What is a Key Performance Indicator (KPI)?

A Key Performance Indicator, or KPI is a metric used to measure performance. Many businesses and industries use KPIs to measure their business activities and help determine whether goals and objectives have been achieved.

What KPIs should I use to measure success for my retail business?

The Retail Industry is an industry which KPIs play an important role in determining the success of your business.

Retail is the process of selling consumer goods and services to customers through several distribution channels (e.g. online, warehouse, local shops) to earn a profit.

Retail is an extremely competitive business industry and KPIs can play an important part in not only individual business performance but also allows you to measuring your business performance against competitors.

KPIs must have a specific purpose, must be measurable quantitatively or qualitatively, must have a realistic goal and must be relevant to the strategic direction of the store and assessed within a specific time-frame.

Whilst there are a large number of KPIs available to any Retailer, below are 5 KPIs a business can use to measure business performance, and at times allow owners to make critical business decisions:

  1. Gross Profit Margin (Gross Profit / Total Income)
  2. Net Profit Margin (Net Profit / Total Income)
  3. Sales per Square Metre (Total Sales / Shop Area)
  4. Sales per Employee (Total Income / Number of Employees)
  5. Inventory Turnover Days (Inventory / Annual Costs of Sales x 365)

The use and effectiveness of KPIs, like anything, will take time to become familiar with.

At Davidsons, we encourage all business to use all available tools (one being KPI reporting) to ensure they are performing at the peak level.

Ian Sweet from our Business Services team specialises in KPI reporting and can provide you with expert advice on not only these 5 KPIs but a whole range of metrics that may be applicable to your business.

Ian can meet with you at one of our convenient office locations; Geelong or Torquay to better understand your business and applicable KPIs.

To make an appointment please email Ian Sweet on ians@davidsons.com.au or call our office on 5221 6399.

Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.