As with so many things in life, the answer to every problem is closer than you think. When retailers feel the pain of an economic slowdown they tend to look outside their business for remedies. However, they would do better to look inside the business, measuring its performance and planning its future.
Managers who expect to be able to make changes based on monitoring financial performance are shutting the door after the horse has bolted. A more reliable approach is to define simple indicators that proactively take the temperature of a business.
For an online retailer, indicators could be based upon website visitor traffic by time of day and duration, highlighting the pages visited and the products that generate sales. A bricks and mortar retailer could measure footfall by location, time of day and length of visit.
It is important to focus on just a few key performance indicators (KPI) which reflect performance, are measurable and are comparable against benchmarks such as a previous year’s data or a competitor’s results.
So how do you identify your KPIs? While best practice suggests that you ask yourself what drives your sales figures, your costs and your cash flow, you should always come back to what drives your own business.
Analyse what would enable your business to outperform your competitors and consider having these elements as KPIs. Remember that measuring sales performance will not help you to make sales. Understanding and acting upon the key indicators of your business is the best route to success.
Ian Tomlinson is managing director of EPoS and ecommerce solutions provider Cybertill