Retail KPIs - Top 10 Best Retail Industry KPIs

If you’re in sales, you understand the importance of collecting and analyzing data. Without key performance indicators (KPIs) — such as monthly sales target, stock turnover rate, average customer spending, and cross-selling rate — retail businesses are making sales optimization much harder than it needs to be.

Below we dissect the top ten crucial KPIs you should look to in order to reach your sales goals faster.

1. Monthly Sales Target

As the name suggests, monthly sales target is how much money you want your retail business to make each month. The nice thing about this retail KPI is that it doesn’t have to be limited to a monthly cadence. Businesses can choose to monitor daily, weekly, quarterly, and yearly sales targets as well. A monthly sales target, however, is a great middle ground because daily and weekly targets are too frequent to give you a real understanding of how your sales campaign is working and the overall sales performance.

2. Stock Turnover Rate

Inventory turnover rate focuses on how much stock your retail business is going through on a daily, weekly, monthly, quarterly, or yearly basis. This is another great retail store KPI for sales managers in retail companies. Are you seeing that some months are significantly slower than others? Save money by limiting the number of products you order. Same thing goes for busier months. If there’s a high turnover rate, you know you need to purchase more stock to prevent back orders. This retail KPI analysis of inventory turnover rate can save your business thousands by reducing waste and helps minimize the effects of inflation.

3. Average Customer Spending

Average customer spending is an essential retail KPI for retail businesses and store performance. If the numbers are high, that’s a great indicator for sales managers to order more stock. If the numbers are low, sales managers know to either limit the number of items they have stocked or to make changes in their sales efforts to get that number higher. Average customer spending is also indicative of how satisfied customers are with your products. It shows you’re good at selling products at high prices or selling products at low prices, but in higher quantities.

4. Cross-selling Rate

Cross-selling rate is a retail key performance indicator all retail businesses should follow because it shows that not only are customers able to find what they want, but that you’re selling other products that are useful as well. Big retail companies like Target have a significantly high cross-selling rate. How often do you go to Target for one thing and find yourself at the register full of items you didn’t think you needed and regret when you see the bill in the hundreds? If the cross-sell rate is low, that’s an indicator your retail business isn’t doing enough to keep customers in the store.

5. Total Orders

Total orders is a very flexible retail KPI, which makes it essential for retail businesses. Sales managers can use this KPI to measure in-store transactions, online transactions, or both. It can also be measured for certain time periods as well: daily, weekly, monthly, etc. By looking into order history reports, sales managers get a clear number of how well the business is doing from multiple angles. One thing to keep in mind is that this doesn’t take into account how often buyers are returning items.

6. Average Purchase Value

Customer loyalty is something all businesses strive for, whether it’s retail, B2B, online, or anything else in between. The average number of transactions per customer shows retail managers who their most loyal customers are. With customers’ order reports, you’re able to access all data and sales when they are attached to a customer on your POS system. 

If there’s a high number of customers who keep coming back, that indicates there’s a strong connection between your store and the customer. However, a low number isn’t entirely bad news. If customers tend to only come once, but the price of the order is high enough, you may not need a large base of frequent shoppers — especially if forecasts show a long-term demand for those products.

7. Inventory to Sales

Inventory to sales shows how much stock you need to order on a regular basis. A high ratio of inventory to sales means your retail business is ordering too many products that aren’t selling. A low ratio means that the majority of the products your business puts out get sold, meaning your business is making wise business decisions in regards to what kinds of products you offer. The last thing your retail business wants is to purchase a store’s worth of products only to have them sit around. This wastes money and space, which could be used for more popular products.

You can also drill down into your year-over-year sales in order to estimate both your product and expert needs. See a product that didn’t do so well over the past few years? It may be time to get rid of this item or start ordering less. Exploring your data insights can help you make money-savvy and objective decisions instead of relying on guesswork.

8. Average Shopper Dwell Time

Average shopper dwell time is an important KPI for the retail industry. It focuses on how long customers are in the store. Typically, the longer they’re in the store, the more likely they’re going to make a purchase. Ever wondered why Ikea’s layout is the way it is? The large and intricate layout showcases how the company controls shopper movement through the store, ensuring the customer sees everything they have to offer.

\However, shopper dwell time can also indicate why sales revenue is lower than expected. If customers can’t find what they’re looking for, they may have a frustrating experience. Consider fixing this by mindfully rearranging the layout of your products.

9. Return Rate

Return rate is a good retail store KPI for retail managers regarding the quality of the products being sold. If the return rate for products is high, it means customers are not satisfied with their purchase. If the return rate is low, it’s a good indicator that customers are happy with their purchase, which can help to improve customer retention rates. Having a high return rate means retail businesses have to hang onto products that take up space when that space can be used for more popular items.

10. Backorder Rate

Backorder rate can be both good and bad for retail businesses, which makes it a necessary retail KPI for sales managers to track. It can tell sales managers that certain products are in high demand, and that those products need to be ordered in higher quantities for the future. It can also tell sales managers that there are other significant problems with suppliers if revenue numbers are low. The longer customers have to wait for the products they want, the less likely they’ll stick with your business.

KPIs for the retail industry are a great way for sales managers in retail businesses to determine how well their sales process is. The great thing about these metrics is that they can be tracked with or without CRM software. That’s why we believe these are the ten best sales key performance indicators for retail businesses.