KPI Definitions

Learn more about the metrics and key productivity indicators displayed on Retail Toolkit dashboards.

Sales

Revenue

The income generated from sales transactions before cost of goods and other expenses are considered.

Profit Margin

A product’s sale price minus its cost. This number will be different for each product, and is usually expressed as a percentage. If a product cost $60, but you sold it for $100, you made $40, or a 40% margin.

Gross Profit Margin

Profit margin averaged across all the products sold.

Conversion Rate

The percentage of visitors who buy something at your store. If 2,000 people visit your store in a week, but 400 buy, your conversion rate is 20%.

Average Transaction Value (ATV)

Basically, on average, how much are your customers buying each time they shop. Expressed as a dollar amount.

Units Per Transaction (UPT)

On average, how many items are customers buying each time they shop. Expressed as quantity.


Inventory

Inventory Management

The system a retailer uses to make sure the right inventory is in the right place, at the right time, and in the right quantity. As a part of this, the retailer is making sure that ordering, shipping, handling, and related costs are kept under control.

Cost of Goods Sold (COGS)

The direct cost, in dollars, of a product or products in a retailer's inventory.

Average Inventory at Cost

The average amount of inventory on hand over the course of a year, calculated in dollars

Procurement

The process of sourcing, negotiating, and strategically selecting goods for your retail shop.

Purchase Order

A document used to communicate a purchase to an employer. It can be used to approve, track, and process purchases as well. A purchase order usually indicates types, quantities, and agreed prices for products or services, as well as delivery dates.TurnsThe number of times a product completes a cycle of moving from warehouse to sales floor to checkout in a year.

Markdowns

Unlike a promotional sale, a markdown is a permanent price reduction due to a product’s inability to be sold at its original price to move the inventory and make room for new products.

Dead Stock

Sometimes called dusty inventory, dead stock is merchandise that has never been sold or has been in stock for a while. Sometimes this is because a particular item is just seasonal, but other times it’s because the product simply isn’t in demand.

Shrinkage

The difference between the amount of stock that a retailer has on the books and the actual stock available. Its inventory loss due to employee theft, shoplifting, administrative error, vendor fraud, or damage.

Lot Size

Also called order quantity, this is the quantity of an item you order for delivery on a specific date.

Inventory Turnover

The average number of times that inventory on hand is sold or used during a specific time period. Most of the time, high stock turn is good — it means you’re selling a lot without stocking too much. To calculate it, divide the cost of goods sold by the average inventory.

Quantity on Hand (QOH)

The amount of physical inventory that a retailer has in possession.

Quantity on Order (QOO)

The amount of inventory in open purchase orders or manufacturing orders.

Quantity Discount

An incentive offered to a buyer to purchase a certain quantity for a decreased cost per unit.

Carrying Cost

Also known as holding cost. Primarily the cost associated with the inventory investment and storage.