Sales and service targets are a key and often a highly contentious issue in retail management. Balancing two great priorities of a successful retail operation – customer satisfaction leading to loyalty and business profitability – can be challenging for even the most experienced retail leader.
It’s a fine line of determining the ideal investment to create the greatest return. Unfortunately, retail is not as predictable as some would like, as many in the current economic climate can attest. Many retailers have consistent figures when considered year on year but a significant shift such as that currently impacting retailers can send that consistency into flux.
Sales and service targets are generally developed as part of an annual budgeting process. Depending upon the retailer, budgets may be developed in head office using high level data and disseminated to stores, or store managers and owner operators themselves may develop them. In either case data from previous year records is used along with a consideration of the potential impacts on their business across the year that will likely see a boost or drop in sales.
Even the most sophisticated data can only estimate the impacts of the year ahead. It is for this reason that sales and service budgets are best considered fluid. Many retailers use an annual budget and adjust its quarterly according to current projections. Others even adjust monthly. The idea is that store staff have a goal to aim for, one their store managers can inspire them toward that ensures business profitability.
Sales targets are as they sound. They are generally quantitative and therefore straightforward to measure whether targets are achieved or not. Targets may include:
· Store sales targets in dollars over time i.e. day, week, month, year
· Individual staff sales targets in dollars over time (often projected by store management)
· Store sales targets for key product lines and categories over time
· Individual staff sales targets for key product lines and categories over time (often projected by store management) Key product line sell through
· Gross profit figures for merchandise categories
· Gross profit figures for key product lines (special buys and impulse lines)
· Net profit figures for business unit / store
In some cases, particularly in large retail operations store management have no access to the details of store profitability. This is retained and managed by head office. Their sales targets are developed on a projected growth percentage and expense budgets such as wage and salaries are set at a given percentage of sales as a guide for store management.
Service targets are a little more challenging to set and measure. Retailers utilise many measures of service and the targets they set relate to the kind of service experience they offer their customers be it customised or standardised.
· Some of options for setting service targets are as follows:
· Mystery shopping results
· Conversion rate of customers to sales
· Add on sales / units per transaction
· Customer retention rate / percentage of return customers
· Total spend per returning customer
· Customer complaints
There is no one size fits all method to set service targets in retail, the approach must be tailored.
Sales targets are generally considered confidential and should be treated as such. Most retailers will have policies that state how and to whom sales data can be disclosed. It is important that such policies are followed, and the confidentiality of sales data be stressed to all staff that have access. Within store teams it is also important to consider how to develop and communicate team and individual sales and service targets.
There is a movement amongst select retailers to shift from individual staff sales targets to store based targets to encouraging teamwork and a more streamlined and consistent customer experience. Particularly when staff incentives are involved, setting and driving individuals’ sales targets using the carrot and stick approach can have a detrimental effect on team morale.
The underlying pressure and tension can lead to competitive behaviours that do not support the customer experience. Communicating store and sales targets can bring the team together, resulting in a holistic view of delivering a seamless experience at the helm of business operations to ensure customer satisfaction. satisfaction becomes the goal.
To learn how to steer your success as a team leader, the ARA Retail Institute runs multiple workshops on leadership and team culture. Join the ARA Retail Institute in their latest workshop which looks into how a team’s attitude and behaviours influence the outcome of challenging customer moments.
About ARA Retail Institute
ARA Retail Institute is Australia’s leading retail training provider for both accredited and non-accredited learning programs. For more information, please visit: www.retailinstitute.org.au