Chapter 8 - Sales Management

Tracking Key Indicators

Retail is about information ... the right information at the right time. Here are some of the key performance measures that you must understand and use to successfully manage your business:

Sales Per Hour

Sales Per Hour = Total Sales (Store or Individual) / Total Hours Worked

This is the most important performance statistic you can track. It is a measure of your productivity and provides you with comparative sales volumes for both your store and staff. In addition, it gives you a clear indication of your wage cost. The higher your SPH, the better.

For example, if total sales are $5,000 this week and there are 80 total hours scheduled for the store, your Sales Per Hour for the store is $62.50 this week ($5,000/80 hours).

Now, what would be the impact of selling an additional $5 per scheduled hour? Some quick math will tell you that sales now become $5,400 ... an 8% increase!

You need to ask yourself what it would take to produce that extra $5 in each scheduled hour. For most retailers, simply tracking SPH results in better sales performance.

Now try to determine your daily and weekly average SPH, not only for the store, but also for each individual. Always strive to move the average upwards. Remember, the higher your SPH, the better. (Although, there does come a point where customer service will suffer if SPH becomes too high for your store.)

There are only two ways to increase your Sales Per Hour:

1. Increase sales.
2. Decrease scheduled hours.

Proper Sales Management allows you to increase staff sales and, in the process, improve your Sales Per Hour.

Average Sale

Average Sale = Total Sales $ / Total Transactions

This statistic is an indication of how much each customer buys from you, on average. It is critical in that it will allow you to see the price points that are moving and will also give you information about your ability to sell multiple items.

For example, if weekly sales are $5,000 and there were a total of 100 transactions, your average sale is $50 ($5,000/100).

Imagine, once again, the impact on your overall sales if you could get an extra $3.00 from each customer. In this example, the increase in average sale from $50 to $53 brings total sales up to $5,300. The question is, how you go about getting that extra $3 from each customer?

You've got a few options:

1. Increase prices (Not advisable, but sometimes it can be done without losing business.)
2. Sell more items to each customer.
3. Sell more expensive items to the customer.

Items Per Sale

Items Per Sale = Total Items Sold / Total Transactions

This ratio tells you the average number of items each customer buys from you. It is an indication of your ability to sell multiple items to a customer. This is important to every retailer and should be included in your sales goals.

When you begin to track and move your Items per Sale upwards, the impact on your bottom line is tremendous. For example, if you sold 150 items this week to 100 customers, your IPS would be 1.5 (150 items sold/100 transactions). By increasing your Items Per Sale to 1.8 from the current 1.5, you achieve a sales increase of 20% (assuming the average price of the additional items remained the same)!

Here are a few ways to increase your Items Per Sale:

1. Train your staff to add-on more items.
2. Merchandise your store so that accessory and complementary items are displayed next to each other.
3. Make better use of the cash counter as a selling area.
4. Use multiple-item pricing (e.g. 3 for $11.97, instead of $3.99 each).
5. Track each individual's IPS and compare it to the store average IPS.

Conversion Rate

Conversion Rate = Total Transactions /  # of People Entering Store

This will tell you how effective you are at turning prospects into customers. If you can keep an accurate count of the number of people entering your store each day, then you should track conversion rate. Your ability to sell to more of the existing traffic is critical in today's marketplace.

For example, if you are selling to 5 out of every 10 people who enter your store (50%) and you move that up by one person to 60% (6 out of 10), that represents a full 20% increase in sales.

Here are some typical conversion rates you might expect to find:

Ladies wear, regional shopping center 5 to 10%
Pharmacy 75 to 85%
Furniture store 5%
Jewellery store, regional shopping center 3 to 8%
Big box clothing store 30 to 40%

You may not be able to track your conversion rate without the installation of a basic traffic counting system.

If the purchase of such a system is not in your future, try doing spot checks throughout the month to get a better feel for your performance in this area. Conversion rate will tell you more about how effective you are as a retailer than any other statistic.If customers are buying when they come in, you must be doing something right. You simply need to understand exactly why they are buying from you, and use that information to convince one or two more people (out of every ten who enter your store) to do the same thing.

Improving your conversion rate involves every major aspect of your business. You must examine:

• Staff performance and salesmanship
• Pricing practices
• Inventory selection
• Marketing message
• Store layout
• Service quality
• Store presentation
• Signage

This list can probably be expanded for your specific store. The point is that if you knew what your conversion rate was (and it's probably a lot lower than you think), you could begin to find ways to improve it.

Of all the numbers to improve, this may be the one that will unlock the floodgates of your success!

Each of the sales statistics discussed in this section provides critical information that can help you become a more successful retailer if you use it effectively. Track these indicators each day and each week. Calculate your monthly average at the end of every period.

By focusing on this useful information and working to improve your averages, you will begin to see dramatic increases in your sales.