Sales KPIs

 

SALES KPI TO ACHIEVE BUSSINESS GOALS

 

 

TO BOOST SALE

 

·         Year-over-year sales YoY Sale)

·         Conversion rate (CR)

·         Average order value (AOV)

·         Basket size

 

 

TO STRENGTHEN CUSTOMER EXPERIENCE

 

·         conversion rate (CR)

·         average order value (AOV)

·         basket size

·         customer retention rate (CRR)

 

 

TO Reduce stock-outs

 

·         Inventory turnover (ITR)

·         Sell-through rate (STR)

·         Shrinkage

 

 

TO Optimize profits

 

·         Cost of goods sold (COGS)

·         Gross profit (GP)

·         Net profit (NP)

·         RETURN ON SALE (RoS)

·         Gross margins return on investment (GMROI)

 

 

A FEW SALES KPI EXPLAINED IN SHORT

 

COGS

 

Measuring your COGS is essential to achieving profitability. If you know how much you spent to acquire or produce your products, you can set prices that are competitive, but that also offset your expenses.

 

average order value (AOV)

 

Also called the average transaction value (atv), this retail metric measures how much a customer spends in your store on average.

 

If your AOV is high, customers are probably either buying your high-value items or buying lots of items at once. A low

average order value would mean the opposite.

 

AOV =  Total revenue / Number of orders or transactions

 

 

 

If you can encourage customers to increase their average purchase through

 

·         merchandising strategies (showcase products in physical and digital stores)

·         identifying popular products

·         shopping promotion programs

 

Then your efforts will likely boost your profit and enable your company to grow.

 

The average transaction value for UK top retailer” Tesco” between 2020 and 2022 fluctuated up and down by 5%

 

BASKET SIZE

 

How many units are sold per transaction on average.

 

A larger basket size indicates that people are buying many items when they place an order with your store. While this may not indicate anything in particular about your business depending on what kind of products you sell, if your basket size is small, you may want to consider upselling, cross-selling, or creative product promotions to encourage larger sales.

 

BASKET SIZE = Total number of units sold / Total number of transactions

 

 

inventory turnover ratio (ITR)  OR  stock turnover ratio (STR)

 

It measures the number of times a retailer sells and replaces inventory during a specific period.

 

ITR = Cost of goods sold (COGS) / Average inventory cost

 

Monitoring your inventory turnover gives you insight into which specific products are in highest demand. With this knowledge, you can better plan your inventory and make sure you maintain optimal inventory levels.

 

An excessively high inventory turnover could indicate that youÂ’re selling your goods too fast and youÂ’re not stocking up fast enough to meet customer demand. Meanwhile, a very low inventory turnover rate could mean youÂ’re not selling your products fast enough, which could create deadstock or result in inventory obsoletion.

 

 

Gross margins return on investment (GMROI)

 

It measures the profit you make from the amount you invest in product stock.

 

GMROI = Total gross profit / Average inventory cost

 

Its specificity can tell you what is worth carrying in your stock and what is not, as well as what you could invest further in. The more you make on each profit margin, the better your retail business does as a whole. Growth comes when you find products worth

investing in and have a good return on their initial costs.

 

GMROI > 1.0 or 100%:

 

A GMROI above 1.0 means the retailer is generating more in gross margin than it is spending on inventory. This indicates that the inventory is being managed effectively.

 

GMROI < 1.0 or 100%:

 

A GMROI below 1.0 suggests that the retailer is not generating enough gross margin to cover the inventory costs. This could indicate excess inventory, pricing issues, or underperforming products.

 

 

Return on Sale (RoS)

 

It measures of how efficiently a company turns sales into profits.

 

RoS = Net Profit / Net Sale

 

It is a ratio that measures a company's operating profit relative to its net sales.

 

It is a financial ratio that's important for sales because it helps companies understand how well they're generating profits from their revenue.

 

RoS can help companies determine if their sales and financial strategies are working, and if any changes need to be made.

 

A high RoS can help businesses grow faster and increase their market share.