The retail equation

The last time we talked about why you should love your KPIs, what KPIs in retail exist or at least should exist and what they stand for.

Today I want to emphasize on the need of truly understanding them – besides the fact that they are elementary for your turnover they also are undispensible for your action plan, as you, by undertakeing an action or not you actively influence them.

As long as you did not incorporate this you will only take action to raise turnover, but will never truly understand why you do things and thus are not able to analyse which kind of activities you excel in, which kind of activities you neglect and to put it straight forward where you suck at.

To illustrate that I already posted already a chart on the composition of Boutique turnovers – it is suggested to know it.

To further illustrate that please find enclosed the retail equation, a whicked and extremely nice way of putting it.

ohne titel

Now this looks evident and tells nothing new. I will give you some examples:

I invite you to do this exercise for your store with last years numbers and to find out HOW your turnover was composed, do it with a simple excel, you will love it.

Now try to find out your best and worst monthly KPI values and put them in the excel sheet, compare the deviation of the turnover and quickly you are going to realise that the bigges changes come from the transformation rate – this because it already aggregates the traffic with the number of invoices issued. In short it is not linear. Fun is what the whole equation tells you…

In fact it will give you an indication on which KPI to work with in order to deeply impact on your turnover.

Once you did the exercise you will see that the ones where you traditionally work the most on are the ones, where you have the lowest impact.

Having said that I am of course trying to limit discount, trying to upsell, trying to sell more then one piece to a customer and evidently to get more customers visiting me, but the most important in my world is to raise the transformation rate and this is exactly where I focus on.

In short anybody who visits your Boutique should buy something.

Please also note tha tthis might vary strongly according to what kind of industry and brand you are in. To stress the already used example – if you are GUCCI in 2018 and people queue in front of your door the task is rather Average price and number of products sold then anything else, but hey this seems rather to be the exception then anything else



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