Measuring retail success with modern KPI's
While some headlines continue to herald the ongoing retail apocalypse, research shows that brick-and-mortar stores are actually flourishing. According to the National Retail Federation, the U.S. saw a net increase in store openings of over 4,000 in 2017 alone. And for every company that closed a store last year, 2.7 brands opened stores.
Although it’s evident that storefronts aren’t endangered species, the retail industry is shifting — and fast. Stores are no longer just places to buy things, which is why retailers need to focus on more than just sales metrics. And along with changes comes a shift in how retailers measure store ROI. The previous ways retailers defined success for their stores is increasingly outdated, but newer analytics have risen to take their place.
What Are Retail Key Performance Indicators? Retailers with pop-ups or physical stores have previously leaned on traditional success metrics to gauge whether a location was successful. Think foot traffic and sales that happen in store, also called “four-wall economics.”
Many retailers with physical stores have previously paid attention to metrics like:
The New Retail KPIs
None of these common KPIs should be entirely disregarded — they still have their place when analyzing the overall success of a retail business. But these traditional retail metrics have focused on analytics gathered only in-store. More merchants are adapting and redefining how they analyze their key performance indicators to assimilate to the shift in the retail industry.
Furniture brand, Joybird, is a leading industry retailer, who’s redefining what in-store KPI’S look like. Joybird took its digital-first approach offline with two physical showrooms — one in TriBeCa (open until the end of Sept.) and one in Brooklyn (opened Sept. 3rd). But rather than honing in on in-store transactions and sales data, this fast-growing furniture brand looks at physical retail in a different light.
"We are much more interested in looking at the total market lift rather than 4-wall sales. The purpose of the store is to meet our customers, learn about them and better adapt to their needs. Direct sales are not the main key performance indicator here. We view the store as a marketing expense," says Rebekah Kondrat - director of retail stores.
Adding their retail stores as a line item to their marketing budget is an unorthodox approach, but it makes sense for Joybird. The showroom is much more than an environment for consumers to engage with the product and be immersed in fully designed rooms, it doubles as a marketing strategy. Joybird views their retail spaces beyond the traditional sales channel, it’s an opportunity to express the brand, drive traffic to e-commerce and leave a lasting impression on the customer.
That’s not the only way retailers are rethinking measuring success. Some other “new metrics” include:
Engagement analytics: A store offers the perfect opportunity to engage with customers face-to-face — something you just can’t do online. Retailers can answer questions on the spot, perform product demonstrations, and offer personalized recommendations on the fly. Because of this unique value proposition, retailers can hone in on engagement metrics like how many customers attended an in-store event, how many customers visited your store and posted about it on social media, etc. Retailers can also incorporate high-tech tools like beacon technology and in-store social sharing tools to track customer engagement.
Experience per square foot: Stores are no longer just a place to buy stuff. To differentiate themselves, more brands have created immersive experiences to make a customer’s visit memorable (and to keep them coming back for more). This concept, called experiential retail, focuses on customer experience rather than cold, hard sales data. That could take the form of interactive displays, luxury-level customer service, product demo displays, in-store events, and more. While this kind of metric might seem intangible, retailers can measure customer experience through analytics like dwell times, how customers navigate through a store, etc.
Upgrading Your Own Retail KPIs
To move forward, retailers can perform an analytics audit to understand what they’re currently measuring and if those metrics offer the insights they need to make data-driven decisions. From there, retailers can reassess their KPIs and implement changes based on what makes sense for their brand. Chat with us about your retail goals and we'll help you build a tracking plan with relevant KPIs — every business is unique and requires success metrics that make the most sense for its specific goals.