Without data, you don’t have the insight you need to know how your business is really doing. That’s why it’s important to keep track of these 3 retail productivity metrics. These three metrics work together and will help you make actionable decisions about your inventory using data.
3 Retail Performance Metrics:
Without the data, it is difficult to accurately know your success. The more insight you have, the better equipped you are to make informed decisions so that you can be a profitable retailer.
- Return On Investment (ROI) – For every dollar you invest in a product, how many are you getting in return. ROI analyzes inventory levels, sales, and profitability by comparing the investment in inventory required to generate those gross margin dollars. A high ROI indicates that you have the right amount of inventory, at the right time, for the right price. A low ROI may indicate that you are missing out on sales opportunities and leaving money on the table in the form of old inventory or excess markdowns.
- Turns – Turns measure how many times will you sell through your inventory in 1 year. This is an important indicator of how efficiently a product is moving through a sales cycle. You can use turns to find out which products sell most quickly and make you the most money (note: products selling at a faster rate usually sell at full price and higher margins). A low turn rate can indicate you may be overstocked in a product. This is based heavily on how you choose to manage your inventory.
- Gross Profit Margin (GP) – GP is the percentage of your overall sales dollars that were profit dollars. The GP% is relative to the cost of the item as well as the selling price. A higher GP% can indicate that you are selling your product as close to the original retail price as possible. A lower GP% may indicate excessive markdowns for products driving down profitability.