Retail Arithmetic

Ekaterina Kazarinova - business coach, retail technology consultant. Practitioner with experience in building your own business, opening retail projects from scratch of different scale formats (from 100 to 7 sq. M.), Active development in large cities of Russia, optimization of business processes of operating companies.

www.kazarinova.ru/

Efficiency and Efficiency

Before starting to solve specific problems, you need to find out how accurately all the leaders of your company understand the basic terminology of retail. For example, Key Performance Indicators (KPIs) include two important concepts at once - efficiency and effectiveness.

Ekaterina Kazarinova at her trainings asks the audience a simple question: "If the company has fulfilled the sales target by 98%, is it good or bad?" In most cases, the audience is divided into two camps - half are in favor of such high indicators, the second - interprets these results as unsatisfactory.

According to standard terminology, performance is the company's ability to focus on results, that is, your ability as leaders to achieve results 100%! Thus, at lower rates, the work of the store can be considered unsatisfactory. Efficiency is understood as the ratio between the results achieved and the resources expended, that is, the ability to obtain maximum results at minimum costs. The different meaning of these terms leads to confusion in the work: you, as a leader, expect 100% performance, while your subordinates are happy with less results.

Control purchase

The key saying in management is that you can only manage what you can measure. The feedback is also valid: anything that cannot be measured cannot be controlled. This is an axiom that does not require proof. Working on store efficiency is always working with numbers! If you do not know the numbers that were yesterday, a week, a month ago, you are unlikely to be able to improve the performance of your store.

The main indicator of retail is sales: the higher it is, the higher your profit.

How to calculate this indicator? The formula is simple:

Sales volume = the total number of visitors to your store (pass-through traffic) x the conversion rate x the average order value. Measured in rubles or units sold.

Passive traffic is the flow of customers inside the store: how many people enter your store daily.

The traffic flow rate is the ratio of the number of website visitors who perform a specific action to the total number of website visitors, expressed as a percentage. To obtain this data, a store is equipped with a traffic flow counter at the entrance. Customers are identified by the number of checks they process. Thus, a traffic flow rate of 10% means that one in ten visitors makes a purchase, and 25% means one in four visitors makes a purchase.

As can be seen from the formula, an increase in any of the three factors will lead to an increase in sales. And what resources we have for this. To understand the calculations and understand the relationship of these indicators, we will solve several problems:

Task 1

Store turnover per month - 1 million rubles, average check - 500 rubles, efficiency - 20%.

Questions: How many visitors does this store have every day, and how many checks a month breaks through?

Store turnover is the total revenue for the period.

Average check - the total revenue is divided by the number of checks for the same period.

Efficiency - the ratio of store buyers to visitors.

Number of checks per month = 1 000 000 / 500 = 2 000 (buyers per month)

Visitors per month (30 days) = 2000 * 100 / 20 = 10 000 people

Visitors per day = 10 000 / 30 = 333 people

Buyers per day = 333 * 20 / 100 = 67 people

Task number XXUMX:

You have 10 visitors a day and two of them become buyers, conversion is 20%. With such indicators, your sales volume is 1 million rubles. You have improved this result through staff training and merchandising. Today you have three visitors a day, which means the conversion is 30%.

Question: how much will the sales volume increase if the remaining indicators remain at the same level?

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Answer: 30 / 20 = 1,5! That is, sales increased 1,5 times!

How complicated were the puzzles for you? This is an elementary test of your knowledge of retail arithmetic! Even if all of your sales are automated, if you don’t know the basics of the account, you don’t have the opportunity to check why the indicators slipped and due to which you can increase your sales!

Why is it useful to compare indicators?

With indicators for yesterday : how much was earned this month, how much was earned last month.

With the performance of another point in your network. Often, simply reviewing and analyzing the performance of outsiders is enough to increase the profitability of the entire business.

With competitors . The easiest way to discover your competitors' strengths and weaknesses is to invite their employees to interview for a job. This is a perfectly legitimate way to find out from those who accept the invitation what they don't like about their current job, how their employee incentive system is structured, their conversion rate, and the store's average order value.

With general market indicators . This will help you clearly understand where you stand compared to other trading participants.

What can increase all these indicators?

This is perhaps the most important question. We calculated, compared and made sure that our sales figures are far from ideal: effectiveness and efficiency have not reached their maximum.

There are strategic solutions to the problem, among them - increasing the trade margin, revising or optimizing the assortment. The first is possible only if you have a truly unique offer and there are no competitors on the foreseeable horizon. However, in reality, few trading companies can boast of such an advantage. In the second case, you can bring in category management to help you and revise the principles of your purchasing policy and merchandising principles. The matter is complex - and in itself is a separate topic of conversation.

But it’s much more important to start by implementing simpler tasks.

Number of visitors. The magical chain of transformations looks like this: passersby – those entering the store – customers – repeat customers. And for this transformation to occur at each stage, something must facilitate it. It must arouse the desire of those passing by to enter the store, to arouse the desire to buy, to create a desire to return again and again. What, why, for whom, and how are you doing in your store?

- A proper sign that matches the store's concept and ethos. If you have a luxury boutique, but the sign above the entrance is dirty or dusty, what impression does it leave on a potential customer? Or what if half the bulbs in a tech store's lightbox are burned out? Such assumptions can be detrimental to any store!

- An interestingly designed window display. Does your window make you want to stop? And what's in it? The latest collection on mannequins, beautiful posters of the city at night, bright lighting, a bubble machine, bright ribbons curling in the air. Can you imagine? It's not hard to guess that behind the door you'll find a store selling fashionable youth clothing.

- Sensory marketing. Music at the entrance, possibly alternating with music and a commercial. Of course, the music should reflect your store's message.

- Promoters' work, flyer distribution. Smiling, active, and competent promoters are a major factor in the success of local events. Therefore, promoter training deserves special attention.

Extending store opening hours also creates the opportunity for more potential customers to visit. This is especially true during the New Year holidays. Is it possible that your product is in demand 24/7? This information can be used for outdoor advertising – hang a banner or sign stating that "due to the New Year holidays, the store is open from 7:00 AM to 12:00 PM" (instead of the usual 9:00 AM to 10:00 PM). Some well-known supermarkets are doing this, and it has a very positive effect on customers. The people who have the most money are usually those who are short on time. And opening 24/7 on the two or three days before the holidays can not only generate good sales but also improve the loyalty of customers whose busy schedules are being accommodated.

- Seasonal considerations. It's important to take this into account and inform your customers well in advance. Ekaterina Kazarinova gives an interesting example: "For a month, hired agents, posing as ordinary customers, went to markets and stores and asked passersby, 'Do you know if there's a Sitronics pavilion here? No? Thank you.' This was done discreetly, without any attempt to start a conversation. The agents were given clear instructions: 'If you ask, they run away.' To enhance credibility, many of them worked in pairs, posing as married couples. As a result, marketgoers remembered the brand name, and many even began aleatherg for it in stores."

Average order value. To increase your store's monthly turnover by 100 rubles, you need to increase the average order value by 50 rubles per order. How can this be accomplished? By increasing the number of line items on the order, increasing the quantity of the same item, and offering more expensive items than usual. How can this be achieved?

- Use complementary items . Many items can be complemented. A lid goes with a frying pan, a purse goes with a bag, and tights go with pumps. You can change the way you display your merchandise and train your salespeople to suggest which items can complement each other.

- Focus on high-priced items. Can your salespeople tell you the most expensive items right off the bat? Can they find and display them right away in the store?

- Use product stories. If your store relies on active individual sales, it's worth training your sales associates in this area. Once a customer is interested in something, the salesperson's attitude toward the product can often influence their purchase decision. Legends and anecdotes can be helpful.

- Run promotions based on the principle: collect a certain amount and receive a prize!

- Offer gift wrapping.

Conversion rate. In this situation, we need slightly more than every fifth customer to become a buyer. To achieve our goal, another seven store visitors must become buyers every day. How can this be achieved? Of course, the most important thing is to make people who enter the store want to BUY! What can we do to achieve this?

- Eliminate queues. Adjust store staffing and schedules. Redistributing salespeople and cashiers during busy and off-peak hours yields good efficiency results. Consider seasonality.

Greet everyone who enters. The simplest thing is to greet EVERY visitor! When we're noticed, we feel good; when we're ignored, it evokes negative emotions. And we don't want to go back to a place where we felt bad. Interestingly, greetings don't necessarily have to be verbal; sometimes a smile and a glance are enough.

- Motivate employees to work effectively. Through a reward system, personalized motivational guidance from a specific manager, and a general work ethic.

- Train everyone in sales techniques ! And monitor their skill development. Organize the sales process in the store effectively: ensure everyone knows and understands what they should be doing, when, and how. Ensure three salespeople aren't hovering over a single customer while five other shoppers are wandering the floor. Ensure there are enough payment centers, so there aren't half-hour waits in the fitting room. Ensure the time from the moment an item arrives at the warehouse until it appears on the right shelf or hanger is minimal.

- Take advantage of PR campaigns. What promotions increase customer traffic? Discounts, sales, "a bonus for everyone," "two for the price of one," "every tenth person gets a gift," etc.