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Leading with Customer-Centric Key Performance Indicators

Retailers need to track key performance indicators (KPIs) to evaluate how effectively the company is journeying towards its strategic goal. Choosing the right KPI is crucial to see how the company is performing and whether the company is on track of its development.

Some of the KPIs that many companies are frequently tracking are:

Sales per square foot

This KPI, which is measured by dividing total sales by total sales space, evaluates how much sales are generated for every square foot of space in the store. It is a good indicator of the productivity of the store regardless of its physical size. The floor layout is an essential aspect of retail strategy since retailers need to maximize the limited space that they have to maximize their sales. If businesses feel that their sales per square foot are low compared to other stores in the same industry, they should consider redesigning their store layout.

Average transaction value

Average transaction value measures how much each customer spends on average. A high average transaction value could indicate that customers are purchasing in large quantities or that they are buying expensive products. Companies with low average transaction values may need to rethink their sales strategies, such as pricing or bundle offers so that customers will spend more.

Inventory turnover

Inventory turnover measures how much inventory is sold for a given amount of time. It is calculated by dividing the cost of goods sold by the average inventory. It may be tempting for businesses to stock up a lot of inventory to prevent sales losses due to lack of inventory on hand. However, the holding cost of having too much inventory may be damaging to the business in case the inventory does not get sold fast enough. Therefore, it is crucial to evaluate the speed at which inventories are sold.


Shrinkage is the reduction of inventories that are not caused by sales. It refers to the loss of inventories due to shoplifting, employee mistakes, or administrative errors. Tracking this KPI keeps businesses vigilant on what is going on in their companies.

Gross margin return on investment(GMROI)

Gross margin return on investment is calculated by dividing gross profit by the average inventory. This KPI measures how much money businesses can get back for the money they invested in their inventory. If GMROI is above 1, it means that the company is earning more than the cost of inventory and that they have a right balance of inventory and sales.


These KPIs that have been mentioned are mostly focused on sales and inventory. Increasing sales and managing inventory are indeed important aspects for businesses, but businesses nowadays are turning their attention to something else: customer experience. With the advent of new technology, such as retail video analytics, retailers now have a whole new set of KPIs they can track, which will help them improve customer experience.

Foot traffic

Foot traffic is the number of visitors that come into the store. Foot traffic is what many many brick-and-mortar store retailers are concerned about since sales can only happen when visitors are coming into the store. By further analyzing the demographics of the visitors in addition to counting the number of visitors, businesses can tune their marketing or store layout to increase foot traffic even more. For example, if a company finds out that most of its foot traffic comes from teenagers and young adults, it may want to display new advertisements or products that target a particular demographic.

Passerby traffic

In addition to counting traffic coming into the store, businesses can also track traffic that is passing by the store. Passerby traffic is a good indicator of potential customer opportunities that companies are currently missing out and may be able to capture in the future.

Capture rate

A KPI that measures how effective a store is in attracting the attention of passersby and converting them into visitors is the capture rate. Capture rate is calculated by dividing foot traffic by passerby traffic. If retailers have low capture rate, it indicates that their shops are just not fascinating enough for customers to enter them. These retailers may want to consider changing their window display items, carry out more marketing events to the ‘right people.’

Conversion rate

Conversion rate is the percentage of visitors who actually buy a product. This KPI may be the KPI that retailers are most interested in because the ultimate goal of any retailer is to increase sales. Conversion rate assesses how effective the marketing efforts and operations were in turning visitors into sales. If a company’s capture rate is high but the conversion rate is low, it means that the marketing and window display was good enough to attract people’s attention, but some key aspect, which could convert visitors into sales, was missing. Some factors could be employees’ incompetence, inefficient store layout, or low stock levels. By taking a deeper look into these factors, retailers will be able to increase the conversion rate.

Average dwell time

Average dwell time is the average amount of time that visitors spent in the shop for a given period. Generally, a longer dwell time means that the chance of the visitor picking up an item to purchase increases; studies suggest that a 1% increase in dwell time increases sales by 1.3%. To increase the time that visitors stay in their stores, companies need to ensure that customers are receiving an enjoyable experience inside the store. They should optimize store layouts, train employees to better respond to customers, and offer mind-catching items.

Queue Time

Although an increased dwell time generally indicates an increased chance of sales, it may not always be the case, like when customers spend most of their time inside the store waiting to queue up at the cashier. Companies should try to keep their queue time low as a long queue time may result in the loss of potential customers. Especially in industries with many substitutes, such as consumer goods industries, customers may leave the store without purchasing anything when they see that there is a long queue.

Engagement rate

Engagement rate is the percentage of visitors that stayed in the store longer than a specified duration (e.g., 1 minute). The time customers spend in the store generally indicates engagement, such as picking up items to take a closer look at it. Businesses can determine a threshold time that they believe is representative of whether a customer is engaged or not. For example, in an apparel store, the engagement threshold time for black pants displayed on a flat surface in approximately 20 seconds. The threshold time for premium shirts is around 40 seconds. Businesses should aim to increase their engagement rate since more people engaged in the store could lead to an increase in sales.

Bounce rate

Bounce rate is a similar but opposite concept of engagement rate: it is an indicator of visitors that left the store without doing anything. It is estimated by calculating the percentage of visitors that stayed in the store shorter than a specified duration. Businesses would want to avoid having high bounce rates because high bounce rate means that the product, store layout, or service of employees are not satisfactory enough for customers to want to stay in the store for a longer time. Monitoring bounce rate can give companies a good idea on when to work on increasing customer engagement rate.

Customer satisfaction score

Being able to figure out how customers feel when they are shopping at stores is vital for retailers. Thus, customer satisfaction score is one of the most crucial customer-centric KPIs. The emotion of shopping customers can be captured with the help of retail video analytics and then further quantified into customer satisfaction score using the valence/arousal model of emotion.

The valence/arousal model of emotion states that there are two dimensions to any emotion. Valence dimension is an estimate of how pleasant or unpleasant the event is. A high valence indicates a pleasant experience, and a low valence indicates an unpleasant experience. Arousal dimension measures how exciting or soothing an emotion is. High arousal means that an event is every exciting, whereas low arousal invokes soothing feelings.

By using the fundamental statistical values of arousal/valence parameters of each emotion, it is possible to develop a model to quantify emotions into customer satisfaction score.

Although traditional KPIs focused on sales and inventories are not irrelevant to today’s business, they cannot give deep insights into what customers actually want. Customer-centric KPIs allow companies to explore whether their strategies are aligned with customers’ interests. In the end, companies that track and act upon customer-centric KPIs will be able to attract customers who are willing to spend money.


Cyclops is a retail analytics system that can help retailers generate insights into how their customers shop inside their stores. To understand more about how Cyclops can help retailers digitally transform their stores amid the COVID-19 pandemic, visit our website:


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