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 = the number of all visitors to your store (traffic passing) x flow rate (conversion) x per average check. Measured in rubles or units of goods sold.

Traffic passing - customer flow within the store: how many people visit your store daily.

Flow rate Is the ratio of the number of site visitors who have performed any targeted actions on it to the total number of site visitors, expressed as a percentage. To obtain such data, the store is equipped with a customer flow counter at the entrance. Buyers are identified by the number of punched checks. Thus, the efficiency of 10% means that every tenth person makes a purchase in the store, 25% - every fourth person entering.

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 they earned this month, how much in the past.

With indicators of another point in your network. Often, it is enough to consider and analyze the work of outsiders in order to increase the profit of the entire business.

With competitors. The easiest way to find out the weaknesses and strengths of competitors is to invite their employee for interviews for hiring. This is a completely legal way to find out from the person who accepted the invitation what does not suit the current place of work, how the employee motivation system, conversion and average check of the store are built.

With overall market performance. This will help you understand exactly where you are compared to other participants in the trade.

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.

The number of visitors. The magic chain of transformations looks like this: passing by - coming to the store - customers - regular customers. And in order for this transformation to occur at every stage, it is necessary that something should help this. So that a person passing by the store would have the desire to enter it, so that the store would have a desire to buy, so that there would be a desire to come here for shopping again and again. What, why, for whom and how do you do in your store?

- The correct sign, consistent with the concept and idea of ​​the store. If you have a boutique of luxury goods, and the sign above the entrance is dirty or dusty, what impression does the potential buyer have about the store? Or when half of the lamps burned out in the light box at the equipment salon? Such assumptions can harm any store!

- An interestingly designed showcase. Do you want to stop at your shop window? And what's in it? The latest collection on mannequins, beautiful posters of the night city, bright lights, a soap bubble machine, bright ribbons curling in a stream of air. Presented? It’s not hard to guess that you will find a shop for fashionable youth clothes outside the door.

- Touch marketing. Music at the entrance, it is possible to alternate music and commercials. Of course, music should be a reflection of your store’s ideas.

- Work of promoters, distribution of flyers. Smiling, active and correct promoters are a big part of the success for local promotions. Therefore, the preparation of promoters should be given special attention.

- Increase store hours also creates an opportunity for a larger number of potential buyers to enter it per day. This is especially true during the New Year holidays. Is it possible that your product may be in demand around the clock? This information can be used for outdoor advertising - hang up a banner or an announcement that "in connection with the New Year's holidays, the store is open from 7.00 to 24.00" (instead of the usual from 9.00 to 22.00). Some well-known supermarkets do this, and it should be noted that this has a very positive effect on customers. A lot of money is usually with those people who do not have time. And 2/3 work on XNUMX-XNUMX pre-holiday days can bring not only good sales, but also have a positive effect on the loyalty of people whose employment was treated with understanding.

- Seasonal accounting. It is important to take it into account in a timely manner and in advance and inform your customers. Ekaterina Kazarinova gives an interesting example: “For a month, hired agents disguised as ordinary buyers went to markets and shops and asked passers-by:“ Do you know if there is a Sitronics pavilion here? No? Thanks". This was done unobtrusively, without any attempts to strike up a conversation. The agents were given a clear instruction: "They asked and ran away." Moreover, for greater reliability, many of them worked in twos, under the guise of married couples. As a result, market visitors remembered the name of the brand, and many even started aleatherg for it in stores. "

Average bill. In order to get + 100 thousand rubles to the store’s turnover per month, you need to increase the average check by 50 rubles each. How to do it? By increasing the number of lines in the check, the quantity of the same product, due to more expensive goods at a price than usual. How can this be achieved?

- Use complementarity... Many items offer the possibility of add-ons. To the frying pan - a lid, to a bag - a wallet, to model boats - tights. You can change the principle of product display and teach sellers to prompt customers which products can functionally complement each other.

- Focus on an expensive product. Can the sellers of your store name the most expensive items right away? And immediately find and show them in the store?

- Use product stories. If your store operates through active individual sales, then it is worthwhile to teach sales consultants separately. When the buyer is already interested in something, very often the attitude to the seller’s product can influence the decision to buy. Legends and stories from life may come in handy.

- Conduct promotions according to the principle: dial in the amount - you will receive a prize!

- Offer gift wrapping.

Conversion rate. In this situation, it is necessary that the buyer was not every fifth, but a little more. To solve our problem, 7 more visitors to the store should become customers every day. How can this be achieved? Of course - the most important thing is for people entering the store to have a desire to BUY! What to do for this?

- Get rid of the lines. Change the staff of the store and their work schedule. The redistribution of sellers and cashiers during the active hours of the store and the lull time gives a good result in efficiency. Given the seasonality.

- Greet everyone who comes in. The simplest thing is to greet EVERY visitor! When we are noticed - we are pleased when we are ignored - it causes negative emotions. And we don't want to go back to where we felt bad. Interestingly, it is not necessary to say hello with words, sometimes a smile and a look are enough.

- Motivate employees to work efficiently. Wage system, personal motivating leadership of a particular manager, general attitude to work.

- Train sales techniques. All! And check the development of skills. Properly organize the trading process in the store: so that everyone knows and understands at what point in time, what and how he should deal with. So that three sellers do not curl around one customer when there are 5 buyers walking around the hall. In order to have enough calculation nodes, the queue in the fitting room did not have to wait for half an hour. So that from the moment the goods arrive at the warehouse, until it appears on the desired shelf, the hanger requires a minimum amount of time.

- Use the opportunities of PR promotions. What promotions increase the number of buyers? Discounts, sales, "each with a bonus", "two for the price of one", "every tenth gets a gift", etc.