Sales per square foot has been a common benchmarking metric in the retail industry for decades, and although the introduction of ecommerce has made it less so, it’s still critical for retailers offering successful omnichannel experiences that include brick and mortar locations. The metric helps retailers make the right resourcing decisions and understand the proper mix of ecommerce to physical location investments.
| KPI | Definition |
| Sales per Square Foot | The average revenue a retailer generates for each square foot of sales space. The higher the sales per square foot, the better and more efficient the retailer’s use of store space. |
| Spend Under Contract | The percentage of procurement spend managed by a contract. Purchasing goods and services using pre-negotiated contracts typically allows for better price negotiation. The higher this percentage, the more likely that your company is saving money on goods and services. |
| Inventory Turnover | Ratio showing how many times your company’s inventory is sold and replaced over a period of time. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. A low turnover ratio signifies weak sales and excess inventory. A high ratio suggests either strong sales or large discounts. |
| Order Fill Rate | Percentage of customer or consumption orders satisfied from stock at hand. It’s a measure of an inventory’s ability to meet demand. A higher fill rate indicates a better ability to meet sales requests, influencing higher customer satisfaction. |
| Cash Flow Adequacy Ratio | The cash flow adequacy ratio is used to determine whether the cash flows generated by the operations of a business are sufficient to pay for its other ongoing expenses. In essence, cash flows from operations are compared to the payments made for long-term debt reductions, fixed asset acquisitions, and dividends to shareholders. |
| Marketing as a % of Revenue | Marketing is one of the largest expenses for retailers. Smart use of marketing dollars means efficiency and higher profit margins. |
| Warehousing Cost as a % of Revenue | Percentage of sales that goes toward the cost of warehousing products. A reduction in warehouse costs will increase net profits without having to increase sales. |
| eCommerce Growth | This metric indicates the rate at which your company’s e-commerce revenue is growing. |
| Liquidity ratios | One of the commonly used liquidity ratio is the cash ratio. This ratio compares just cash and readily convertible investments to current liabilities. As such, it is the most conservative of all the liquidity ratios, and so is useful in situations where current liabilities are coming due for payment in the very short term. |
| Debt service coverage ratio | Calculated by dividing total net annual operating income by the total of annual debt payments. This measures the ability of a business to pay back both the principal and interest portions of its debt. |
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