A quick walk through the mall reveals that retailers are trying to increase revenue with some dramatic sales. But sales can hide the probable cause of failure of your retail business… inactive employees.
Selling a bunch of goods for a loss, even if it generates revenue, is often the result of passive sales.
It has to sell the goods to get the full price actively. But since your employees weren’t active and didn’t sell merchandise, the product had to be marked down.
The price tag took a hit to sell the goods.
So we reach the question of …
How to rate a sales team?
Are your retail business KPIs the most revenue generators, or are they the most profitable? Both can be profitable to your store, but one does it more actively. An inactive employee costs you money.
For example, let’s say seller A sells 10 sales widgets worth $1000 this week. That’s $10,000 in revenue. (But those on-sale widgets sold themselves anyway.)
Seller B sells 5 of the same sales widgets and, in addition, sells each customer an additional full-priced item for $350, generating $6750 in revenue.
Seller A’s net profit for Company A is $100 per unit ($1000 revenue – $900 cost of goods) times 10 units, so it’s a profit of $1000.
Salesperson B’s net profit is $100 per unit times 5 units = $500. He gave the customer an exceptional experience, so they simply sold the complete solution with additional items, making a profit of $170 per item. $170 times 5 = $850. So $500 + $850 = $1350 net profit for Seller B.
Seller B actively earned more profit for less revenue and spent less time working with 5 customers instead of 10.
When a sales team member has good upselling skills, they can do more with less than engage strangers, find out their wants and needs, and become a best seller instead. There is less running around trying to make a sale.
why it matters
If you just consider how much the seller sold per hour, that indicates performance but doesn’t give a clear picture of what’s lost. Seller B made 30% more profit but faced fewer customers in less time.
Just imagine the difference a month, a season, a year can make…
A real example: I recently bought an Armani suit on sale. After the saleswoman fitted the tailor’s suit, she went to the register to ring me. He never suggested the obvious add-ons I would have bought, including a shirt, undershirt, tie, and shoes. She settled for the pieces without considering the feast. I ended up spending some on a sale item but nothing on full-priced items.
Salesman, not a clerk
Anyone can passively stand at the counter and ring people up.
And in some cases, they can generate good revenue by doing so. However, professional retailing is required to read the customer, develop a relationship, and sell the total package to them. This is reflected in the profit of sales, not in total revenue.
It takes collective efforts on all fronts to ensure that a retailer is profitable. When a crew is with him, they can reap profits and revenue.
UPI and KPI
When improving or growing your company, it can be challenging to find a clear starting point. Every organization around the world works with some goals or objectives in mind. To evaluate the activities being carried out to pursue these goals, businesses need measurable indicators known as KPIs. Choosing and tracking your retail business KPIs is a smart way to find out what isn’t working for your business.
Several types of retail business KPIs vary depending on the business’s goals, needs, and other factors. But they prove effective only when chosen carefully.
You might not know the profit margin for each sale, but you have a good indicator of a sales superstar in the number of units per transaction. Rating them based on that key performance indicator will make the store more inclined to sell, not just something on sale.
To increase retail sales, your employees need to provide balanced sales. Otherwise, you can have great employees who sell items that shouldn’t require much convincing while your more expensive items sit.
Refocus your employees on balanced sales to help them understand in a new way that add-ons are essential. Not just for the customer, but the whole business.
When this happens, your margins will increase, your profits will increase, and so will your employees’ salaries to actively do the heavy lifting of getting more merchandise out the door.