, so we need to decide what criteria are fundamental to us.

We think logically: the price of the goods is decent, the circle of customers in this segment is limited by the boundaries of a not-so-large city, which means that you need to hold onto each client, shift the maximum benchmark to increase the average bill and repeat purchases, attract the client’s friends, receive recommendations among your friends and conversion from incoming to those who bought. That is, instead of massive advertising throughout the city, we create an internal strong customer loyalty system and promote the store purposefully in our customer base through specialized programs and cross-marketing.

Example 2. An individual entrepreneur has shoe stores in the resort town, where tourists make the main revenue. It is logical that if our guideline is mainly “holiday-makers” and not local residents, then repeated purchases are of little interest to us. The main thing is to attract as many visitors to the store as possible and increase the conversion, perhaps also the average check. This means that all efforts will be devoted to making the shop window dynamic and selling, to advertise in tourist places and to teach sellers to be welcoming and welcoming.

Count customers by head

It’s simple: we fix the entire number of people who went to the store. A permanent assistant for us will be special counters that are installed at the entrance and count how many people have visited you. Standard: 20% is subtracted from the final figure - these are sellers who went out and went in, those who stood at the door and did not go in and others. Do not forget to divide by 2, if the indicator on the equipment does not do it automatically (if a person entered the store, he must exit it). For example: 850 (the figure issued by the counter based on the results of the store’s working day) ÷ 2 = 425 - 20% = 340 people - potential customers who visited for one specific day. It makes sense to analyze the data on different days of the week and hours (to understand the dynamics of demand), in different months (to understand seasonality) and compare the indicators of similar periods for previous years (which will show us the trend of needs in the long term).

What affects the number of visitors?

1.    Advertising. It is not enough to give an advertising message to different media, you need to monitor the effectiveness of both the media itself and the advertising message - its quality and relevance for your target audience. Data for analysis can be provided to you by employees of the promotion channel, or you can track yourself how many people came through advertising for some specific distinguishing features: coupon, flyer, code word that was used in the commercial, etc.

2.    The appearance of the store (facade, showcase, announcement of current promotions). Look at your store from the side. Does it look attractive, “tasty” for your potential buyers? What sets it apart from others? Why should the visitor choose yours from the many stores? The showcase should attract not only those who have a clear goal - to buy shoes here and now, but also those who just walk or even go about some of their own business not related to shopping. A lot of useful articles have been written about the window dressing of a shoe store, so I wanted to say briefly only that mathematics and specifics are important here. Announcements that the buyer sees should be noticeable, understandable at a glance, it is better if they contain numbers and are limited in time. For example: “1 + 1 = 3 when buying two pairs of shoes, the third - as a gift! Only 3 days / only until 25 July. " Remember: to capture the attention of a potential client passing by you have only 8 (!) Seconds - that’s how much time a person’s attention is focused on a background object.    

3.    The location of your store. Is your store visible? It happens that the showcase is well designed, the staff is trained, hit models on the shelves, but it’s rather difficult to find the store, it is in an uncomfortable place for pedestrians or drivers, or the facade is blocked by trees, billboards, and other buildings. If this factor affects the number of visitors, it may be worth taking measures - to strengthen advertising, add vivid navigation, and, sometimes, completely change the location to a better one.

4.    Word of mouth Especially in small cities, the recommendation of those who have already visited you and made purchases is very important. This item can become for you a gold mine, if you correctly place the emphasis. In this matter, absolutely all components are important: assortment, pricing policy, quality and speed of service, promotions and discounts, customer comfort, convenience of store location, customer loyalty program and many small things that, at first glance, are not so important, but can to do bad service in the future.

IMPORTANT: The “inbox” includes not only people who have visited your store, but also those who called you to inquire about something. Tracking the number of incoming calls, the purpose of each caller and the quality of working with them will help special programs that are simple enough to use and invaluable to improve the quality of service and understanding of customer demand.


How to convert incoming to bought?

Perhaps one of the main indicators of the correct operation of your business machine is the percentage of conversion. Simply put, how many people from those who came to you bought something. Calculating the conversion is easy. Let's say 800 people came to you in a day, bought 55 people from them, which means we multiply 55 by 100 and divide by 800, we get 6,9% - this is our conversion. By the way, a very good conversion for a retail shoe store. A conversion from 6,5% to 10% is considered good, from 4% to 6,5% it is tolerable, but requires some measures (advertising, training, rearrangement, promotions), if the conversion falls below 3,5% - time for radical changes and in-depth analysis .

What affects the conversion:

1.    Range. Of course, this is the most important point that you sell, and whether it meets the demand of your customers. Demand analysis is necessary. Sales data, hits, balances, analysis of the assortment of competitors, trends and trends of the fashion market as a whole will help you in this. When analyzing sales, it makes sense to make a summary table in which you can see data on sales in different segments (type of shoes, style, price), in different seasons, months and days of the week. Track the dependence of sales this season on similar months in previous years.

2.    Price policy. Where does the final cost come from? In your case, is this a calculated figure or taken "from the ceiling"? The cost of goods, although an important indicator that affects consumer demand, is far from the main one. In most cases, the customer buys his own benefit, and this is not so much a price advantage as a combination of factors affecting the decision “like” or “dislike”. You can dump the price, but you should not take the example of the negative segment or large Internet players who can afford very large discounts. If your business is not built around the “Low Price Highlights” business model, then this is not your tool. Of course, you need to give discounts and promotions, but you should not compete with discounts and accustom customers to the fact that you always have discounts.

3.    Service. Of paramount importance when making a customer’s buy-not-buy decision is how much your sellers have (quickly, efficiently, unobtrusively) served the customer. How to teach, motivate and control the work of staff so that everything works like a clock? There are many, many different answers, they can be found in business literature, at numerous trainings for managers and sales staff. The manager should understand the main thing: no matter what skills we require from people, it is important to convey to them our specific expectations. Just activity is a very vague concept for people, but greeting each incoming visitor, establishing contact with each 3 is a very specific expectation and an easily verified requirement. A concrete understanding of what we want from employees will help us find focused methods and tools for educating people.   

4.    Atmosphere. Few people think about whether it is pleasant for a customer to be in your store. You may have well-trained salespeople, up-to-date shelving models, competitive prices, but some little things - say, it's very cold or hot, bad smell, lack of repair, greasy rugs, dirty mirrors, or even too low ceilings - can distract many from buying and pretty annoying. You can’t even say that you will want to return to such a store only if you really need it.

5.    Merchandising. A lot has been said and written about the art of product display, so we will not dwell on this here in detail. It is recommended to take this item into account when analyzing the operation of your store and, if the state does not have its own merchandiser, contact the experts for the necessary information and help.

6.    Navigation. Navigation inside the store is no less important than navigation on the way to it. Try to distribute the zones in the store so that the customer, right from the entrance, can quickly and easily find their way and choose the direction he needs. If necessary, order POS materials and place them in the hall in the direction of the buyer.

7.    Weather, seasonality. Of course, the retail segment, especially the fashion segment, is very dependent on some external circumstances, for example, on seasonality and weather. These circumstances are taken for granted, it is in our power to accept that sales are lower in certain months, commensurate with the decreasing traffic of the outlet, or, having analyzed the features of the store and the needs of your target audience, come up with ways to increase the attention of customers to your company, stimulating promotions for customers and staff, some, perhaps only your "steps" and finds.

Increasing your average bill is no easy task

The average check is the average sales for one payment transaction: the total amount is divided by the number of checks (arithmetic average). The main information that interests us is the amount of the average check and the number of items in the check. It is these two components that make sense to work out in more detail.

What affects the average bill:

1.    Promotions for buying more than one pair of shoes / one product. For the most part - this is advertising and promotion inside the store + the correct layout of the goods. For example, discounts may increase with the purchase of more pairs. Or you can give a gift for a purchase from a certain amount, carry out special promotions on groups of goods.

2.    Sale of related products. This position, although inexpensive, but in total can give a very good financial inflow. Check if the related products are available for the buyer’s eyes and if your employees (more often the sale is charged with the duties of cashiers) make efforts to sell the “bundle”, whether everyone is offered care products, wallets, gloves, laces, insoles.

3.    Grouping. And once again we return to merchandising. The correct distribution of goods on the trading floor will help not only quickly orientate the customer around the room and pay attention first of all to the goods we need, but also help to sell goods in groups, for example, a scarf to a handbag, a clutch to shoes.

4.    The work of sellers. One of the biggest stumbling blocks to increasing the average bill. The seller’s phrase “I see that he doesn’t need anything” robs us of at least 30% of our revenue. Moreover, often a customer buys only one unit of goods just because they are not selling anything else. Remember the dialogue that takes place in almost every store between the buyer and the seller: the seller fulfills the objections, makes sure that the customer is “comfortable, likes, everything fits”, asks the buyer to “go to the cash desk”, where he makes the purchase and says “Goodbye, come again ". That is, they say goodbye to the client instead of offering to continue shopping. What remains for a decent person to do after saying goodbye to him? Just leave.

If you manage on your own or with the help of invited training experts to direct the actions of the staff in the right direction, believe me, a positive result will not take long.

“How glad we are to see you again!”

In a good way, with these words you need to meet every customer who comes to your store again. This is a welcome situation for any seller - to see again and again a smiling, satisfied and, most importantly, customer ready to buy something again. Repeated sales, customers who return to you - you and your team should strive for these goals with all your might.

I would really like to have some kind of magic button or phrase that will make customers come back to you again and again, bring friends and relatives, but, alas, such a button is not yet known to the science of efficient retail. I will take the liberty to declare that this button is in an integrated approach and a detailed study of each of the points listed here, as well as in a clear understanding of the strategy and vision of your business. If everything is in order with this - the matter is small: follow your goal, born of the needs of your target audience, be faithful to your mission and success will definitely come!


This article was published in the 138 issue of the print version of the magazine.

In the era of mass insanity on the MBA and foreign business formats, it has become incredibly fashionable to count everything. We consider effectiveness in all its manifestations: conversion, correlation, sales plan, ...
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