In his recent article “The Way We Measure Retail Store Performance Needs to Change” M&A banker Richard Kestenbaum puts forward a strong case for retail to re-consider which metrics they are using to measure success.
Retailers tend to rely on two key metrics for store performance: sales per square foot and store income statements. Sales per square foot allows retailers to compare performance for stores of varying sizes. Store income statements on the other hand, treat each location as though it were an independent business.
While these were once judged as sufficient, modern retail is a more complex beast. Stores are no longer simply warehouses for goods. Experiential retail has changed the way we think about customer experience. Technology has changed the way we shop. It’s time to re-think which retail metrics really matter in today’s world.
The Store as Media (Digital Retail Metrics)
In, “Measuring the Store of the Future“, Doug Stephens goes a step further then Kestenbaum, calling sales-based metrics ‘industrial relics’.
“Judging a store’s performance simply by regarding its most recent sales results is like evaluating a patient’s health by asking what they had for breakfast that day.”Doug “Retail Prophet” Stephens
For Stephens (touching on themes from his book Re-Engineering Retail) stores should be thought off as media channels. Customers already treat them like that so we should too, “Your stores are your media, you’re just not measuring them that way yet”.
Stephens makes a comparison to the metrics more frequently used in digital marketing. One positive customer experience, should be thought of like an impression. In positioning store performance as something closer to advertising spend, Stephens points to an interesting alternative that reflects the evolution of the store as something like a media channel.
What if your store don’t sell anything?
Nordstrom’s recently launched “Local” concept stretches the idea of what a store can be to its limits. It’s 1,800 ft Upper West Side sells nothing at all. Rather than products, it offers services. Customers can book consultant sessions with stylists. They can return goods, even those bought from other stores. Retail as experience. The store as a channel for luxury treats.
With such a radical re-think, how do you measure success? James Nordstrom announced increased market share as the goal of his stores. Not how much they sell, but how much of a draw the store can be.
Is this what the future of retail looks like? Something closer to the original vision of Harry Selfridge. The store as a place to socialise and chat. Experience first, purchases second? Yet there still seems to be something crucial missing. How do you get to the lived customer experience itself?
Customer Experience First
Speaking to Forbes, TruRating CEO Georgina Nelson recently observed a serious problem in contemporary retail. “There is a disconnect between customer experience and store operations. Without a consistent way to measure customer insights, how do you put them into practice?”
For retail metrics to work, they have to tell us something about the way our customers feel and think. Without that, they are misleading at best and dangerous at worst. While sales figures provide a piece of the puzzle, they do not tell us why customers shop with us in the first place.
Providing an outstanding experience should always be the goal. If you can find out what ‘outstanding’ means to your customers while your at it, well that’s even better.
Find out how TruRating’ point-of-sale customer feedback solution can help you understand your customer experience today – get in touch with one of the team today for more information.