Metrics system

Measuring success in retailing used to come down to your P&L: ensuring that you made more money from a site than it took to run it. But the internet changed that.

Even in the early days of the internet, websites were seen as a way to increase footfall to a physical location. But as technology became more prevalent, and our phones became miniaturised laptops, it became harder to define what made a specific site successful for most retailers.

It is perhaps no surprise that one of the first industries to change the way they looked at defining success for a store was the same industry that – indirectly at least – caused much of the disruption: the mobile phone providers.

They switched from store profitability and footfall to assessing the average revenue per user of the customers that frequented the store or were based within the store’s catchment area.

We take a look at what metrics retailers should be measuring to determine success today:

Customer engagement
We believe that one of the best measures of the strength of your brand is how engaged customers are with it. One of the most popular ways of measuring engagement is determining how many brand advocates you have or measuring your net promotor score (NPS). While useful, this is an active measurement that requires you to get your customers to respond to a question, something that isn’t always easy to do. And once you have your NPS score, you'll no doubt want to understand why your customers have chosen to give that rating.

Other, more passive, measures such as analysing unprompted engagement through Twitter, Facebook, and other social media platforms can help understand the true underlying sentiment towards your brand. While sentiment isn’t a direct substitute for brand engagement, it does serve as a useful proxy, and the ability to look at sentiment across different locations can be helpful in a variety of situations.

Views on your own website can track general customer engagement through understanding how many impressions you have, to the number of pages visited, to how long visitors remained on a single page. Although this measures the success of the brand as well as the design of the website.

Sales attribution
Working out where the pound hits the till, be it a physical or digital check-out, is straightforward. But in order to understand the role that your physical estate has on generating sales, we consider that it’s crucial to have a view on where the sale originated. Just as marketeers attribute a particular campaign or promotion to a sales uplift, the presence of a physical store can – and does – drive online sales.

By knowing to what extent your physical portfolio contributes to your online earnings, you can determine what sites are contributing to overall profitability through the halo effect, and this can also be used help determine where to open your next store, or to optimise the stock package by location.

Customer touchpoint
Linked to the sales attribution is calculating how important the store is as a customer touchpoint. This shouldn’t be limited to counting footfall, but measuring the types of interactions that take place within the store.

Are your customers using the store to return products purchased online? Would they still have purchased the goods if there wasn’t a store to return them to? How much would it cost to facilitate a return if you didn't have a store to handle the process? These are all important questions that need to be answered before a value can be placed on the physical unit. Likewise, understanding the benefit of your estate in enabling click and collect instead of the cost of last mile delivery is an important measure.

What started with the mobile operators looking at the value of their customers within their catchment is just as important today as it was 20 years ago.

Chris van Ryswyck