Are Customers Trading Down? KPIs Will Tell You This & More

Comprehensive inventory planning isn’t just about open-to-buy plans. You also want a full picture of your business and where it is heading. That’s why Blacks likes to track retailers’ key performance indicators (KPIs).

KPIs can help you answer important questions such as:

-How long is it taking me to sell through my inventory?

-Am I maintaining healthy margins?

-Can I increase my prices?

-How much are my customers spending on average?

They even give us a way to answer topical questions like one we have been hearing a lot about recently:

“Are customers dealing with inflation by “trading down,” or shopping at less expensive stores?” Let’s take a look.

What we know so far based on our client data is that October sales look to be the weakest over the last 18 months. To determine if sales are really slowing, or if your customers are trading down, we suggest keeping track of two key performance indicators: 1) the average transaction value, and 2) units per transaction.

If these two indicators are dropping your customers are still in the store, but buying less. If these indicators are holding steady it’s likely that your customer is trading down to lower-priced stores, or that they have put a pause on shopping altogether.

These are important factors to monitor, especially as we head into the holiday season when we are determining our markdown levels. Slow sales in October may be a blip, but if we don’t see an uptick soon, we may have to plan steeper promotions compared to the last two years.

An Essential Part of Planning

So, in addition to producing finely tuned open-to-buy plan, it’s important to have a merchandise planner who also tracks your key performance indicators so together you can set goals and make plans to achieve them.

And then, when you have questions such as “are my customers treating down?” you have a way to answer them, with supporting data.

Need help tracking your store’s KPIs? We’re here to help.