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Retail:Financial Metrics

Retail:Financial Metrics

by Sanjeev Archak

Anyone with a business knows that the numbers don’t lie.Retail is a hyper-competitive industry. And, I promise, your competition is already tracking and measuring retail metrics.  Retail, in particular, is data rich with constant tracking on so many levels. A lot of business owners lose out as they do not know what to look for or if they do they struggle to find a way to bring the data together. Let’s get familiar with key financial  metrics for retail businesses.

Stock turn/inventory turnover

Also known as inventory turnover, stock turn is the number of times stock is sold through or used in a given time period.Stock is a huge part of your retail operation. So if you find yourself replenishing an item frequently that item has a high turnover. If you rarely need to order it then it has a low turnover. 

To buy stock, you need cash, once you buy the stock that money is then tied up in that product until it is sold. If something has a very low turn rate it means it reduces your cashflow and essentially ties up funds on your shelves. Figuring out the worst performing items and reducing your number of lines on that basis can improve your cashflow and boost your bottom line.

Gross margin

Every business needs to make a profit in order to survive.Gross margin is defined as: total sales revenue minus the cost of goods sold, divided by the total sales revenue, expressed as a percentage.Tracking Gross Margin ensures you are actually turning a profit.Having this information available  real-time as possible means you can act fast and avoid  losses 

Cashflow

Cash is king. A business cannot survive without cash.A retail business needs cash daily to keep the show running. If you are selling seasonal products then cash management becomes crucial in the off season. Track these trends and understanding when they will occur allows you to stay ahead . A cash forecast always helps you stay on top of your cash situation.

Average Transaction Value

All retail marketing efforts are directed towards attracting new customers. A retail business needs to find ways of increasing the customer spend over a period of time. An increase in 10% spend by a customer,across product lines can be huge.Tracking the average sales value and then finding ways to improve it is vital.The key is to increase the average sale value and add to your revenue.

What metrics do you find the most useful in your business?

 

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