5 Key Performance Indicators You Must Not Ignore For 2014

Going into 2014, the hangover of a meek and meager Christmas season hung across all channels of specialty retail stores. Fear of an Amazon drone attack seemed imminent, even though Jeff Bezos admitted that the flying delivery system with a shopper’s internet shopping cart payload was more of a joke then reality.

Brick and mortar store owners can be forgiven for not having a great sense of humor right now given the release of the holiday shopping numbers that showed a whopping 23% decrease in in- store shoppers, those buyers instead turning to the internet to purchase their gifts online, even without the promise of an aerial backyard drop-off service.

Here we are almost a quarter later and our focus now turns to the weather, and with it a prayer to “please make it better than last year”. As shelves across specialty channels start to fill with summer goods, we wanted to share our top Key Performance Indicators (KPI’s) for this year. These are what we consider the most important metrics small and mid-sized retailers should have their eyes on this year to help them stay competitive in this constantly changing market and shopping battlefield.

Staffing is a balance between maintaining high levels of customer service and avoiding paying employees to stand around the shop with little of nothing to do.  FInding the correct staffing levels and even looking in hindsight to determine if your payroll is too high or too low can seem impossible.

1. Optimization of staff: Gross Margin Return On Employee

Staffing is a balance between maintaining high levels of customer service and avoiding paying employees to stand around the shop with little of nothing to do. Finding the correct staffing levels and even looking in hindsight to determine if your payroll is too high or too low can seem impossible.

GMROE: Gross Margin Return on Employee: (Gross Margin $ / Payroll $)

For Outdoor and Running Stores a GMROE target of $3.00 can be used to set a total payroll budget, and in evaluation to gauge if overall staffing levels are too high or too low. A $3 GRMOE will yield a payroll equivalent to 12-17% of sales depending on margin rate. This target includes your total payroll: floor staff, managers, buyers, and other back of the house support roles. This overall target allows flexibility within your stores structure for how roles are defined and structured.

If you have a seller that spends 10-25 hours on the sales floor, you don’t need to allocate this person to “front of the house” (sales) or “back of the house” (operations). They are part of the total GMROE target of $3.00.

For Bike Stores, because of the lower realized margins on bikes – especially as the retail price of the bike increases – the target drops a little. The total GMROE target of $2.50 can be used for bike store. Most bike shops are seeing sales of bikes as a percentage of total sales greater than 50% which is a problem in itself, but leaving that alone, in order to be accurate we can offer the following GMROE scale for bike shops:

Minimum acceptable
Likely has market conditions affecting the outcome (cheap labor, no competition, etc)

2. & 3. Customer acquisition and activation: Items/Transaction & Units/Transaction

As we continue to evolve to serve our rapidly changing customer base, there’s two things we can keep an eye on:
Customer Acquisition and Customer Activation. In 2013, sales growth in many cases came through price inflation, while transactions declined. Fewer people came through the doors but each one was spending more.

In 2014, a critical baseline metric will be transaction growth. In the specialty business, we often do such a good job of cultivating our customers that they eventually outgrow us and begin shopping elsewhere. Growth needs to come from continued new customer acquisition as well as re-acquisition of lost customers.

The simplest measure of success is improvement in the number of transactions. If you have the data available, tracking the percentage of new versus returning customers provides insight into both your marketing effectiveness and your in-store experience. If customers are not returning, is it because you are not reaching out, or did you fail to exceed their expectations on their last visit?

If you are retaining current customers, how can you interact with them more often, and how can you leverage them to connect you with new customers?

UPT: Units Per Transaction (Unit Sales / # of Transactions) 

AT: Average Transaction (Sales $ / # of Transactions)

The second piece looks at the value of each transaction, measuring how much each customer is purchasing. Using Units Per Transaction (UPT) and Average Transaction (AT), you can see both how much customers are spending, and if they are cross-shopping categories in your store.

This is also a gauge of how well your staff is identifying the needs of the customer and connecting them with potential solutions. Using both UPT and AT will balance noise caused by a substantial increase in high unit categories like nutrition, or high dollar categories like winter jackets. For Bike Shops – when considering AT, sales of bikes should be considered separately, as their impact would overwhelm other categories.

4. Count Your Customers…NO REALLY…CountThem:   Conversion Rate

Perhaps one of the biggest differences between large scale, big box and other high volume stores to Specialty Retailers is the way customers are counted, and then understanding how often their visits turn into shopping dollars. The level of technology and sophistication going into looking at measuring and understanding this key metric is growing exponentially and becoming increasingly more affordable.

In an era where we seemingly upgrade our smart phones every two years, it’s time to update your door counter (assuming you have one in the first place) for the first time ever. The value to your business will be as noticeable as your new smart phone compared to that shoebox you used to put to your ear a decade ago.

One of the most exciting new pieces of technology we have seen in the retail world comes from 

Swarm Mobile. This new age “door” counter measures the number of cell phones that walk or pass by your store and then registers them as a shopper when they actually come into your business.

Unlike traditional infrared door counters that generally take a year of data before you can understand increases or decreases in your traffic flow and can be influenced by staff traveling in and out of the store, Swarm gives you real time data, can measure window conversions (the number of people who window shop then come into your store) and dwell time – how long a customer actually spends in your store. Soon the Swarm device will be able to measure and report linger time – the time that a customer spends in each area of your store.

Swarm can even be integrated into most Point of Sale systems and then allow real time sales data to be matched with your customer traffic flow. All this is viewed in a smart and simple dashboard that can be adjusted by date range to show trends.

Turning customers into sales is the number one way to increase dollars to your bottom line.

An example of the Swarm data is below:

Using our Mann Group “Retail Health” App:
If we can sell to two more customers/day – a mere 6.7% more/year, we increase our sales by $66,667.00

5. Sales floor value by Employee: Sales/Hour vs Payrate/Hour

As employee costs have increased in the past years, employers have been looking for ways to evaluate sales floor performance, staffing levels, and overall sales trends to make staff decisions in their stores. This conversation was heated up further with the ObamaCare changes and is bound to catch fire with changes to the US Minimum wage looming.

At the center of this discussion has been the shift of many employees from full time to part time hours, to save costs associated to and forced on employers for the full time staff they employ.

Traditionally retail managers have looked only at total sales by an employee to evaluate their time on the sales floor and ignored the true indicator of performance – Sales By Hours Worked. Looking below, at our theoretic store and staff below, most managers would have ranked their four employees by monthly sales (Sales by Month), and doing so Susan would have been ranked #1. At $16/hour that would make sense but what if we look at Sales By Hours Worked. When ranked this way Susan is 2nd from last and Nancy is #1. Jim, who was last previously is now #2.

Of course we need to make sure that all four of these employees have similar training, but assuming they do, maybe our manager needs to re-evaluate who gets to work at the busiest times of the month.

Often managers are too quick to note that one employee might lack in sales because they are asked to do other tasks such as merchandising or cleaning, but one important thing to remember here is that busy employees attract staff and often account for lots of sales/hour because customers love dealing and feel comfortable with staff that are busy doing something other than stalking them on the sales floor.

Comments (5)

miscalcuation on frank's sales per hour, right? do you ever take into account their pay rate in these productivity figures?

how valuable is swarm if it doesn't integrate into your POS system?


Thanks for your question.

1) Even if you don't integrate – SWARM really gives you a much clearer understanding of who comes in your store. Things a door counter can't tell you that SWARM can:
~ Is the customer new or repeat
~ Did the customer linger and window shop you before they came in
~ How long did the customer stay in your store.
~ Where did the customer surf to on the web enabled phone (if you have enabled the free wifi option)
~ What time the customer came in

We feel this data is invaluable and will help you analyze your customer traffic. Traditional door counters count everyone – your staff, the UPS guy and the shop dog. SWARM counts customers.

Thanks again for the question.

Kevin Simpson – CSO


Good catch!
We have posted the correct data – and to the question of pay rate – yes we do evaluate the pay rate – next month's blog will give you an even more powerful way to do this so tune in then.


Kevin Simpson – CSO

Thanks for this blog. All screenshots can explain the full blogs easily. This is very easy to understand. Using this screen shots know the details becomes easy.
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