Top 7 Supermarket KPIs You Need to Track for Business Growth

As an experienced entrepreneur, I understand how essential it is to measure the performance of your supermarket with Key Performance Indicators (KPIs). These metrics allow you to track and calculate critical business aspects with accuracy and precision, making data-driven decisions for the success of your store.

Let's dive into the top seven supermarket KPIs every retail owner should track closely.

• Total daily sales revenue: The total revenue generated by your supermarket daily is an essential indicator of your store's health and well-being. Higher revenue means more sales opportunities, which could boost your profits and business growth.
• Customer satisfaction rating: Your customers' satisfaction rating is a crucial KPI to monitor as it directly impacts your store's profitability. Satisfied customers are more likely to make repeat purchases, refer other customers, and create a loyal customer base.
• Average transaction size: The average sales transaction size is a simple yet powerful KPI that helps you understand your customers' purchasing habits. It helps you decide on specific strategies to increase customer spending in your store, such as bundling products, upselling, and cross-selling.

Ready to learn more about the remaining four core supermarket KPIs? Keep reading, and we'll explore these metrics in-depth to improve your retail business performance.

Total daily sales revenue

As a supermarket owner, it is crucial to track and measure certain KPI metrics for your business to succeed. Total daily sales revenue is one such metric that helps you determine how much money your business is generating on a daily basis. Let's dive into the importance of this KPI and how to track and calculate it.

Definition

Total daily sales revenue refers to the amount of money received from the sales of products and services in your supermarket on a daily basis. This metric is an essential indicator of your business's overall performance and determines your supermarket's financial health. It also helps you identify any trends and patterns in sales that can help you make informed decisions for the future.

Use Case

The use case of total daily sales revenue is simple. It allows you to track the income generated by your supermarket on a daily basis. By keeping track of this KPI, you can determine the sales trends, identify your best-selling products, and make adjustments to inventory and pricing to improve profitability.

How to Calculate KPI

To calculate total daily sales revenue, you need to add up the total amount of money received from sales in your supermarket over a 24-hour period. The formula for calculating this KPI is:

Calculation Example

Suppose your supermarket generated the following sales:

• $500 from produce
• $750 from dairy products
• $300 from meat products
• $200 from bakery products

Using the formula above, you can calculate your total daily sales revenue as:

Therefore, your supermarket generated a total revenue of $1,750 that day.

KPI Advantages

• Helps you track your supermarket's overall financial health
• Enables you to identify your best-selling products and adjust inventory accordingly
• Allows you to make better pricing decisions to improve profit margins

KPI Disadvantages

• Does not account for costs associated with your supermarket's expenses and overheads
• May not accurately reflect your supermarket's profitability if high-value items are sold less frequently
• Can be affected by variations in demand and seasonal trends

KPI Industry Benchmarks

According to industry benchmarks, the total daily sales revenue for a successful supermarket business should average around $20,000-$25,000 per day. However, this number may vary depending on factors such as the size of your store, location, and target customer base.

Customer satisfaction rating

As a seasoned entrepreneur, I have learned that measuring customer satisfaction is key to business success. It involves collecting and analyzing data to assess whether your customers are happy or unhappy with your products or services. A popular metric for measuring customer satisfaction is the Customer Satisfaction Rating.

Definition

The Customer Satisfaction Rating (CSAT) measures the degree to which customers are satisfied with a company's products or services. It's typically measured on a scale from 1-5, with 5 being the highest level of satisfaction.

Use Case

CSAT is used to measure how well a company is meeting customer needs and expectations. It's commonly used to identify areas for improvement, track changes over time, and compare performance against industry benchmarks.

How To Calculate KPI

To calculate CSAT, you can use the following formula:

Calculation Example

Let's say you surveyed 100 customers, and 75 of them indicated that they were satisfied with your service. To calculate your CSAT score:

KPI Advantages

• Provides actionable feedback for improving customer experience.
• Helps to identify and prioritize areas for improvement.
• Enables comparison of performance against industry benchmarks.
• Can improve customer retention and loyalty.

KPI Disadvantages

• May not capture the full range of customer experiences or satisfaction levels.
• May be affected by bias or sampling issues in survey design.
• May not reflect the impact of external factors, such as pricing or competition.

KPI Industry Benchmarks

Industry benchmarks for CSAT can vary widely depending on the industry, business model, and customer expectations. However, a generally accepted benchmark is around 80% satisfaction.

Number of Repeat Customers

As a supermarket owner, you aim to make your customers’ shopping experience as pleasant as possible. The more they enjoy the shopping experience, the more likely they are to keep returning. Monitoring the number of repeat customers is an essential metric for assessing your supermarket's popularity with customers. It is a key performance indicator (KPI) that can help you determine how satisfied your customers are with your supermarket's overall offering.

Definition

The ‘Number of Repeat Customers’ indicates the total number of customers who visit your supermarket more than once within a specific period.

Use Case

A high number of repeat customers may indicate that your supermarket has developed a loyal customer base. In contrast, a small number may indicate that some customers have switched to competitors, indicating the need for improvement. Monitoring this KPI can enable you to track customer satisfaction levels, adjust your product mix, and enhance your customer service experience.

How to Calculate KPI

To calculate the ‘Number of Repeat Customers’ KPI, you need to:

• Choose a defined period (for example, a month or a quarter)
• Count the number of customers that have shopped at your store at least twice within that period
• Divide the number of repeat customers by the total number of customers during that period

Calculation Example

Suppose your supermarket had 1000 customers during the month, and 200 of those customers came in more than once.

KPI Advantages

• Helps you understand customer loyalty levels
• Enables you to optimize customer retention and acquisition strategies
• Improves customer satisfaction levels

KPI Disadvantages

• Does not differentiate between frequent and occasional shoppers
• Does not provide information on the amount of revenue that comes from repeat customers

KPI Industry Benchmarks

Although industry benchmarks for the ‘Number of Repeat Customers’ KPI vary, a percentage ranging from 20-30% indicates that the supermarket has developed a loyal customer base.

Average transaction size

As a serial entrepreneur with experience running multiple businesses, I understand the importance of tracking relevant KPIs to improve business performance. One of the top KPIs that every supermarket should track is the average transaction size.

Definition

Average transaction size refers to the average value of each customer's purchase in a supermarket. It is calculated by dividing the total revenue generated by the number of transactions made during a particular period.

Use Case

Tracking the average transaction size is crucial for supermarkets because it gives insights into customer behavior, product pricing strategy, and merchandising. It helps to identify which products sell the most, which ones are not selling, and how much customers are willing to pay for each product. This data, in turn, helps to optimize the store layout, product placements, and sales strategies which ultimately helps to increase revenue and profits.

How To Calculate KPI

The formula for calculating the average transaction size is:

Calculation Example

Let's say that a supermarket generates a total revenue of $50,000 from 2,500 transactions made in a week. To calculate the average transaction size for that week, we would divide the total revenue by the number of transactions:

Therefore, the average transaction size for that week is $20.

KPI Advantages

• The average transaction size KPI helps supermarkets to identify the best-selling products and optimize their pricing strategy for those products.
• It helps to track changes in purchase behavior over time, which allows supermarkets to adjust their merchandising and sales strategies accordingly.
• The KPI is easy to calculate and provides quick insights into the performance of a supermarket.

KPI Disadvantages

• The average transaction size KPI does not take into account the number of items purchased in each transaction. A customer could purchase a single high-priced item, which would skew the average transaction size.
• It does not account for variations in seasonal or promotional pricing strategies that may affect purchasing behavior and transaction size.

KPI Industry Benchmarks

The average transaction size varies by industry and store size. According to research, the average transaction size in supermarkets ranges from $20 to $30.

Inventory turnover rate

One of the most important KPI metrics for supermarkets is the inventory turnover rate. It helps the business owners to understand how efficiently their inventory is being managed and how quickly they are selling their products. Here's everything you need to know about the inventory turnover rate KPI.

Definition

The inventory turnover rate is the measure of the number of times a supermarket sells and replaces its inventory during a specific period, typically a year.

Use Case

The inventory turnover rate helps supermarket owners to identify how long it takes to sell their stock. They can use the information to make decisions about restocking, to buy more products to keep up with customer demand, or to reduce the quantity of less popular items in stock.

How to Calculate KPI

The formula for inventory turnover rate KPI is:

Calculation Example

To calculate the inventory turnover rate KPI, let's take an example. Suppose a supermarket had a Cost of Goods Sold (COGS) of $1,000,000 and an average inventory of $200,000. Using the formula, the inventory turnover rate is:

The inventory turnover rate is 5, which means that the supermarket sold its entire inventory five times in a year.

KPI Advantages

• The inventory turnover rate measures how quickly a business can convert its stock into sales.
• It helps the supermarket owners to evaluate the effectiveness of their inventory management system.
• A lower inventory turnover rate gives a warning to the business owner to reconsider their inventory management methods since it may indicate a problem such as overstocking, inefficient purchasing decisions, or poor sales numbers.

KPI Disadvantages

• The inventory turnover rate does not consider the profit margins involved in the sales.
• A high inventory turnover rate may lead to stock shortages and supply chain issues, which can negatively impact customer satisfaction and, eventually, business growth.
• It does not account for the cost of holding inventory, including storage fees or shipping costs, which all can lead to business costs increasing beyond expectations.

KPI Industry Benchmarks for the KPI: ' Inventory turnover rate '

Industry averages for the inventory turnover rate depend on the type of supermarket and products sold. For instance, the luxury supermarket market industry has a low inventory turnover rate ranging from 1-2.5. On the contrary, the grocery store market industry has a higher inventory turnover rate ranging from 6-15. The general average for the inventory turnover rate for the supermarket industry lies between 4-6.

Gross Profit Margin

As a serial entrepreneur, I've come across many KPI metrics that are essential when running a business. Gross profit margin is one of the most crucial metrics that a business owner should keep track of. In this chapter, we will dive deep into what gross profit margin is and how to track and calculate it.

Definition

Gross profit margin is a financial metric that measures a company's profitability by subtracting the cost of goods sold (COGS) from the revenue and then dividing it by the revenue.

Use Case

Gross profit margin is an important KPI metric that helps business owners and managers understand the profitability of their products or services. By tracking this metric regularly, businesses will be able to identify trends and shifts in their profitability, allowing them to make informed decisions to improve their bottom line.

How to Calculate KPI

Calculating gross profit margin is relatively straightforward. All you need is the revenue and the cost of goods sold. You can use the following formula:

Calculation Example

Let's say that a company has generated $1,000,000 in revenue and $400,000 in COGS. In this case, the calculation would be:

This means that for every dollar generated in revenue, the company earned 60 cents in gross profit.

KPI Advantages

• Helps to measure the profitability of a company
• Allows businesses to identify trends and shifts in their profitability
• Helps in decision-making processes that can improve profitability

KPI Disadvantages

• Does not take into account other expenses such as overhead costs
• May be misleading if the company has a high fixed cost
• Does not account for changes in prices over time

KPI Industry Benchmarks for the KPI: ' Gross profit margin '

The gross profit margins vary depending on the industry. For example, grocery stores typically have a gross profit margin between 25-30%, while software companies may have a gross profit margin between 70-80%.

Employee Retention Rate

As a seasoned entrepreneur, I can tell you that one of the top KPI metrics for supermarkets is employee retention rate. Employee retention is the ability of a company to keep its employees for a specific period, and the rate is calculated as a percentage of employees that are still with the company at the end of the period.

Definition

The employee retention rate is a KPI metric that measures the number of employees who remain with the company over a specific period. This metric helps to determine how well a company is doing when it comes to keeping its employees satisfied and engaged. A high retention rate indicates that employees are happy with their jobs and the company, while a low retention rate suggests that the company needs to work on improving employee satisfaction and engagement.

Use Case

When it comes to supermarkets, a high employee retention rate is crucial as it directly affects customer satisfaction. Happy employees are more likely to provide excellent customer service, resulting in satisfied customers who are more likely to return. Additionally, high retention rates save hiring costs as recruiting and training new employees can be expensive.

How To Calculate KPI

To calculate the employee retention rate, use the following formula:

Calculation Example

Suppose a supermarket had 50 employees at the start of the year. During the year, two employees resigned, and at the end of the year, 48 employees were still working with the company. Using the KPI formula:

KPI Advantages

• Indicates employee satisfaction and engagement levels.
• Helps in cost-saving, as the supermarket doesn't need to hire and train new employees constantly.
• Increases customer satisfaction due to better-trained, experienced, and engaged employees.

KPI Disadvantages

• Employee retention rate does not account for the quality of the retained employees, which could impact performance.
• The KPI calculation may not consider employees who left the company due to retirement, extended leaves, or personal reasons.
• The KPI may not be suitable for companies with high employee turnover rates.

In conclusion, tracking Key Performance Indicators (KPIs) is crucial for measuring the performance of your supermarket and making informed decisions for its success. By monitoring these metrics closely, you can identify areas of strength and weakness, implement effective strategies, and enhance your store's profits and growth over time.

The top seven supermarket KPIs every retail owner should track closely include total daily sales revenue, customer satisfaction rating, and average transaction size. Additionally, it's important to keep an eye on other essential metrics, such as number of repeat customers, inventory turnover rate, gross profit margin, and employee retention rate.

By regularly monitoring these KPIs, you can gain a better understanding of your store's health and performance, make data-driven decisions, and strive towards achieving your business goals. Remember to always prioritize the customer's satisfaction above anything else, as happy customers tend to return and create a loyal customer base, boosting your store's profitability in the long run.