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Retail Metrics Worth Monitoring
Retail mobility providers need to measure their performance. Here are some great indicators to track.
A sound retail business is founded on
solid numbers, the kind of information
that can help a provider truly
understand how their business is
performing, and what they need to change or
implement if they want to succeed.
Providers must measure their performance in
order to see if they’re on track in terms of their
goals and objectives. So they need to set up
specific metrics. Moreover, retail performance
measuring is especially important given how
much the industry has shifted and how steadily it
continues to transform.
Numbers guide smart decision-making
and help steer staff in the right direction and
measure. Bearing that in mind, let’s take a look
at some useful metrics for retail providers:
GROSS PROFIT
A prevailing metric for retail sales is gross profit
(GP). Essentially, gross profit serves as the
canary in the coal mine — an early indicator that
something is wrong and needs to be corrected.
And that is why a provider must measure all the
other metrics. In addition to being the keys to
increased revenues and profitability, they can
also help the provider pinpoint key problems
before they turn into disasters.
If a provider happens tracks its gross profit
daily and sees GP start to trend down, it knows
that something is wrong with its business and
can adjust accordingly. Furthermore, if it can
start to track this by department or category, it
has an even more granular level of control.
CASH FLOW
Cash flow is a very simple metric that simply
describes the difference between a retail business’s
incoming cash inflows from sources such
as sales or loans, and its cash outflows for items
such as bills or inventory purchase. Obviously the
goal is to show positive cash flow, because then
the business can reinvest and grow.
This will likely be your most important metric,
because you have to be able to balance the
receipt of sales with the payment of bills. There
are multiple factors that can impact cash flow,
and once again, that’s why monitoring a variety
of retail metrics is so important.
SALES PER SQUARE FOOT
Sales per square foot — also called sales by unit
area — is a traditional retail metric that is a very
standardized retail metric. The metric is just that,
how well is the store performing when the total
sales are broken out by square foot. It is used
universally across retail businesses as a general
rule of thumb regarding the store’s performance.
On an annual basis, U.S. retailers generate
roughly $300 to $350 a square foot on average
(again, that’s annually), but that is averaged
across a wide variety of businesses, including
everything from food courts to the Apple Store
(which, incidentally, rakes in an average of $6,050
per square foot annually). For numbers a little
closer to retail HME, a 2013 report from the
National Community Pharmacists Association
put their industry’s mean sales per square foot
for items other than prescriptions at $163.
CUSTOMERS PER DAY
Obviously, location is critical for a retail business.
While a mostly funded provider serving
Medicare and privately ensured beneficiaries can
locate their operation in a business park, that
kind of setting is not going to fly. This is because
retail needs foot traffic in order to survive.
That is as true for an HME business as it is for
a coffee shop. The provider must ensure it has
an adequate number of customers coming into
the door in order to drive a sufficient number of
retail transactions.
And this is fairly easy to track. Most door
chimes for retail businesses offer a counting
feature that can total up the number of times
someone passes in. In fact, there is a whole
range of people-counting systems available to
providers, along with analytic tools. Better yet,
there are a variety of sensors that providers can
install in each section of their store in order to
track customer traffic by section.
SALES PER SALESPERSON
Obviously, the sales team is a key element in
the retail sales process, and if they are underperforming
or performing well, management
would want to know about that right away to
either fix a problem or make the most of a key
staff asset.
And that fix could be as simple as providing
an underperforming staffer with simple sales
lists of all the items a patient with one condition
or another might need. In other words, the
fixes could be really simple, but if the provider
management isn’t aware that a team member
needs that help, it will never be able to apply
those fixes.
And let’s not forget that the positive reinforcement
side of the equation is also critical. Sales
per salesperson is a great way to fire up the
team. For instance, you can create a performance-based compensation program that pays
commissions or a bonus when a salesperson hits
a certain threshold. Then each salesperson has
a code that can be entered in the cash register.
AVERAGE SALE PER CUSTOMER
Now that the provider knows how many people
are coming in, and it knows how many of those
people are turning into a customer, it can apply
some simple math to start looking at the average
sale per customer. That average can then get the
provider thinking about how to increase it.
This is where the consultative sales and caretailing
aspects of retail HME really come into play.
The salesperson can start asking questions and
probing whether or not the customer who’s in the
market for a scooter might also need a threshold
ramp to get into the house or to help negotiate
inside the house. Or maybe that customer might
also need some bath safety items.
REPEAT CUSTOMERS
Tracking repeat business is also important.
There’s an adage that it costs 10 times as much
to get a new customer as it does to keep an old
one. Bearing that in mind, tracking repeat sales
is a key metric for HME provider businesses,
given that they work so hard to develop longterm
patient relationships.
And this is particularly critical in HME. Patients
are looking for a resource they can rely on and
come back to for all their HME needs. The
keys to ensuring they do are sales and service.
Revving up the consultative sales approach and
partnering it with good service and treating your
clients well will do wonders for your bottom line.
Why? Repeat business can account for as much
as two-thirds of a retailer’s revenues.
INVENTORY TURN TIMES
Inventory turn times are crucial retail metric,
particularly for the HME industry. The reason
being is that there are many items that HME
businesses keep in stock that are very expensive.
The longer that expensive inventory sits on the
shelf, the longer the capital spent to acquire that
inventory is tied up in a way that works against
the provider’s cash flow. It is critical that the
inventory gets sold in a cash flow-intensive business
such as retail sales. The faster items move,
the more profitability will increase.
Moroever, if the provider can drill down to
turn times per inventory item. Then it can start
to identify pricey items that are languishing in
stock, as opposed to being sold. From there, the
provider can start examining whether or not they
can move those items faster.
This article originally appeared in the Aug/Sep 2019 issue of HME Business.