Did you know that the holidays account for up to 30% of a retailer’s annual profits?
The more you know how your store makes money, the more control you have over its success this holiday season.
That’s why we’ve outlined how you can track your sales, transactions, conversions, and profits, along with offer tips on how you can improve in all of those categories.
Let’s get started.
1. Measure your sales
Sales per square foot
This metric helps you track how many sales you make per square foot of store space. Use this formula to calculate it:
Why should you measure your sales per square foot?
Sales per square foot help you see how productive your store is, and whether or not you’re using your space efficiently. Use this information to make layout decisions in your store.
How can you improve your sales per square foot?
Consider training your staff on proven sales tactics like cross-selling and upselling. Ultimately, your goal is to boost your store’s average transaction value. That can be achieved by optimizing your prices, offering promotions, or improving your visual merchandising. When your average transaction value and volume of sales increases, so will your sales per square foot.
2. Measure your transactions
Average transaction value
This shows you the average amount a customer spends per transaction in your shop. Use this formula to calculate it:
Why should you measure your average transaction value?
This gives you visibility on how much customers spend at your store, on average. A high transaction value can mean that either customers are buying more expensive items or that they’re buying a large volume of items. The right POS can tell you which it is.
Average transaction value can also give you valuable insights on how to improve your sales. If you have a low average transaction value, it could mean that you need to either reconsider your pricing strategy or train your sales associates on how to upsell and get customers to spend more.
How can you boost your average transaction value?
Train your staff on how to upsell and cross-sell. If done correctly, it’s mutually beneficial for customers and your store. What we mean by “done correctly” all boils down to context. Don’t try to upsell or cross-sell products that are irrelevant or clearly out of the price range of your customer. This comes off as pushy and self-satisfying, which is bad customer service. Rather, focus on adding value for the customer.
3. Measure your conversions
Your conversion rate indicates the percentage of store visitors that turn into buying customers. Use this formula to calculate your conversion rate:
Why should you measure your conversion rate?
Your conversion rate lets you know how efficient you are at turning window shoppers into buyers. Essentially, it calculates how good you are at selling.
How can you improve your conversion rate?
It all starts with your sales staff. They need to be personable, insightful and knowledgeable about the products they’re selling. More importantly, they need to be able to convince customers of a product’s value without seeming pushy or aggressive.
4. Measure your profits
Gross and net profit
Your gross profit tells you how much profit you make after subtracting how much it costed you to buy, create and sell the product. Use this formula to calculate it:
Your net profit shows you how much you earned after you deduct the cost of goods and overhead expenses. To calculate it, use this formula:
Why should you measure your gross and net profit?
These metrics show you whether or not you’re actually making money. Making sales is good, but ultimately you need to be running at a profit to be successful.
Monitoring these two metrics enables you to make smarter business decisions. For instance, if you’re gross profit is low, consider finding a way of lowering your cost of goods. If your net profit is low, perhaps you should look for ways to lower your overhead expenses.
How can you improve your gross and net profit?
Consider exploring these profit-boosting strategies: raising your prices, boosting average transaction value, reducing overhead costs, or purchasing from cost-effective vendors.
The bottom line
The best way to capitalize this holiday season is to use the information available to your advantage. But auditing your sales is just one part of what should be a much bigger game plan.