5 Steps to Better Sales Recaps
5 Steps to Better Sales Recaps
One of the most important parts of running a successful retail business is recapping your sales and utilizing your data to make better assortment decisions. The insight available in your sales and inventory data will determine which products you should reorder and chase inventory on and which items to mark down and move on from.
While the concept of recapping sales and reviewing data is simple, it takes an experienced analyst to really get the most out of the valuable information you already have at your fingertips.
Consider your current recap process; are you organizing it and reviewing it in a way that enables you to make better decisions about your assortment? Ever feel like you could be going more in depth? Detailed and intuitive sales recap reports are one of the retail business services we offer at Boon. Lean on our expertise! Review a sample sales recap here. Read on to see five of our time-tested key steps to creating sales recaps that work best for our clients.
Step 1: Choose the crucial metrics for your business
Every business is different, and there are tons of metrics you could review to analyze your sales and inventory in different ways. Deciding which ones are the most important for you to look at is your first step. Generally speaking, sales are going to be the first thing you’ll look at. But you’ll also want to consider looking at gross sales vs. net sales. Net sales reflects the impact of any discounts or promotional activity along with any impact of returns. You may also want to include returns and discounts as separate metrics in order to monitor the effects of each on your overall business, depending on how big of an impact you see from each of these metrics.
Most retail businesses will look at both sales dollars and sales units, along with gross margin dollars and percent. These are the most basic and universal metrics to include in your sales recaps, and tracking these metrics over time will help you understand the seasonality of your business, the impact of new products and categories, how profitable your assortment is, and so much more.
Depending on your business, you may also choose to add sales metrics that help you better understand what’s happening below the surface of those high level sales and margin numbers. Three calculations we like to use are AUR, UPT, and AOV. Let’s talk about how each one is calculated and why you’d want to look at it.
Average unit retail or AUR is calculated by dividing sales dollars by sales units. This gives you visibility to the average price your customer is paying per item. If the items in your assortment are all the same price, this metric may not be as important for you to monitor, but if there’s a variety of price points in your assortment this metric helps you see shifts that are happening over time. It can also help you to understand price sensitivity and the impact of promotions on your sales.
Another metric you may want to monitor is the average units per transaction or UPT, especially if you’re focusing on building your average order size and driving more units per order. With the high cost of shipping, increasing order size is a win for both you and the customer, and utilizing this metric will help you track your progress over time. Calculate UPT by dividing unit sales by the number of transactions in the same time frame.
Average order volume, or AOV, is similar to UPT but looks at the dollar amount instead of the units. If your promotions are typically focused on hitting a dollar threshold, like offering free shipping for orders of $100 or more, this is a great metric to track and use to make decisions. For example, if your average order volume is already close to $100, you may want to increase the threshold for a promotion to push that average order size up and get more incremental sales out of your promotion. Calculate average order volume by dividing sales dollars by number of transactions for the same time frame.
The next category you’ll want to consider is inventory metrics, and you’ll generally want visibility to your total inventory along with some type of forward looking metric to help you understand and get ahead of any inventory concerns. You can look at inventory as both a dollar value and in units, and a few of the other metrics we like to use in different recaps are on order (OO) quantities, sell through percent (ST), and weeks of supply (WOS). Having these metrics at your fingertips will help you understand your current and future inventory picture, so let’s talk about how each one is calculated.
On order (OO) quantities reflect the units you’ve ordered and committed to. Including this in your sales recaps gives you easy visibility to inventory that’s on the way but hasn’t arrived yet. Sell through percent (ST%) is calculated by taking the sales divided by the total inventory available for a certain timeframe. Weeks of Supply (WOS) is a handy metric to understand how many more weeks your current inventory can sustain sales before falling out of stock.
Your current reporting may not be able to pull together all the sales and inventory metrics you’d like to see in one place, and that’s where Boon can come in. We pull data from multiple sources into customized sales recaps that help our clients make better business decisions. Our talented team is practiced at working with a wide variety of software systems in order to build sales recap solutions. Whatever software you’re currently using to track your sales, keep it! We can improve your current sales and inventory planning process without requiring you to invest in additional tools. Next, let’s talk about the different ways you can look at your sales by time frame.
Step 2: Identify the time frames that are important to you
Most businesses look at sales recaps on a weekly basis, but it’s also important to recap sales in longer spans of time, like monthly, quarterly, seasonally or yearly. The question you want to ask yourself here is how you want to see each of these timeframes in your weekly recaps as opposed to separate monthly or quarterly review documents. Some of our clients like to have visibility to what percentage of their monthly, quarterly, and yearly numbers have been achieved so far or how these longer time frames are tracking year over year.
Beyond your typical weekly sales recaps and reporting, most businesses will create another sales report to recap quarterly or seasonal performance. This is where you can begin to track the seasonality of your business and look at your sales builds from week to week or month to month. You’ll use this valuable information when planning your future sales, inventory, and promotional strategy for the same quarter or season next year.
These quarterly or seasonal hindsights are also a great way to make data driven decisions on future assortment planning. For example, if your tops sold through a lot faster than pants and shorts, you may have room to grow the tops category and get some incremental sales growth in the next season. Speaking of product categories, another important way to recap your business for future assortment planning is by category, style, or attribute, so let’s talk about how to look at those next.
Step 3: Determine the categories or attributes you want to evaluate
Next, you’ll want to think about which categories or attributes are important to look at in your business. You may want to roll up specific product categories to understand how they’re performing week to week and month to month. This gives you an understanding of which categories are most popular, most profitable, and where your inventory is turning the fastest. You can also see if there are seasonal shifts happening in categories that you’ll want to plan for in the future.
If you’re running an apparel business you may want to summarize style, size, or color selling in your monthly or quarterly recaps to help you better determine future inventory quantities by attribute. This may not be something your current reporting supports, but it’s definitely achievable by setting up some report coding and creating your sales recaps in Excel or Google Sheets. Check out this quick tutorial video that shows you some simple Excel formulas you can use to create size and color selling recaps that you can use over and over again.
Understanding the sales trends by color will help you protect your inventory on core colors you want to be in stock on and better plan for fashion colors that aren’t meant to stay around all year. Looking at your sales spreads across different sizes will help you identify any needs for extended sizing and better plan your inventory buys in the future. Next we’ll consider how we want to break out sales recaps by location or channel.
Step 4: Analyze sales by location or channel
Another way you may want to slice and dice your sales recaps is by location or channel. Where is your product sold? And how do you want to look at those sales on a weekly basis? Some of our clients like to have full visibility to all channels of the business in one summary report, others like to split out reporting based on wholesale and retail sales. If you’re managing both direct-to-consumer (DTC) and wholesale accounts, you’ll probably want to look at how sales are actualizing week to week in order to make sure your inventory is in line with projected sales.
For example, if one of your wholesale accounts is overperforming, you’ll probably need more inventory to fulfill future orders from that retailer. Conversely, if one of your accounts is underperforming, the future orders from that account will likely be lower. Stay one step ahead and avoid forecasting errors by looking at your business performance each week and thinking about what the numbers are telling you, which leads us to our last step - summarize your key findings.
Step 5: Summarize key findings
After you’ve pulled together the key metrics and organized by timeframe, reviewed the relevant category rollups and attributes, and analyzed across the different channels of your business, you’ll need to tease out the story the data is telling you. Some of our proven key questions when reviewing sales recap data with our clients are: What are the biggest surprises? How close to your sales forecast are you actualizing? What action needs to be taken based on what the data is telling you?
When you scrutinize your findings you’ll start to determine what action is needed. What items are selling faster than anticipated and need some rebuys or inventory action to continue to support sales? Which items or categories are turning slower than you expected, and what should you do about it? How is your margin actualizing and does this change your assortment or pricing strategy going forward? This is also a place where you can share qualitative information that may have impacted sales, including events, promotional activity, inventory delays, and more.
By using these five steps to better sales recaps, you’ll be equipped to make better decisions in your business both in the short term and in the long term. If your team is struggling with the sales recapping process and doesn’t have the bandwidth to go as in depth as you’d like, or if you just need support getting the right sales recap templates up and running, the team at Boon can be an incredible resource for you. Take a peak at an example recap we created!
Effective sales recaps are a fundamental part of successful merchandise planning. We recommend investing here so that you’re empowered to make better business decisions. Get started with us to elevate your sales recaps without having to increase the workload on your team. And sign up for our email newsletter to get monthly tips like this delivered straight to your inbox.