Two Merchandising KPIs to Rule them All
The abbreviation ‘KPI’, Key Performance Indicator, contains a key word.
This key word is..... ‘Key’.
There are dozens of KPIs to keep track of, to use in decision-making, and to leverage when managing your business (I wrote about some a few weeks ago). Too many of them and you lose sight of the big picture, or end up with paralysis analysis.
So what if you could pick just two? What are the ‘key’ ones?
I thought it would be an interesting exercise, and these are the two for me:
$ Color Productivity: it allows you to identify under and overperformers, whether a style needs more or fewer colors and versions, and it avoids the confusion of unit productivity that can be deceiving (when comparing $250 with $15 products).
Net Margin %: it tells you if products are priced right and if they drive profitable business at retail, it can serve as an indicator of inventory (high inventory > more discounting > lower net margins).
These two allow me to see at a glance if styles drive high revenue per color and have high net margins: it’s a strong signal of an investment opportunity.
I can also see quickly when style-color revenue is low and margin is lacking: I'll need a very good reason to keep such products in the line.
It’s by no means a full picture, but if I need to start somewhere I do it with “the Two to Rule them All”. Feel free to prove me wrong, I'd love to hear your thoughts!
PS. I was inspired by this Forbes article: https://www.forbes.com/sites/forbesfinancecouncil/2024/03/14/when-did-we-forget-the-key-in-key-performance-indicators/
PPS. The image only might make sense if you’re into Lord of the Rings, otherwise it will just seem incredibly weird 🧙♂️
PPPS. Did this make you think? Reach out to me!
I am a product merchant in sports & fashion retail, an advocate for personal growth, and an introvert finding out how to thrive professionally. My strengths are simplicity and structure in strategy, operational excellence, behavioral/people development, and kind leadership.
I'm happy to have a conversation, share my experiences, and pass on the tools I've found to deal with different situations. I'm always eager to learn from like-minded people, so I'd love to hear from you.