Developing a habit of reviewing your business is an essential aspect of retail strategy. By regularly analyzing key performance indicators and identifying patterns on a daily, weekly, monthly, and yearly basis, business owners can make informed decisions that lead to sustainable growth and success. This post, aligning with the first week of the retail strategy course offered by Point Of Sale Strategies, lays out the key questions to consider at each review interval for an effective retail business review
Point-of-sale systems and e-commerce platforms offer small business owners a wealth of retail data that can be both beneficial and overwhelming. To better utilize this information, it's crucial to establish key performance indicators (KPIs) and set specific, measurable, achievable, relevant, and time-bound (SMART) goals. This will allow you to pinpoint the areas where you need to concentrate your efforts in order to achieve your top financial objectives.
I suggest reviewing your business as often as on a daily basis. For the daily review, you won't need to spend more than 5 minutes. For longer review periods, like monthly or quarterly, you will want to dedicate a few hours to understanding your business trends. It is at these times you may want to reassess your original sales plan. For a yearly business review, I would schedule a full day. It may sound overwhelming but it's actually a lot of fun! To give you some guidance, here are a few questions I walk through with my clients to help develop a business review template:
Daily Business Review
As I mentioned before, a daily business review should be short- only about 5 minutes a day. You don't want to make any assumptions based on a one-day trend. Find a place where you like to take notes- I suggest Excel, but there are many possible options. Really a daily business review is taking notes of trends you see so that you can have those in mind when completing your weekly business review. Here are some questions to ask during your daily business review:
Were my sales higher or lower than expected? Did anything cause this like bad weather or a new marketing campaign impact my usual foot traffic (or website traffic). If yes, take note.
Did customers ask for items that I did not have in stock or something that I haven't carried? For online, look into searches from your website to see if you notice any trends
What items are customers purchasing or browsing together? It may make sense to change up your merchandising in-store or online
Weekly Business Review
As a retail buyer, my whole Monday was dedicated to business reviews and reporting. As a small business owner, you don't have that kind of time. But it is important to dedicate at least an hour to reviewing what happened in your business the past week. Automating sales reports in your POS system or on your eCommerce platform can help save time and allow you to actually analyze. A monthly refresh of your OTB (open to buy) can also help you keep better track of inventory and help you manage your cash flow.
Here are some things to look at for your weekly business review:
How were my sales week-over-week? Did they increase or decrease and what might be driving that?
What was my AUR ( Average Unit Retail) last week? Did it increase or decrease? What items or categories caused it to change?
Did any items run out of stock sooner than you expected? Or did an item perform better than expected? Time to review your inventory and calculate weeks of supply to see if you need to order more. For smaller retailers, I like to calculate weeks of supply in units rather than in inventory dollars, but the math works the same either way
Weeks of supply formula:
inventory units on hand/ inventory units sold last week = weeks of supply
So if you have 50 units of a toy, and sold 15 units last week, your weeks of supply is:
50/20 = 2.5 weeks of supply
How much inventory you want to keep on hand is up to you, but if an item is a top seller, I suggest keeping at least 6 weeks of inventory on hand so that you can reorder and have items back in stock before you sell out.
Did you run any promotions online or in-store? If so, what was the impact on your margin, and was it worth the additional revenue?
Did you have any customer issues that you need to review? Briefly scroll through online reviews
Monthly Business Review
At the beginning of the month, you are going to want to review the sales plan for the next three months. Take into account what level of inventory you have on order. If last month exceeded your sales plan, you might need to call a few vendors and ask them to ship next month's inventory earlier if possible. If sales were lower than expected, you might need to push out some inventory. Take a look at your inventory levels from last year and make sure you are planning appropriately.
When planning sales, remember the 4 5 4 calendar. In retail, some months have 5 weeks of selling instead of 4. This will impact your total month's sales.
I like to review selling and customer acquisition in my monthly business review:
How were my sales last month? Did they increase month-over-month and what drove the change?
Did anything impact my margin negatively or positively? Did I have to mark down more inventory than expected to hit my sales goals?
What was my conversion rate online, or my sell-through rate in-store? Are any brands or products trending?
How many new customers did I acquire? Through what channel did I acquire them?
Quarterly Business Review
In the quarterly business review, you will want to roll up everything you pulled together for your monthly review and see if you notice any trends between months. If you had a very successful month, what happened that month that did not happen in the others?
I suggest setting up times to talk to your biggest vendors once a quarter. Here you can ask them questions about what is going on in their business if there are any new products that are doing well that you may want to add to your inventory and talk through any business issues such as shipping delays.
It's also a good idea to look at big events that may come up in the next quarter. Are there any retail holidays that you should plan promotions around? Not every retail event will work for your business but it's good to review your marketing calendar to ensure it is up to date.
Yearly Business Review
Congrats- you made it through a crazy retail year! Even though you want ( and deserve) a much-needed break post-holiday I do suggest getting all those Q4 thoughts down on paper before you forget. Notice any gaps in inventory or items that you sold through quickly and start having conversations with your vendors about re-ordering right away.
Spend a day looking at the peaks and valleys of your year. What can you change and what was beyond your control?
What new products performed well and what were misses? Are you noticing any trends in colorways, materials or price points?
What markets did you attend that were beneficial to your business? Schedule your trade show trips for the year.
And most importantly, give yourself a BIG pat on the back. Retail is hard- and you got through it! Planning for 2023 will help alleviate some of the stress.
Retail Strategy is Key to Growing Your Business
You are on your way to creating a retail strategy to grow your business. If you need help getting started, Point of Sale Strategies can put you on the right track with our custom retail strategy course.