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New Metrics for a New Retail Industry

By Alexei Agratchev   |   May 2, 2016

RR Retail MetricsEmpowered 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.”

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; and 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 touch point 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.

Read more on Experience

About Alexei Agratchev

Alexei Agratchev is the CEO and Co-founder of RetailNext and he serves on its Board of Directors. Before founding RetailNext in 2007, Alexei spent eight years at Cisco Systems. Prior to Cisco Systems, Alexei was a consultant at Accenture. Recently named to the Silicon Valley Business Journal’s 40 Under 40 list, Alexei holds a bachelor’s degree in International Relations from Claremont McKenna College, where he graduated Magna Cum Laude. He has also completed the Stanford Graduate School of Business Executive Program and the Cisco Leadership Series.

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H&M Tries to Amazonify Operations by Hosting Competing Brands

Is Best Buy Unplugged?

Return on Experience, the New Metric

A Closer Look at Retail & Labor in Inflationary Times

Hidden Opportunities

Private Retailing: For Your Wallet Only

Will BOPIS and BORIS Replace Delivery?

The Good News and Bad News for Kohl’s

Sustainability Can Be Deceptive

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Copyright © 2022 · Robin Lewis, Inc. All rights reserved. Copying or reproducing, by any means whatsoever, of The Robin Report, or any distribution hereof, in whole or in part, without the express written consent of Robin Lewis, Inc. is strictly prohibited. The Robin Report is published for senior executives in the retail, fashion, beauty, consumer products and related industries. The opinions expressed herein are not, and should not be construed as investment or other advice. All expressions of opinion are subject to change without notice.

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