To run a successful retail business, your company needs to be running as efficiently as possible. Any mistakes or missteps could result in lost revenue and profits.
Using Your Point of Sale Software
We all make mistakes. They are unavoidable. The best way to avoid mistakes with your inventory is to be data driven. The right point of sale software can provide the advanced inventory metrics you need to understand your products and your customers’ buying habits—no need for more software or technology.
Inventory metrics assess your retail performance through measuring key performance indicators (KPIs). Let’s take a look at six of the most common inventory KPIs in retail.
1. Total Sales
This inventory KPI measures all of the sales at all locations over a period of time. With this information you can determine when demand picks up or slows down. It’s one of the best metrics for sales projections, too.
2. Average Transaction Amount
Lots of things can affect the average transaction size, such as pricing and bundling. This metric can tell you if you’re growing of not. You can use the average transaction amount as a target for future sales goals, especially during downtimes or off-season.
3. Average Days to Sell Inventory
Small ticket items and perishables need to move quickly. While large items are typically slower to sell. So, it’s important to see how long it takes for your store to turn the entire inventory into sales.
4. Rate of Sales Returns
No one wants to see an unhappy customer return and customers don’t want to do it, either. Returns can be a nightmare. They take time and special care when handling them. Reducing your rate of returns is the key to having a great customer experience. Return rates differ by product categories, and some are substantially higher than others. You may need to examine the quality of the products being returned and look into a better alternative.
5. Back Order Rate
A high back order rate is not necessarily a bad thing. It could indicate an unexpected rise in demand. But, if it is always high, then you’ll need to work with your vendors and adjust your stock levels to meet demand. Also, you can use automated POs generated through your point of sale software to avoid low stock levels.
6. Customer Retention
Acquiring a new customer is expensive. So, a high customer turnover rate means you’re losing out on the marketing investments to get those new customers. Plus, competition is tight, so your business needs loyal customers to generate a steady-stream of revenue. To raise your retention rates, implement a rewards program to build loyalty through value.
Getting Your Employees Involved
Using advanced inventory KPIs to make improvements will help you and your employees to become more efficient at what you do. This is something that your employees will really appreciate. They’ll learn how to upsell and offer better alternatives when helping customers. It gets them involved with the success of your business. And, with the busy season just around the corner, using those metrics will have everyone at the top of their game.