Business owners should use key
performance indicators (KPI) to make smarter professional decisions
regarding their professional operations. If you own or manage a
retail store, you can use this data to boost revenue and turn a
higher profit. Unfortunately, far too many business owners gather
mass amounts of data, grouping it into one big meaningless mass. A
smarter approach, however, is to look for specific data and metrics
which hold the most weight in your line of work.
Shrink
Shrink is one of the biggest KPIs in
the retail industry. If you keep up with our blog here at
AAStoreFixtures.com, you're probably well aware of the importance of
shrink in retail businesses. When a store if forced to write X amount
of dollars off as “shrink,” their profits drop and they're forced
to raise prices to make up for the loss.
Analyzing your business's shrink on a
regular basis allows you to monitor the problem. If the numbers
continue to grow over the course of several months, then perhaps you
should make some changes to reduce your store's shrink.
Net Profit
Of course, net profit is a major KPI
that business owners shouldn't overlook. Just as the name suggests,
this metric is the actual profit that your business creates. Not to
be confused with gross revenue, which is the amount of money your
store generates, net profit is the actual profit that's left
over after paying payroll, taxes, overhead, insurance, etc.
Return on Investment (ROI)
We really can't talk about KPIs in the
retail industry without mentioning return on investment (ROI).
Whenever you open a new store or launch a new business, you are
investing your money into what you hope is a successful
establishment. ROI is the percentage of money based on your initial
investment that's returned.
ROI can be used in a countless number
of applications. Let's say you want to purchase a radio commercial
advertisement to drive sales to your store. You could announce a
special radio coupon code during the commercial to track which sales
came from this medium. Once the promotion is over, you can then
measure the ROI of your radio commercial campaign by determining
exactly how much revenue it generated.
These are just a few of the most
commonly used KPIs in the retail industry.
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