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How to measure your point-of-sale performance with key business indicators


Do you want to measure the performance of your point of sale with key business indicators? Efficient management of a point of sale is essential for the success of any retail business. However, measuring the performance of your point of sale is not a simple task.

 

Retail is one of the most important industries, employing millions of workers and generating billions of dollars/euros annually in sales revenue. For this reason, a company must constantly analyze what would help it grow.


The way your store performs directly affects your revenue

Store owners must be attentive to all business metrics to improve their performance, especially if they operate with a point-of-sale (POS) system. Measuring performance requires a strategic approach and the use of key business indicators (KPIs).

 

The first step in measuring your point-of-sale performance is knowing which indicators are used to obtain this data. Then it is important to monitor the key performance indicators, also known as KPIs.

 

To do this, goals including business metrics must be established, i.e., the actual progress of the company must be measured against the goals initially set.


Importance of measuring point of sale performance


The way your store performs directly affects your revenue, customer satisfaction, and overall profitability of your company. Here are some reasons why measuring your point-of-sale performance is important:


Resource optimization


Resource optimization is one of the biggest challenges in managing point of sale. Measuring performance allows you to identify areas where you can optimize your resources. This includes staff management, store space utilization, and inventory management.


Strategic decision-making

 

Data collected through KPIs help you make strategic decisions. You can identify trends, customer buying patterns, and market opportunities. These insights enable you to adapt your business strategy more effectively.

 

Assessment of customer experience

 

KPIs allow you to assess customer satisfaction and take steps to improve it. This may include reducing waiting times, improving customer service, and customizing the shopping experience. A Salesforce study indicated that 78% of consumers will return to a retail business if the customer service is satisfactory.

 

Competitiveness

 

Measuring your point-of-sale performance helps you stay competitive in the market. By comparing your KPIs with those of your competitors, you can identify areas where you need to improve to stand out and attract more customers.

 

Despite the importance of measuring point of sale performance with key business indicators, a survey by Geckoboard revealed that almost half (49%) of small and medium-sized business owners failed to recognize any key performance indicators (KPIs).

 

On the other hand, the same study found that business owners who tracked KPIs were twice as likely to achieve their goals.

 

How to measure point of sale performance with key business indicators

 

When we refer to point-of-sale KPIs, we must consider the figure of the responsible persons at the point of sale, as they are in charge of tracking the company's products and those of the competition in each of them. Let's see 5 keys to measure effectiveness at the point of sale:

 

Promotion

 

To measure the effectiveness of promotions on consumers at each point of sale, it is important to implement the actions correctly and then monitor the strategies, which will allow us to obtain this data.

 

Price

 

Another variable to consider is pricing strategy. It is important to closely control the prices set at each point of sale, both for own products and for the competition, to understand the price's impact on consumer behavior.

 

Product availability

 

In this case, it is necessary to ensure that there is an adequate quantity of product on the shelf to meet the needs of end consumers. Part of the work of GPV focuses on ensuring that this quantity is adequate to ensure product availability.

 

OOS (Out of Stock)

 

As we have commented, it is important to always have stock of each item, thus avoiding stockouts. This situation would significantly affect the effectiveness of the POS, as the absence of a product directly affects sales.

 

Shelf share

 

With this indicator, we can measure the space available for a product on the shelves of each POS, thus gaining a higher percentage than the competition.

 

6 Key Business Indicators to Measure Performance

 

Now that we understand the importance of measuring point of sale performance, it is crucial to know the key business indicators that will help you do so effectively. Here's a list of relevant KPIs:

 

1. Conversion Rate

 

The conversion rate is the proportion of the total number of visitors to your store who made a purchase. This metric indicates how well your sales staff is performing and how much your product or service attracts consumers.


The formula to calculate the conversion rate is:

 

Conversion Rate = (Total number of buyers / Total number of visitors) × 100

 

For example, if 1000 people visited your store and 100 of them made a purchase, the conversion rate would be:

 

Conversion Rate = (100 / 1000) × 100 = 10%

 

This means that 10% of visitors purchased in your store. It is a useful metric to evaluate the effectiveness of your sales and marketing strategies and to understand the level of interest generated by your product or service among visitors.

 

2. Gross and Net Profit Margin

 

The gross profit margin of a product is your selling price minus the cost of goods sold divided by the selling price times 100. Meanwhile, the net profit margin is calculated by subtracting all expenses from all generated incomes divided by the total income times 100. Gross and net profits are KPIs to determine if your company is making or losing money and where you can adjust profit margins.

 

In summary, the formula to calculate the gross and net profit margins is:

 

Gross Profit Margin:


Gross Profit Margin = ((Selling Price - Cost of Goods Sold) / Selling Price) x 100

 

Net Profit Margin:


Net Profit Margin = ((Total Income - Total Expenses) / Total Income) x 100

 

3. Inventory Turnover

 

The inventory turnover rate is the amount of merchandise your retail business sells daily, weekly, monthly, quarterly, or annually. It is calculated by measuring the cost of goods sold divided by the cost of the average inventory available.

 

Inventory Turnover = Cost of Goods Sold / Average Inventory Cost

 

4. Year-over-Year Growth

 

One of the most important goals for retailers is sustained year-over-year growth: increased revenue each year. Comparing performance year-over-year can provide valuable insights. If there is a downward pattern, you'll know that you need to determine why and how it can recover.

 

To calculate the percentage growth in sales from one year to the next, you can use the following growth rate formula:

 

Growth Rate = ((Current Year Sales - Prior Year Sales) / Prior Year Sales) × 100

 

For example, if last year's sales were $100,000 and this year's were $120,000, the formula would be:

 

Growth Rate = ((120,000 - 100,000) / 100,000) × 100

          = (20,000 / 100,000) × 100

          = 20%

 

5. Return or Refund

 

 The return rate or the frequency with which refunds are requested is a good way to measure the quality of the products and services you sell. It also indicates how satisfied your customers are with their purchases.


It is calculated by dividing the number of returns or refunds by the total number of sales and expressed as a percentage.

 

Return Rate = (Number of Returns or Refunds / Total Number of Sales) x 100

 

6. Customer Retention and Positive Reviews

 

Regular customers are the financial backbone of any successful retail business. As a retailer, you need to inspire loyalty in your customers to encourage them to keep buying your products and services.

 

The Net Promoter Score (NPS) can be an excellent tool to measure your customers' loyalty! The NPS is a metric that assesses customers' willingness to recommend your business to others. It is based on a simple question: "On a scale of 0 to 10, how likely are you to recommend our product/service to a friend or colleague?"

 

Customers are divided into promoters, passives, and detractors based on their responses. The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters, providing a score that ranges from -100 to +100. This score reflects customers' loyalty and willingness to be ambassadors for your brand, providing deep insights into how your customers feel about your business and their willingness to promote it.


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