Retail markup: The amount by which a store increases the price of a product above what it cost to

make it before selling it to its customers.

Selling Price - Cost

Markup % = x 100
Cost

It is used to determine the Retail price: RP= Markup * Purchased price

In fashion stores, the Retail markup is de ned by calculating the weighted average which takes
into account the weight of each brand, category, type of collection, historical sale data and
expected sale.

Why? By calculating a simple average all numbers are treated equally and assigned equal weight,
while a weighted average assigns weights that determine in advance the relative importance of
each data point.

OTB: it is an inventory management strategy which helps retailers understand how many
products they need to buy. Using this formula, retailers create a plan in which they can calculate
the money required to purchase future inventory orders for a speci c sales period.

BEP: the point at which total cost and total revenue are equal.

Fixed cost (cost of the shop):

-rent
-building maintenance cost
-labour costs
-utilities
-other costs

KPIs: Key performance indicators are tools for measuring business performance and serve,
through their metrics, to indicate the level of achievement of a given goal by an individual,
department or company, thus being fundamental to the implementation of strategic directions.

They can be used at both “High level” to analyze overall business performance, and at “Low level”
to monitor the performance of individual departments such as sales, marketing, human resources,
customer care etc.

Any KPI must be S.M.A.R.T:

• Speci c = the goal must be clear and speci c
• Measurable = to be useful for measuring progress
• Attainable = the goal must not be impossible to pursue
• Relevant = it must help to achieve the desired result
• Time-Bound = the objective must be de ned in a speci c time frame

In this way, once the business objectives are clearly de ned, a quickly calculable KPI allows
quick decisions to be made.

KPIs can be:

• General: they measure the volume of work;
• Qualitative: they evaluate the quality of the results according to certain standards
• Of Cost: take into account the company expenses
• Of Service or time: they measure the response time, from the start of the process to its
conclusion.
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KPIs IN RETAIL:
As we said, they are numbers that you must regularly monitor so you can determine if your
business is on the right track, but What metrics you should look at?
Each retail business is di erent, so speci c measures may be more signi cant to you than others.
Here are the most important retail metrics and KPIs to track in your retail business.

1) Sales per square foot:

This metric concerns the amount of sales you generate per square metre of sales space in
your shop. (Note: this does not include tting rooms or warehouses).
You can calculate your sales per square foot using the following formula:
Net sales / amount of sales space

Why measure your sales per square foot? Retail sales per square foot is a good indicator of store
productivity, and it can also tell you if you're making good use of space and xtures in your shop.
You can use this metric when planning your store layout and merchandise. Certain stores and
industries make their sales per square foot public, which means knowing this metric will help you
determine how your business compares with others.

How do you improve your sales per square foot? The right sales and retail productivity tactics will
depend on your store, but here are some general tips for improving your sales per square footage:
-Improve your store layout
-Have a winning product assortment
-Optimize your prices or promotions
-Increase transaction or basket value
-Train your sta
-Encourage people to stay longer in your shop

2) Sales per employee:

Sales per employee is a useful measure when planning your personnel programs and
initiatives.
You can easily measure it using this equation:
Net sales / number of employees

Why measure retail sales per employee? This metric can help you make smarter employment
decisions, particularly when it comes to hiring, scheduling, and compensation.

How do you improve your sales per employee? The best way to enhance this metric is to
encourage your associates to generate more sales. Depending on your store, this may involve
actions such as:
-Setting smart sales goals per employee
-Investing in sales training
-Motivating your sta to perform better

3) Conversion rate:
The conversion rate is the proportion of shop visits to the number of buyers who have made a
purchase.
To calculate it, use the formula:
Number of sales / Total number of visitors

Why measure your retail conversion rate? Your conversion rate tells you how e ective you are at
turning browsers into buyers. Driving store visits is excellent, but tra c alone won’t signi cantly
impact your bottom line if your visitors don’t convert.

How do you improve your conversion rate? Increasing your conversion rate starts with your
employees. Ensure to train and empower your associates to:
-Build rapport with customers
-Become "likable experts" who can provide product information and insights
-Be persuasive without being pushy
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 4) Gross and Net pro ts:
• Gross pro t tells you how much you have earned after deducting the costs of creating and
selling the product.
Calculate it using the formula:
Sales revenues – Cost of goods sold

• Net Pro t tells you how much you have earned after deducting the cost of goods together with
all other business expenses, including administrative costs, operating expenses, etc.
To nd it, use the equation:
All revenues – All expenses

Gross and net pro t will indicate whether or not you’re actually making a pro t. Generating sales
and revenue is good, but ultimately, the goal is to generate pro ts from those sales.
Tracking these KPIs will help you make smarter decisions in various aspects of your business. For
instance, if your gross pro t is on the low side, then you may want to examine product sourcing
and nd ways to lower your cost of goods.

5) Average transaction value:

This metric tells you how much shoppers spend on average on your shop.
To calculate it, use the formula:
Total revenue / Number of transactions

Why measure your average transaction value? This metric provides a general indication of how
much customers are spending. A higher amount might suggest that shoppers are purchasing
more expensive items or buying larger quantities.

You can derive insights and action steps from this KPI. For example, a low average dollar per
transaction could indicate a need to reconsider pricing strategies. Alternatively, it might suggest
implementing new sales tactics such as upsells, bundles, or other o ers to encourage customers
to spend more.

6) Year over year growth:

Is your business growing? How much better are you doing compared to your previous years
of business?
To nd out, calculate your YOY revenue growth with the following equation:
(current period revenue – prior period revenue) / prior period revenue x 100

7) Stock turn:
Also known as inventory turnover, this metric concerns the number of times inventory is sold
or used in a given time period.
Calculate it using the formula:
Cost of goods sold / Average inventory

Why measure stock turnover? Stock turnover is a critical metric for determining your optimal
inventory levels. If your stock turnover is too low, it indicates that you're not selling inventory
quickly enough, potentially leading to the accumulation of slow-moving or obsolete stock.
On the other hand, if your stock turnover is too high (i.e., you're selling out of the product four or
more times a year), it could mean that you're understocked, and customers frequently encounter
out-of-stock situations.

8) GMROI:
Gross Margin Return on Investment (GMROI) measures your pro t return on the funds
invested in stock. It answers the question, “For every dollar invested in inventory, how many
dollars did I get back?”
The formula for GMROI is:
Gross pro t / Average inventory
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 Why measure GMROI? GMROI indicates how e ectively your inventory is generating pro t. You
use this metric to assess whether your stock is yielding a return on investment. It's typically
calculated for speci c products or categories, providing valuable insight into which merchandise
is worthwhile to carry in your shop.

9) Sell-Through:
Sell through is the percentage of units sold out of the number of units available for sale.
It is expressed in percentage using the formula:
Number of units sold / Beginning inventory x 100

Why measure sell-through? Sell-through is an excellent method for evaluating merchandise

performance. It also aids in determining the rate at which a product is selling, enabling you to
make informed purchasing decisions.
*For instance, suppose you've stocked up on a new style of shoes and observed that you've sold
through 80% of your inventory in just a week — a notably rapid pace for your shop. You can
utilize this insight to gauge how much to reorder, ensuring you don't run out prematurely.

10) Shrinkage:
Shrinkage concerns an inventory loss that is not caused by actual sales. The most common
causes of shrinkage are employee theft, shoplifting, administrative errors and supplier fraud.
To calculate it, use the formula:
Ending inventory value – Physically counted inventory value

Why measure shrinkage? The last thing a retailer wants is to lose products or money due to
factors like theft or administrative errors. Tracking shrinkage keeps you vigilant and helps ensure
that no suspicious activities are occurring in your business.

How to reduce shrinkage? The approach to addressing shrinkage depends on its root cause. If it's
due to consumer theft, then bee ng up store security is necessary. For employee theft, focus on
hiring trustworthy individuals and implementing procedures to prevent insider incidents.
Tightening up processes is also e ective for reducing admin errors and mitigating vendor fraud.

11) Customer retention:

You have worked hard to get new customers, so it is only fair that you understand whether or
not you are keeping them. There are several ways to nd the customer retention rate, but here
is a relatively simple formula:
((CE-CN)/CS)) x 100
CE = number of customers at the end of period
CN = number of new customers acquired during period
CS = number of customers at start of period

Why measure customer retention? Your customer retention rate indicates the number of
customers who return to your store. This metric serves as an excellent gauge for evaluating
customer service, product performance, and loyalty.

12) Foot tra c:

Foot tra c refers to the number of people entering your shop.
You can measure it using people counters and retail analysis software.

Why measure foot tra c? Foot tra c assists in evaluating your marketing and advertising
endeavors. For instance, if you recently launched a promotion to attract people to your shop,
analyzing foot tra c can determine the success of your campaign. Additionally, foot tra c is a
signi cant metric for evaluating the e ectiveness of your window displays.
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 13) Tra c/sales ratio:
A KPI used in many fashion retail stores is the ratio between the number of people who enter
the physical space of the shop and those who have eventually bought something.

*Although it is an indicator hated by many owners since there are people who enter a shop in a
group but in the end only one buys, this remains one of the benchmark KPIs to check the sales
performance in a day.

14) Number of items per transaction:

The UPT, acronym for Unit per Transaction, is used to indicate the average number of pieces
sold per receipt.
You can calculate it with the formula:
Total number of pieces sold / Number of receipts issued in a given period
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