Business owners understand that numbers wield immense power. However, leveraging these numbers to boost your bottom line is not always simple. For stores looking to amplify retail furniture sales, tracking and interpreting key performance indicators (KPIs) is a crucial first step.
Retail furniture is fiercely competitive, with stores diligently analyzing KPIs to gain an edge. In today’s market, the most prosperous furniture retailers are focused on data, diving deep into analytics to learn more about their own businesses, their competitors, and their consumers.
Where to start
A few fundamental metrics are pivotal in enhancing furniture retail sales success. While each company is unique, this handful of core KPIs is essential in gauging industry performance.
1. Sales conversion rate
For furniture stores, the sales conversion rate signifies the proportion of purchases to visitors, offering a direct understanding of a store’s efficacy in turning interest into sales. To illustrate, if a furniture shop receives 1,000 visitors monthly and completes 100 sales, the conversion rate stands at 10%.
Measuring this rate is relatively straightforward, but it demands meticulous monitoring of two vital metrics – visitor count and sales figures. For brick-and-mortar stores, tallying visitors can be accomplished through manual counts, electronic door counters, or advanced visitor tracking systems. Sales data, on the other hand, is gathered from your point-of-sale (POS) system. Tools like Vena assist with the automation of tracking visits and transactions, giving businesses a real-time snapshot of the conversion rate.
Conversion rate = (Number of sales / Number of visitors) x 100
2. Customer acquisition cost
Customer acquisition cost, commonly abbreviated as CAC, evaluates the total expenses involved in gaining a new customer. Typically, it encompasses expenditures, such as advertising costs, divided by the total number of acquired clients. This metric is important, as a prolonged CAC can surpass revenue and render a business financially untenable.
To boost profitability, a business must find ways to diminish customer acquisition expenses. For instance, discontinuing underperforming ads and reallocating those funds towards more impactful marketing efforts. By securing more customers within the same budgetary constraints, a furniture retailer can effectively lower its customer acquisition cost.
Customer acquisition cost = Total expenses to acquire a customer (cost of sales and marketing) / Total number of customers acquired over a given time
3. Gross margin return on investment
Gross margin return on investment (GMROI) serves a distinct purpose; it evaluates the profit generated from an investment in product inventory. In practical terms, it reveals the return achieved for every dollar allocated to stock. Tracking return on investment is crucial for several reasons, as it offers a deeper understanding of business performance beyond just sales or profit margins.
Unlike overarching inventory assessments, GMROI typically focuses on specific products or categories. Its granularity identifies which items merit inclusion in the store’s inventory, what should be omitted, and where further investment may be beneficial.
Data integration has become crucial for companies to sync information from different systems, like financial measures and inventory counts. Utilizing Integration Platform as a Service (iPaaS) tools, for example, will allow a business to better manage its retail operations while saving valuable time, which in turn contributes to business growth.
Enhanced profit margins contribute to overall retail success. Growth results from identifying products worthy of investment and securing a favorable return on their initial expenditures.
Gross margin return on investment = Total gross profit / Average inventory cost
4. Sales per square foot
Sales per square foot is another important KPI in retail. This industry standard primarily aids in inventory management.
Every retailer should ensure their POS system provides functionality that enables precise stock level monitoring. The following are basic features these systems should offer:
- Purchase order receiving to avoid stock shortages
- Inventory adjustments to rectify damaged, lost, or stolen items in designated stores
- Product management for creating various inventory items, non-inventory items, and serialized products
Once inventory is accurately tracked via a POS system, retail sales per square foot can be determined. This data also facilitates approximate return on investment (ROI) calculations and informs rent evaluations.
When gauging sales per square foot, it is important to remember that the selling space excludes the stockroom or any area where products are not displayed, encompassing solely the “usable” selling floor.
Sales per square foot = Total net sales / Square feet of selling space
5. Total order cycle time
Retail businesses are interested in the average duration from order placement to delivery receipt, including delivery time, because consumers are sometimes impatient, which often leads to abandoned online orders when estimated delivery times are lengthy.
Total order cycle time serves as a critical KPI and factor in all the steps and processes involved in order fulfillment. Efficiency in these processes will result in shorter total order cycle times. Recognizing the total order cycle time’s significance is vital, as extended cycles detrimentally affect a business’s capacity to attract and retain customers.
Total order cycle time = (the time the order was received by the customer – the time the order was placed) / Total number of orders shipped
6. Average order value
The average order value (AOV) denotes the mean monetary worth of each transaction made with a retailer within a specified timeframe. AOV is highly significant for online retailers because it impacts various strategic decisions, such as website layout and product pricing.
Efforts to enhance AOV can include bundling products, offering discounts for purchases exceeding a certain threshold, and upselling customers on complementary accessories. Additionally, website design can incorporate features like a “related products” section to encourage higher-value transactions. Addressing low AOV in mobile orders can involve exclusive mobile discounts that bundle products or mandate a minimum order value.
Enriched with advanced analytics capabilities, business intelligence (BI) tools like Power BI deliver these insights across an organization, allowing a business and its team to make confident business decisions.
Average order value = Total revenue / Total number of orders placed
7. Additional eCommerce metrics
Retailers who leverage platforms like Wayfair benefit from accessing a vast online marketplace, which reaches a broader audience beyond their physical locations. By tracking e-commerce KPIs, retailers can refine their strategies, optimize product listings, and enhance the overall online shopping experience.
Wayfair uses the following to determine a supplier score:
- In-stock rate: The percent of a supplier’s Wayfair catalog available for sale
- Fill rate: The rate at which a supplier fills orders on time
- Out-of-stock/backorder rate: The percentage of orders that cannot be fulfilled immediately because of a lack of stock
- Actual days to ship: The aggregate speed from order to ship
- Advanced shipping notice (ASN) compliance: The percent of ASNs being received and processed in time
- Extranet label prints: The percent of labels printed from Wayfair extranet
In a fiercely competitive online landscape, these e-commerce KPIs serve as vital benchmarks to drive retail success.
Using technology to improve KPI tracking
Utilizing cutting-edge technology to enhance KPIs tracking in your furniture business can revolutionize the decision-making processes. Tools like Vena and Power BI offer sophisticated visualization capabilities, enabling a business to gain insights and monitor KPIs with unprecedented clarity and depth. With customizable dashboards and intuitive interfaces, these platforms empower businesses to discern trends, identify areas for improvement, and make data-driven decisions swiftly and effectively. Additionally, Vena and Power BI allow for the rapid sharing of these insights with organizational leadership, allowing for quicker internal responses to keep the business ahead of the competition.
To transform your KPIs tracking methods and propel your furniture business to new heights, contact Citrin Cooperman’s Digital Services Practice Managing Partner Eric Casazza at ecasazza@citrincooperman.com today for professional guidance and support.
“Citrin Cooperman” is the brand under which Citrin Cooperman & Company, LLP, a licensed independent CPA firm, and Citrin Cooperman Advisors LLC serve clients’ business needs. The two firms operate as separate legal entities in an alternative practice structure. The entities of Citrin Cooperman & Company, LLP and Citrin Cooperman Advisors LLC are independent member firms of the Moore North America, Inc. (MNA) Association, which is itself a regional member of Moore Global Network Limited (MGNL). All the firms associated with MNA are independently owned and managed entities. Their membership in, or association with, MNA should not be construed as constituting or implying any partnership between them.
