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Some retailers in this situation essentially freak out. But the pros, like you, know to keep asking questions. Before they decide what to do next to fix lagging sales, they want to know "Why?"
So, rather than guess the answer, here is a way to get to the numbers behind the numbers; to begin to know the "why" of your sales trends, whether they’re falling or rising.
All it takes is tapping into the data that's already in your POS system, and putting together a little summary tally sheet. The point is to get some key data together in one place so you can easily, quickly, and for free, compare and analyze your results.
Start by entering the Sales results for each week for the last four weeks into columns on the table. (Still showing that same grim picture, right?)
Now is when you start to dig a bit deeper. For instance, how many Transactions did you have each of those weeks?
Find that data in your POS system, and note down those results on your tally sheet.
Hmm. Are transactions changing the same way as total sales?
Well, what is the Average Transaction each week?
Just need a little arithmetic (each week's total sales divided by total number of transactions.)
That too can reveal some interesting differences for each week.
Here's something else to look into: IPT's (items per transaction.)
Again, find where your POS system captures that data, and add it to your tally sheet.
Are customers buying more items? Or maybe they're buying fewer items?
As you compare that to the total sales, what does that suggest?
Are they spending less because they're buying fewer items?
Or are they buying more items, while spending the same or less in total, suggesting trading down to less expensive items?
Why raise all these questions? Because only when you have a better understanding of WHY sales are different can you make good decisions about what, if anything, you need to do about it. Ideas are easy; facts are better.
Granted, as you review these numbers, you will be reminded of circumstances way outside your control: a major weather impact; an unusually large transaction from an out-of-town visitor; a key employee who was off for a few days; some viral social media post that affected interest in your merchandise.
That’s very useful to note! We’re going for perspective here; we want to better understand why sales are trending down. (Just know the difference between a lame excuse and an “extenuating circumstance”….)
Here's the key: Everybody wants to “grow sales.” The challenge always is “How?”
For instance, say that IPT's are trending down. How about a spiff for add-on sales? Or, what special bundles might we put together? Or, how should our displays be updated? And always, how do we make it fun for the shoppers?
It can be motivating for your staff to have more concrete goals like "increase IPT's from 2.3 to 3.0."
That can be tracked; it even could be turned into a game, especially when you post the results each day in the back room.
Be sure to have prizes when folks meet or beat the goals. They don't have to be fancy. Pizza, or smoothies, or lattes, or whatever. Just be sure to celebrate the good spirit and hard work of all.
Meanwhile, you can be monitoring how changes in a particular measurement, such as IPT's in this example, actually affect sales.
You will have greater peace of mind, thanks to this added perspective. You will be able motivate your staff with specific, measurable goals. Even better, you canexplain the “Why?” behind a particular program or effort you introduce.
Want to go further? Do this same exercise but by month, not just by week. Or by department. Or by store. Or… Know the facts behind all those numbers.
All of which is very empowering!
Consider this retailer, whose sales over the last 4 weeks are down 12% compared to last year. Some retailers in this situation essentially freak out. But others know to keep asking questions. Before they decide what to do next to fix lagging sales, they want to know "Why?" So, here is one way to get to the numbers behind the numbers; to begin to know the "why" of your sales trends. All it takes is tapping into the data that's already in your POS system, and putting together a little summary tally sheet. Here's one example.
Retail IS detail. And some of those pesky details are increasingly cropping up to torment online sellers. For example, there's the matter of managing returns. As Chris Jarvis wrote in DMM/ShoppingCenters.com*:
Meanwhile, the pure-play online retailers are confronting the ever-demanding customer expectations.
It's a given that your sales volume is a very big deal. Granted, you are analyzing it every day. But here's a slightly different approach which you may find very revealing. Let's start with a couple truisms. The definition of retailing is “selling to the ultimate consumer.” Retailing also is having "the right product at the right price at the right place at the right time for the right customer." But, as retailers ponder how best to manage sales in the current consumer environment, does it really matter whether their "right customers" buy from them in-store or online? Actually, it might! And here’s a simple, free "pilot project" to find out a little more.
There is much enthusiasm coming out of the buying trade shows, and why not? Attendance levels have been near to or better than 2019. Energy levels are high, and very contagious. A sense of urgency persists, due to past supply chain issues, emboldening the pressures from the vendors to "Buy now!" Especially in today's environment, FOMO - the Fear Of Missing Out – can be a compelling sales pitch. How to deal with this pressure, especially given all the headlines about a coming recession, or drops in consumer spending, or cautions about the need to control expenses, improve profits, maintain cash? Here are two tactics to help you manage this. One helps monitor and control "How much to buy?" The other helps decide "What to buy?"
Since we first established The Retail OWNERS Institute®, we have asserted that the greatest growth opportunity in retailing is between the ears of the owners. And nothing since then – not even (or maybe especially!) – a once-in-a-century pandemic has diminished our belief. Independent retailers and restauranteurs have been among the first business owners to pivot to a survival mode. Why? Because they have had plenty of practice!
By now, you have your year-end financials for 2021. Remember, it always comes with a Balance Sheet! Whether sales are up, down, or sideways, the financial strength – and staying power – of every business is shown on its Balance Sheet. And revealed by its Balance Sheet ratios.
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