As all of us in the industry are well-aware, the COVID-19 pandemic and strict government regulations have forced retailers to innovate at a breakneck pace. As a result, traditional retail store metrics no longer reflect the current retail environment. Customers have turned up the pressure on retailers to meet their new and ever-changing shopping habits and values, which is not accounted for in the traditional metrics. What matters for retailers now is how your customers interact with your entire retail ecosystem, regardless of where they are on the customer journey.
As the post-pandemic era continues to shift, the retail landscape will need to adopt new retail metrics to accurately measure customer success.
The following are three new retail metrics that have undergone rapid change due to the effects of COVID-19 and how you can utilize these new retail KPI (key performance indicator) formulas to improve customer satisfaction within your retail business.
1. Traditional Retail Metric: Dwell Time
Dwell time is a metric that has long been favoured by retailers, shopping centres, and investors in the retail industry. It measures how long the customer remains in your brick-and-mortar location. When time limits, capacity limits, and consumer hesitancy regarding the pandemic began to occur, dwell times plummeted.
New Retail Metric: Ecosystem Dwell Time
JCWG proposes the ratio of dwell time and time spent on in the digital ecosystem to be a more useful metric in this new world. This allows for newer retail models such as buy-online-pickup-in-store (BOPIS) to make up for the limited time spent in store by customers. This new retail business metric is more future-proof, with customers becoming more touchpoint-agnostic as online experiences become more personalised.
By replacing the dwell time metric with our new “Ecosystem Dwell Time”, we can begin to comprehend where the pain points are for customers, while still considering curbside pickup, online and in-store shopping touchpoints.
Ecosystem Dwell Time = Time Spent in Store + Time Spent on Web Store
While dwell time should always be maximized, this new metric helps illustrate how different models should prioritise different dwell time tactics. Here are some examples of how this metric might play out.
|Time Spent in Store||Time Spent on Web Store|
2. Traditional Retail Metric: Employee Turnover
As everyone knows by now, there is a labour shortage, and the war on talent is not going away anytime soon. This has rendered the traditional metric of Employee Turnover much more relevant, but it is important to not stop there. The higher the employee turnover, the less chance for relationship building. This can also hinder management significantly, as they will be focused on filling vacancies rather than more important leadership and operational tasks.
New Retail Metric: Human Capital Efficiency
Customers are also expecting brands to meet their values in order to maintain their loyalty, and customer-facing employees are often the best way to show these values. JCWG is examining customers and employees holistically, rather than as separate key performance retail metrics. This means measuring your “Human Capital Efficiency” rather than employee turnover. By considering employees and customers as a single unit, there is not only better clarity on value alignment, but can identify opportunities to turn your best promoters or customers into some of your best employees.
Human Capital Efficiency = (Net Promoter Score + Glassdoor Score) - Employee Turnover
Hiring your best customers, and keeping employees who are passionate about your brand, is very beneficial. The goal of this metric is to keep your Net Promoter Score (NPS) high, your Glassdoor score high, and your Employee Turnover low. Once one of these metrics begins to slip, this is the opportunity to innovate. If NPS drops, you need to dive further into your customer’s pain points and your points of differentiation. If you Glassdoor drops and Employee Turnover starts to increase, it’s time to start listening more to your employees, and see where they are dissatisfied with the organization.
3. Traditional Retail Metric: Sales Per Square Foot
Arguably the most widely used productivity metric, especially for shopping centres, sales per square foot is due for a review. Government legislation that required non-essential retail stores to be closed throughout 2020-2022 transformed many brick-and-mortar retailers into mini distribution centres. This occurred through both curbside pick-up and better integration of inventories across retail networks.
Online sales made it so that products picked up at brick-and-mortar locations did not necessarily reflect the stores’ efficiency. Stores could be completing millions of dollars worth of online curbside pickup orders, none of which have any reflection in their sales per square foot. As a result, this metric has been rendered ineffective. On top of this, new entrants to shopping centres like Tesla or Lucid are inflating sales per square foot with many sales starting well over $100,000.
With the shift to work from home, we are also seeing office spaces being rendered obsolete. Retailers with large, centralised offices have empty offices, desks and main areas with employees deciding to work from home.
New Retail Metric: Total Square Footage Efficiency
At JCWG, we utilise “Total Square Footage Efficiency,” a retail industry KPI that works as a modified ROI or sales per square foot calculation.
Total Square Footage Efficiency = Total Revenue / Total company square footage
This first formula measures an overview of all their assets such as warehouses, distribution centres, brick-and-mortar stores/kiosks, and office spaces. The reason that this is more reflective of the current retail landscape comes down to two main factors:
- It is no longer a requirement for a retailer to own office space. Office space can still be useful for team building and collaboration, but there is no need for corporate employees to be in office everyday and require them to all move to the same location.
- And it is no longer important where the retailer is driving revenue, in brick-and-mortar or digitally. Multiple channels are a thing of the past, everything needs to be viewed holistically, and all areas of a retail business needs to work together to generate revenue.
Retail metrics will continue to shift
Retail is one of the fastest moving industries in the world, with small trends triggering huge impacts on the entire industry. With such a fast-moving industry, the way we evaluate these businesses needs to move just as rapidly. In some ways, traditional metrics may have been holding us back as we continue our trek towards the retail landscape of the future. What are some other metrics that feel outdated in your sector? Comment below!
For more information or to book a conversation about the ideas presented here, feel free to reach out to our advisors.