Use of Metrics in Retail Industry in the GCC

Every business has its own set of metrics that helps the business to assess its performance and benchmark itself against others in the business. The focus here is to describe the few important metrics that are being measured by the retail industry globally and also share some insight into metrics that are being measured by the retail industry in the GCC countries

Traditional ISO 9001 approach to metrics is "you cannot manage what you do not measure". Modern e-business driven retail industry defnition of metrics is "you cannot measure what you do not defne". Defning metrics for measuring success of retail business is not easy due to prevalence of several formats of retail globally such as super markets, hypermarkets, single brand retail, department stores, specialty chains, and many more. Also some of the metrics that may be appropriate for retailers in the US and Europe may not be of much relevance to the retailers in the Middle East. Additionally few new metrics may be required for the retailers in the Middle East due to local factors. The inability of executives in the retail industry to identify the metrics that would be useful in the long run to measure the performance of their industry is a serious issue that cannot be wished away. Once the metrics is identifed, appropriate technology needs to be chosen to capture the data that helps in buildup of metrics. Mangers in the retail industry need to defne metrics that are not only relevant for physical customers who visit the retail stores but also their virtual customers who visit the website to know about the product features and pricing before deciding to order the product online or visit the retailer's store based on their choice of product they intend to purchase.

TRADITIONAL BUSINESS METRICS
Traditional business metrics used by the industry includes the following:

Corporate	Retail Specifc	E-retail
Market capitalization	Product return	Hits
Price-to-earnings ratio	Product sold per transaction	Page views
Fixed assets	Out of stock product line	Visits and visit duration
Cash fow	Sale value	Users
Inventory turnover	Inventory to sales ratio	Customers
Net profts	Customers per day	Loyal customers
Customer turnover	Revenue per customer	Recency
	Revenue per employee	Frequency
Market share	Frequency of stores visit	Monetary value
Industry sector growth	Shoplifting	Acquisition cost
	Vendor fraud	Conversion cost
	Sales per unit area	Stickiness
	Percentage of selling space	Slipperiness
	Top selling items	Focus
	Percentage of sales by product category	Velocity

Sl No.	Metric	Defnition	How this can be measured	Number of retailers in GCC measuring this
1	Product return	Measures the value of the products that were sold and returned to the store by the client, for various reasons	From POS output	Majority
2	Product sold per transaction	Measures the average number of items from diferent product lines sold on a per purchase basis. A product line refers to a number of related products that are developed by the same manufacturer	From POS output	Not many
3	Out of stock product line	Measures the number of product lines that are not available in the store	From POS output	Not many
4	Sale value	Measures the value of a customer bill / purchase, on average, within the store.	From POS output	Not many
5	Customers per day	Measures the average number of customers the store manages to atract on a per day basis	From POS output	Majority
6	Units sold per customer	Measures the average number of units sold by the store on a per customer basis	From POS output	Not many
7	% of store loyalty	Measures the percentage of loyal customers, from all store customers. Loyalty should be defned based on several atributes, such as size of purchases, time spent in store and frequency of purchase.	From POS data using analytics	Not many
8	Frequency of store visits	Measures the number of times a customer visits the store in period, on average	From loyalty care programme	Not many
9	Inventory to sales ratio	Measures the ratio between the retailer's inventory value and the sales revenue	Centralized fnancial data	Majority
10	Time spent in store	Measures the length of time spent, on average, in store by prospective customers (for the purpose of shopping)		None
11	Employee theft	Metric	From an incident reporting	None
12	Shoplifting	Measures the value amount of products that were stolen from the store.	Difcult to establish	None
13	Vendor fraud	Measures the value of fraud generated by the vendors. Vendor fraud can be delivering the wrong amount of inventory on the shipping invoice up to removing small amounts of inventory	Internal audits	Not many
14	Sales per unit area	Measures the value of sales divided by the retail space, on average per unit area. The unit of area is usually square meters in the metric system or square feet in U.S. customary units.	Centralized fnancial data and store level data	Yes
15	Percentage of selling space	Measures the percentage of store space available for selling products, from overall store space	Measured from the store plan	Not many
16	Top selling items	Measures the percentage of the sales from the top selling items from gross sales.	From POS	Majority
17	Percentage of sales by product category	Measures the percentage of sales generated by a product category from overall gross sale	From POS	Majority

In the GCC countries except for few large retailers we have not come across majority of retailers having defned what they need to measure. In many instances the companies have defned the metrics based on what the software vendor's application measures. Also usage of analytics has not matured to extent whereby retailers can beneft from the vast repository of data that is being collected.

A FEW TERMS USED ARE DEFINED:

Recency: Has the customer made a purchase or visited your website site recently

Frequency: How often has the customer placed orders or visited your site historically?

Monetary value: Customer's total spending and proftability

Stickiness: Stickiness is a composite measure that captures the
efectiveness of your content in terms of consistently holding users
atention and allowing them to quickly complete their online tasks

Slipperiness: Slipperiness is equivalent to low stickiness

Focus: Focus is another concept related to page visit behavior within
a section of the site

Velocity: Velocity is the measure of how quickly a user moves from
one stage of the customer life cycle to the next.

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