screen with an online retail shop

KPI Examples for the Retail Industry

visual example of the average transaction size in retail businesses

Average Transaction Size

Analyze the purchasing behavior of your customers

The Average Transaction Size will enable you to measure the amount of money spent on average for each transaction, and varies depending on the type of retail store. Evaluating this KPI over the year is a good indicator to know when your customers are more likely to spend money, which enables you to adapt your advertising accordingly. Likewise, measuring it according to the customer segments or to the device used to carry out the purchase will let you know who are your customers and what are their favourite purchasing platforms, giving you an opportunity to adapt your online shop. However, stay alert with this retail KPI that can misguide: if you have a lot of outliers taking the median instead of the average of your transaction size is more accurate.

Performance Indicators

Of course you want to increase your average transaction size over time. However often it makes sense to look at this metric in combination with your ARPU (Average Units Per Unit/Customer), which shows you the average customer’s revenue from all your transactions.

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visual example of one of the most important retail KPIs: The Average Units Per Customer

Average Units per Customer

Get insights on your customers’ behavior and the purchasing trends in your store

The Average Unit Per Customer is a sales metric used in retail to evaluate how many items are purchased, on average, by a customer in any given transaction. It is interesting to break it down into different periods of times or into different categories of article, so as to have a more precise evaluation of the sales. That way, you will know about purchase trends over the year, or how effective your sales teams are. Parallelize this data with other retail KPIs like the Average Transaction Price and you can have a bigger picture of your customers‘ behaviour.

Performance Indicators

The higher this metric, the more items are purchased per transaction. Low numbers can be increased by encourage more cross-selling.

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chart which visualizes the developement over time of the total volume of sales

Total Volume of Sales

Measuring what you sell, where and when

This one is a pretty straightforward retail KPI example. It measures the amount of sales performed over a period of time, or across locations including physical stores and online transactions. That way, you can see where and when demand is higher or lower, and try to understand why. It also helps gauge the dynamic of your business and create projections for future. Besides, comparing it between stores over same periods of time lets you customize products or services appropriately to these locations, as well as performing A/B testing: for similar volume sales in location 1 and 2, implement discount/promotional sales/samples/demos in one of them only, and see how it affects sales.

Performance Indicators

Monitor and predict your total sales volume in detail to identify underperforming areas of your business or product categories early on.

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data visualization of the retail metric 'back order rate'

Back Order Rate

Enhance your inventory management analysis

The Back Order Rate is the amount of orders that cannot be fulfilled at the moment the customer places an order, divided by the total number of orders. This is a retail metric that can be measured in units of items or in dollars. Having high back order rates usually is a situation that companies want to avoid; however, it isn’t always negative. If that happens regularly, it can indeed show a certain inefficiency in the production process that needs to be fixed; but it can also suggest rising sales that were not expected. Likewise, a decreasing back order rate can translate a lack of demand, or on the contrary a better production efficiency.

Performance Indicators

To make the best out of this metric and understand what it means, it is interesting to measure it in its context, along with other logistics and supply chain KPIs like the Inventory Accuracy or the Out of Stock Ratio.

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visual representation of the rate of return

Rate of Return

Evaluate the number of orders returned to you

No business likes to see a customer walking back in with his items, or a package coming back in the factory. Returns are costly because they need to be processed again, or because they are lost due to a defect. This is why it is important for you to track not only the amount of returns your retail store has over a certain time, but also the reason why: you can couple this retail metric with the Return Reason for greater insights. Knowing at which pace these returns are happening and which categories of articles are affected the most will help you decrease it in the future.

Performance Indicators

To calculate the rate of return divide the number of returns by the number of items sold. Multiply this ratio by 100 to visualize it as a percentage. The purpose is to maintain it as low as possible.

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data visualization of the retail kpi customer retention

Customer Retention

Analyze how good your business is at keeping customers in the long run

If it's realistic to shorten your sales cycle in your industry, you first need to understand how you can optimize your current sales cycle. We recommend you analyze the cycles for individual reps at the different stages of the cycle. A quick comparison can show how effective a rep in comparison to others in your company. The shorter time each leads spend in each stages of the funnel the better. This can also serve as a way to track an individual rep’s progress over time. This KPI can alert you on when your staff could need extra training and goal setting.

Performance Indicators

Once you have a sales cycle length baseline, the goal should be to decrease that number, resulting in more sales in a shorter period of time.

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line chart showing the total number of orders

Total Orders

See the evolution of orders placement

Another retail metric which is pretty straightforward. Your Total Orders figure calculates how many orders have been placed in your business over the course of the day, month or year. This will help you in knowing what are the rush periods and adapt your stock inventory accordingly, to avoid any stock-out or back order. It will also help you adapt your staff management, and avoid mistakes or defects due to overloaded personnel. You may calculate an average of orders per customer as well, but like for the transaction size, the average can be biased if one customer places a huge amount of orders in one time. The total orders your company is receiving is also giving you the pulse of your business.

Performance Indicators

A growing figure of total orders is a good indicator of business growth. Be careful though to compare it to your revenue/profit growth, that should increase as well.

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map chart of the retail KPI 'Total Sales by Region'

Total Sales by Region

Evaluate how much you sell and where

Measure the amount of sales you make according to the customers’ location if you have an online business, or to your stores location if you have physical points of sales. As mentioned when reviewing the Volume Sales KPI, you can compare your sales volume across locations and try to understand why, as well as try to implement new marketing initiatives and testing them in different places. To make the best out this retail metric, analyze it along other KPIs like the demographic ones related to your customers: gender, age, population of the city and state, so as to have a big picture on your customers and all the cards in hand to grow your total sales respectively to each region.

Performance Indicators

Acknowledge where your customers are purchasing the most to find trends and implement specific strategies accordingly.

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pie chart illustrating the order status

ORDER STATUS

Track your orders in real-time and allow your teams to answer to any incidents immediately

The Order Status is a good retail KPI example that serves both your business and your customer. Indeed, customers like to know at which stage of the achievement process the order they placed is, and you need to have real-time update on the different orders you have to evaluate your supply chain efficiency in the matter. The purpose is of course to decrease the percentage of back orders or restocking, and maintain a high percentage of new orders to keep the business going. Tracking such retail metric will help you monitor your supply chain and adjust in case of slow processing, high inaccuracy, or low new orders.

Performance Indicators

A growing figure of total orders is a good indicator of business growth. Be careful though to compare it to your revenue/profit growth, that should increase as well.

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data visualization of the retail KPI 'Perfect Order Rate'

Perfect Order Rate

Assess the efficiency of your company in delivering orders without incidents

The Perfect Order Rate is a good retail KPI to assess performance. It measures the amount of orders that are fulfilled and shipped out without any incident on the way (inaccuracies, damages, delays, loss…). A low perfect order rate translates an inefficient supply chain and will inevitably affect your customers’ satisfaction as well as your business reputation. A high ratio will avoid you useless expenses due to returns or damages, and will give a reliable image of your business in your clients’ minds, that will in return be more likely to come back and recommend your services to friends and family.

Performance Indicators

The higher, the better. This KPI is directly impacting your Customer Retention rate.

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chart splitting of the return reason of a retail store

RETURN REASON

Get insights on why customers return their orders

The Return Reason is a retail KPI example of quality assessment: after evaluating the Rate of Return your business is facing, you should dig into the why of that rate. It might be the product quality, the marketing promises unfulfilled, the customer service, a defect, an inaccuracy, etc. With these insights, you can improve the areas where your retail business is falling short. Return Reason is to be compared to other KPIs such as the Rate of Return or the Perfect Order Rate to be used at its full potential. Once you have assessed your returns, you can consider implementing return policies specific to items, services or reasons.

Performance Indicators

After careful evaluation and benchmark, your goal should be to decrease the Rate of Return thanks to the insights you gain with the Return Reason.

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