Understanding the Top 7 KPIs for Sporting Goods Stores

Introduction

Having an effective Key Performance Indicators (KPI) system is essential for a successful sporting goods store. By tracking and evaluating KPIs such as average revenue per customer, gross profit margin, net profit margin, and others, businesses can gain visibility into key financial and operational metrics and make more informed decisions.

In this blog post, we’ll discuss the top seven metrics used to measure sporting goods store performance, along with suggestions for tracking and calculating these KPIs.

The seven KPIs for tracking sporting goods store performance are:

• Average revenue per customer
• Gross margin
• The net profit margin
• Customer acquisition cost
• Inventory turnover rate
• return on assets
• Days of incredible deals

Average revenue per customer

Definition

Average revenue per customer (ARPC) is a business performance metric used to calculate the average amount of revenue earned from each customer over a certain period of time. It is a key metric for measuring the success of all sales and marketing efforts, and helps identify areas for improvement in the customer experience.

Benefits of Tracking

Tracking average revenue per customer is beneficial for businesses because it helps them understand how much money they earn from each customer. This metric can also provide insight into customer loyalty, as it helps identify customers who spend more than the average. Additionally, it can help identify areas for improvement, such as price gaps, product mix, and customer service, which can help increase revenue.

Industry Benchmarks

The average amount of revenue earned by each client varies greatly from industry to industry. Generally speaking, businesses with high average revenue per customer tend to be more efficient than those with low average revenue per customer. For example, the financial services industry typically has an average revenue per customer of ,000, while the retail industry has an average revenue per customer of around 0.

How to calculate

To calculate average revenue per customer, divide the total revenue earned during a certain period of time by the number of customers during that same period. The formula is:

Calculation example

For example, if a sporting goods store earned ,000 in total revenue from 100 customers in a month, the average revenue per customer would be 0. The calculation would be:

KPI Tips and Tricks

• It’s important to track average revenue per customer on a regular basis to ensure your business is operating efficiently and generating adequate revenue.
• Analyze customer data to identify customer segments that generate more than average revenue and explore ways to target these segments more effectively.
• Focus on improving customer service and product mix to increase average revenue per customer.

Gross margin

Definition

Gross profit margin (GPM) is an important metric for any sporting goods store. It measures the percentage of sales that remain after subtracting the cost of goods sold. This is an indication of the total profitability of the store.

Benefits of Tracking

GPM tracking helps store owners understand their store’s profitability. It can be used to compare store performance against industry benchmarks. Additionally, tracking GPM can help store owners identify areas where they can improve their cost structure and increase profitability.

Industry Benchmarks

The industry average GPM for sporting goods stores is typically around 30%. However, this may vary depending on the type of merchandise being sold and the size of the store.

How to calculate

To calculate GPM, subtract the cost of goods sold from the total store sales. Then divide that number by the total store sales. The formula for GPM is:

Calculation example

For example, if a sporting goods store had total sales of 0,000 and cost of goods sold of ,000, the GPM would be:

KPI Tips and Tricks

• Track GPM over time to look for trends and identify areas where you can improve cost structure.
• Compare your store’s GPM to industry benchmarks to better understand your store’s performance.
• GPM is just one metric and should not be viewed in isolation. Consider other metrics such as gross margin, operating margin, and net margin.

The net profit margin

Definition

Net profit margin is a key performance indicator (KPI) for a sporting goods store that measures the store’s profitability. It is calculated by making the store’s net profit and dividing it by the total revenue generated from sales.

Benefits of Tracking

Tracking net profit margin is beneficial for a sporting goods store because it provides insight into the store’s overall performance and shows the store’s ability to generate profit from its sales. It also provides a way to compare store performance against store industry benchmarks.

Industry Benchmarks

The average net profit margin for sporting goods stores is between 3% and 8%. However, depending on the type of merchandise sold and the size of the store, the net profit margin could be higher or lower.

How to calculate

The net profit margin is calculated using the following formula:

Calculation example

For example, if a sporting goods store has net profit of ,000 and total sales of 0,000, the net profit margin would be calculated as follows:

KPI Tips and Tricks

• Track net profit margin on a monthly basis to monitor store profitability.
• Analyze the components of net profit margin to identify areas for improvement.
• Compare the store’s net profit margin to industry averages to see how it compares.
• Look for ways to increase net profit margin such as reducing costs or increasing sales.

Customer acquisition cost

Definition

Customer acquisition cost (CAC) is a metric that measures the cost of acquiring a new customer. It is calculated as the total cost of sales and marketing activities divided by the total number of customers acquired during a given period.

Benefits of Tracking

Tracking customer acquisition costs can provide valuable insight into the effectiveness of a company’s marketing and sales efforts. It’s also useful for comparing the cost of acquiring customers across different channels, allowing for more informed decisions on how to allocate resources.

Industry Benchmarks

The average cost of customer acquisition varies widely, depending on the industry. For example, the average CAC for a software company is around ,200, while the average CAC for a retail store is around .

How to calculate

The cost of customer acquisition can be calculated by dividing the total cost of sales and marketing activities by the total number of customers acquired during a given period.

Calculation example

For example, if a sporting goods store spent ,000 on sales and marketing activities and acquired 100 new customers, the CAC would be 0.

Tips and tricks

• Track customer acquisition costs over time to better understand the effectiveness of marketing and sales activities.
• Compare CAC across different channels to determine which are the most profitable.
• Keep in mind that CAC does not take into account customer lifetime value, which can be important in understanding overall company profitability.

Inventory turnover rate

Definition

Inventory turnover rate is a key performance indicator (KPI) that measures the number of times a company sells or uses its inventory within a certain time frame. This metric is used to assess the efficiency of a company’s inventory management and to determine the cost of holding inventory for a certain period of time.

Benefits of Tracking

Tracking inventory turnover has several advantages, including:

• Improved Inventory Management – Tracking inventory turns allows businesses to better manage their inventory levels and ensure they have enough to meet customer demand.
• Reduced Costs – Keeping too much inventory can be costly, so tracking turnover rate can help businesses reduce inventory costs.
• Increase Profits – By tracking turnover, businesses can also maximize profits by ensuring they don’t overshoot and undershoot.

Industry Benchmarks

Industry benchmarks vary depending on the type of business and its inventory. Generally, a turnover rate of 2-4 times per year is considered good for most businesses.

How to calculate

The inventory turnover rate can be calculated using the following formula:

Calculation example

Let’s say a sporting goods store has a cost of goods sold of 0,000 and an average inventory of 0,000. The inventory turnover rate can be calculated as follows:

Tips and tricks to improve the KPI

There are several tips and tricks that can be used to improve inventory turnover rate, including:

• Analyze Inventory Levels – Regular analysis of inventory levels can help businesses identify items that are not selling well and make adjustments accordingly.
• Price optimization – price optimization can be an effective way to reduce inventory levels and increase turnover.
• Managing Inventory Levels – Businesses should also strive to maintain an optimal level of inventory, which can help avoid overstocking and understocking.

return on assets

Definition

Return on Assets (ROA) is a financial metric used to measure a company’s profitability relative to its total assets. It is calculated by dividing a company’s net income by its total assets. A higher ROA indicates that a company is more efficient in using its resources to generate profits.

Benefits of Tracking

Tracking ROA is an important metric for a sporting goods store because it helps gauge the efficiency of the business. It can be used to compare store performance against industry benchmarks and identify areas for improvement. Moreover, it can be used to assess the effectiveness of various strategies and operations.

Industry Benchmarks

The industry benchmark for ROA for sporting goods stores is between 3% and 6%. This means that a store with an ROA of 3% or more is considered to be performing above industry average. It is important to note that the ROA can vary depending on the type of goods sold and the size of the store.

How to calculate

To calculate ROA, divide the store’s net income by its total assets. Net profit is total revenue minus total expenses. Total assets include all resources owned by the store such as cash, inventory, and equipment.

Calculation example

For example, a sporting goods store has net income of 0,000 and total assets of 0,000. Store ROA is calculated as follows:

Tips and tricks

• It is important to track ROA over time to identify performance trends.
• ROA can be used to compare performance with industry benchmarks and to assess the effectiveness of various strategies and operations.
• ROA should be used in conjunction with other metrics such as sales, costs, and inventory levels to get the full picture of a store’s financial performance.

Days of incredible deals

Definition

Days Outstanding Sales (DSO) is a key performance indicator (KPI) used to measure the average number of days a business takes to collect payments from customers after a sale. It is used to measure the effectiveness of a company’s credit policies and customer payment performance.

Benefits of DSO Tracking

DSO tracking can help a business better understand their customers’ payment behavior and take corrective action if necessary. Additionally, DSO tracking can help with cash flow management and provide businesses with insight into their operations. This can help businesses set more accurate customer payment expectations and ensure they get paid in a timely manner.

Industry Benchmarks

The industry benchmark for DSO is generally considered 30 days or less. However, this may vary depending on the type of business and its particular customer payment policies.

How to calculate

DSO is calculated by dividing the average number of days in a given period by the net sales in that period. The formula for DSO is:

Calculation example

For example, if a company had a sales volume of 0,000 in a given period and their accounts receivable totaled ,000, the DSO calculation would be as follows:

This means that the company takes an average of 0.15 days (or 3.6 hours) to collect payments from customers.

Tips and Tricks for KPIs

• Regularly monitor the DSO to ensure customer payments are collected in a timely manner.
• Set realistic payment expectations to ensure customers pay on time.
• Establish policies and procedures that help reduce DSOs and improve cash flow.
• Analyze customer payment behavior and take corrective action if necessary.

Conclusion

Sporting goods stores can increase profitability and efficiency by tracking key performance indicators such as average revenue per customer, gross profit margin, net profit margin, cost of customer acquisition, customer acquisition rate, inventory turnover, return on assets and outstanding day sales. By understanding their performance and taking quick action in response to changes or fluctuations, businesses can ensure that their operations remain healthy and profitable.