New Metrics for a New Retail Industry | RetailNext

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New Metrics for a New Retail Industry

Alexei Agratchev
Alexei Agratchev

Retail is attempting to hurriedly change its ways to better mirror today’s post-channel, spiraling, circuitous shopper journey. But, if retail is to truly change, it needs to develop and use an entirely different set of evaluative metrics.

[Note:  This post was originally published on The Robin Report, May 2, 2016.]

Empowered with easily accessible information and almost endless global alternatives, shoppers demand value-added, seamless cross-channel shopping experiences, and they exhibit little patience or tolerance for retailers who “don’t get it.”

Male cross-channel shopper

As a result, retailers are in a reactive period of immense change, and the retail industry in 2016 is as disruptive as it’s ever been. Whereas e-commerce once changed the game, it’s no longer effective as a standalone strategy, and retail’s new website is – in effect – the store, of which the new front door of the store is now located … on mobile devices.

It’s a post-channel, spiraling, circuitous shopper journey, and retailers are hastily trying to marry their business models to it.

So, if the retail game has changed, why are we keeping score the same old ways?

A new omnichannel retail reality is forcing the industry to develop and use a new set of evaluative metrics, from managing the business on the front lines and in-store to developing critical strategies from the C-suite and boardroom.

Related to physical retail, fundamental business models and the economics they are built upon need to be revamped. Physical retailers have long planned on huge windfalls from traditional retail seasons, be it Holiday, from Thanksgiving through New Year’s Day, or Valentine’s Day, Mother’s Day, “Dad and Grads” and Back-to-School. The business models that stores were built on – and on which retail businesses still largely depend upon – were rooted in those key periods of profitable performance.

However, while big peaks in seasonal volume remain, for the most part profits have moved elsewhere, particularly as shoppers stretch shopping seasons, starting earlier and ending later each successive year. Holiday shopping is now almost entirely deal-, convenience- and novelty-driven, and that’s not a formula for either long-term, sustainable growth or profitability.

So, where do we go from here?

In the new omnichannel world, retailers must first establish their go-to-market differentiation and value proposition to shoppers, and then redefine the role of their stores as necessary for support. Some stores will become de facto distribution centers, while still others – like Samsung’s new store in New York’s Meatpacking District – brand showrooms. The one commonality will be the importance of being a branded touchpoint between retailer and shopper, and one that reinforces (and furthers) the shopping experience throughout the shopper journey.

Sales and sales growth have been and will remain key metrics in retail, but only within a context of cash flow and market capitalization. And, not entirely surprising, it might be time to cut same store sales loose as a key performance metric. You get what you measure, and attributing sales to particular channels only drives channel conflict. It also has nothing to do with an omnichannel shopper experience.


Sales per shopper is the most salient selling metric, and it’s available across all channels. Plus, while average transaction value (ATV) is still useful, sales per customer across all channels is more reflective of omnichannel effectiveness.

Other key operational metrics include customer acquisition costs and lifetime customer value calculations, and shopper experience requires analysis into shopper engagement and shoppers’ transitions through their often widely varying purchase cycles. It’s about brand awareness, recognition, retention and loyalty. And, for retailers, it’s about maximizing each and every opportunity to connect with, interact, listen and engage.

Where do you think the C-suite should be paying the most attention? I’m interested in reading your thoughts in the Comments section, below.

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  • Ken Silay

    Today, when you hear the phrases omni-channel or connected commerce in conversation, your eyes most likely will glaze over and your ability to listen seriously diminishes. After what seems like years of omni-channel hype in the retail industry, we are still constantly renaming and redefining the concept. Don’t expect it to go away quietly though as technology advances continue to drive changes in the experience demanded by the customer and with those demands come serious changes in the type and timing of the information required to provide a relevant customer experience in an omni-channel world. It’s a given that the pace of change is staggering for retailers, but I hope that most of you would rather be the catalysts for change than the victims of it.

    Regardless of the ever-changing landscape for omni-channel, there are some fundamental building blocks that cannot be ignored if anyone is to be successful delivering a complete omni-channel solution. Everything that is visible to the customer depends upon, in my opinion, three foundational elements:

    • Inventory Accuracy: Are you confident in your inventory and how much does your inventory accuracy degrade between physical inventories?

    • In-Store network Vitality: Does your network have the horsepower to handle tablets, mobile checkout, digital signage, RFID, etc. now and for the future?

    • Integrated Channel Data: Are you faking it, or do you truly have a repository for your customer data that includes all channels in an accessible location?

    Let’s focus on the third element and assume that we have consolidated our customer data, regardless of channel, and have a network that is robust enough to deliver specific customer information at the point of the transaction. Our rapidly changing new technology can or will be delivering or accessing transactional information, not after the transaction is completed, but in the moment of the transaction. This information will transform and enhance the customer experience if properly integrated. Traditional retail metrics will no longer be acceptable because they are yesterday’s news. We cannot expect to manage tomorrow’s retail landscape with yesterday’s retail metrics. Sales, margin and units per transaction are historical metrics. They tell us what we did or didn’t accomplish. What we will need are metrics that evaluate the effectiveness of the information provided at the moment the transaction is executed. This is a seriously important concept to grasp, but not one that most will even think about until after the technology to provide the information has been implemented. It requires a new way to think about the analytics of the customer experience, a paradigm shift in retail thinking.

    For example, let’s define some hypothetical metrics that we don’t necessarily track today, but will illustrate the point of new metrics that will essentially drive the results we require for our traditional metrics. These analytics will serve as indicators that identify potential positive as well as negative issues with new technical capabilities and allow for continuous improvement of the results. These are examples only and may require some discussion and/or improvement, but the intention here is to initiate a different way of thinking about retail metrics.

    • System Suggested Selling (SSS)

    o How much dollar volume did geo-location suggested coupons generate? Do not be satisfied with tracking just an increase in sales volume, but be specific to what volume was driven by what specific coupon or offer. We will then know what offers to repeat and which to modify or eliminate.

    • Recommendation Effectiveness (RE)

    o What % of the time did in-transaction recommendations increase UPT? Providing a recommendation during the transaction to assure that the UPT target is achieved will be the objective. The metric required will be a measure of the effectiveness of the recommendation engine. Tracking the number of times that a recommendation was accepted by the customer against the number of recommendations provided will provide a ratio that can be measured against a target for RE. Achieving that target will assure that the traditional UPT metric will be achieved.

    • Augmented Revenue (AR)

    o What dollar volume was generated by in-moment suggestions/recommendations? Similar to Recommendation Effectiveness, tracking specific dollar increases in transactions due to “in the moment” recommendations will help with determining the type and frequency of the recommendations

    • Assisted Conversion (AC)

    o Define the conversion rate for customers identified by technology and given an offer. If beacons are used to identify in-store customers and those customers are communicated to with a targeted offer, based upon analysis of that customer’s history, we should track how often conversion was achieved during that technology-enhanced transaction.

    Mobile dashboards of retail metrics are currently available to retail executives today on a variety of devices. We are constantly striving to provide up to the minute management information, but the information being provided is still historical. It’s like looking in your rear view mirror. A fighter pilot uses a heads up display to allow him or her to focus on the air battle. What is behind them, in most cases is of no consequence. To be effective, we need a heads up display of retail metrics to keep pace with the changing retail environment and the expectations of our customers. Providing dynamic, accurate information to the customer or the sales associate during the sale will help to assure that the results expected in the traditional retail metrics are being achieved.

    Let’s extend our paradigm shift a little more. We normally think of our IT resources as capital or operational expenses that must be justified in some ROI calculation in order to fund them. Furthermore, analysts and investors view organizations who meet their financial objectives and solidify their sustainability through innovation more favorably and have proven to pay a higher price for the organization’s stock. This is called the Innovation Premium and is used by Forbes Magazine as the measure to determine their list of the world’s most innovative companies. So by implementing innovative technology and setting metrics to manage and enhance technology’s impact on the traditional metrics, we can essentially drive the results we expect.

    So I ask you to consider the possibility that given the rapid technology explosion and an ability to focus technology on driving long-term results, Shouldn’t retail thinking shift to

    • Approaching business transaction metrics differently,

    • Placing a premium on innovative technology, and

    • Considering increased technology budgets to provide the needed resources to achieve our desired results?