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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 August/September 2019 issue of HME Business.

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