There is a saying that “Retail is Detail. In today’s fast changing retail environment retailers face many challenge. It is important to utilise metrics for retail success to manage their businesses into the future.
One key fundamental is the ability to quantify important financial information to deliver business growth.Both today and in the future this will help you build a sustainable winning product offer for your customer.
The result – business growth and the freedom to pursue new directions and innovations as your customers expectations change and as new competitors enter the market.These disciplines will result in a higher quality in visual offering and when planning the product range, it will force you to think about space management, hot spots, visual merchandising and traffic flows within the store.
Here are some of the key areas of focus.
- Category Management: All retailers should have strong category management principles in place. This enables you to analyise the business across all categories and to “drill down” further sub categories. With clear category strategies in place this helps to improve store traffic flow, increase transaction size, and increase gross profit.
- Product Mix: Retailers should always build their product range keeping their customer in mind. A well prepared and thought out buying plan can eliminate unnecessary items and avoid duplication. The facts are that “less is more” in retailing. Using the Pareto Rule where follows that 80% of sales will come from 20% of the product range, it is imperative to know how to plan to ensure that the key 20% is constantly on the shelves and available for your customers.
- Information Technology: Having access to real time information on your business performance is a necessity. Inventory is your biggest asset and it is key to know your best sellers, worst sellers and inventory values. Your decisions on future purchase orders will result in reactive management rather than proactive management.
- Understanding Key Performance Indicators (KPI’s): There are many KPI’s or metrics for retail success. Some of the main ones include quantifying your buying margin, sales , inventory levels, markdowns, stock turn, purchase orders, final GP, and shrinkage by category. These must be understood and applied in order to manage profits and growth effectively.
- Financial Planning: Most commonly referred to as Open to Buy (OTB) is the single most important retail financial methodology that retailers must embrace. This involves planning stock levels by category/sub category/sku for future months using the retail KPI’s. This provides a transparent understanding of the direction of the business. Used correctly It allows you to see “what if” scenarios in advance and to execute a buying plan of product by month by category.
