What are the KPIs and its importance for brands
KPIs - Key Performance Indicators - an acronym that some people are familiar with but few masters them perfectly. To find out more about them, we have interviewed Jordi Sanz Martínez, Retail Director in Spain at Perfumerías Júlia, who in a few simple steps tells us the keys to mastering KPIs.
What are the KPIs?
KPIs are performance indicators that allow you to have a diagnosis of your situation.
They exist for different areas of the organization and show whether the actions developed are working (and to what degree), or if they are not working. In Retail, they are the tools that a shop manager (area manager, retail manager...) has to evaluate and improve the performance of his or her business. They are the link between team motivation and business performance.
I always compare it to going to A&E at a hospital without knowing what you have. The first thing they will do is a series of tests; an X-ray, a blood test... So that they can make a diagnosis and tell you: from now on you have to do this to cure yourself.
In retail, these are the indicators that allow us to measure the success of a shop's business. For example: measuring the percentage of customers who buy compared to those who enter the shop (Conversion Rate); calculating the number of people who pass by the shop (Traffic); assessing the average expenditure of a customer in your shop (Average Basket); among many others. In addition, according to Jordi, they also act as a communication vehicle, which is usually linked to the organization's strategy and allows the company's mission and vision to be communicated.
How to use them properly?
Knowledge of KPIs is very important for people working in the fashion and luxury sector. They allow brands to see which items sell best, which ones need to be put aside, which shops are the most profitable or, among other things, how the customer behaves towards their brand or in their shops.
"The good use of KPIs is based, above all, on knowing how to choose which indicators you need to review according to your company's strategy," says Jordi.
The important thing to keep in mind is: You can't use them all, you have to choose them strategically.
You have to know them because if you don't, you can't understand the business you manage, and you can't improve the performance of your team and yourself. If you don't know them, you can't manage efficiently; you are in total blindness.
Why are KPIs so important in job interviews?
Mastering the analysis of KPIs is essential. Therefore, anyone who wants to work in the world of fashion and luxury, especially those working in or managing retail outlets, should know and know how to calculate these indicators.
Now we see an evolution towards OKRs - Objectives and Key Results - which means that first I set the objectives I want to achieve, and once I have them clear, I set in parallel which KPIs I want to work on.
OKR (Objective): Improve Customer Care
KPIs: Control the number of complaints
If you don't do this reasoning, you are going blind. And if you go in blind, you make the wrong diagnosis and the problem continues because you can't solve it. That is why they are so much in demand in interviews, because the work of KPIs gives you a much more proactive way of working.
KPIs also allows you to improve for Leadership skills because:
- Involves the team in the project
- Inspires the development of their creativity
- Enhances autonomous thinking
If you don't work with KPIs you often expect the results to change "just because", because it rains, because it doesn't rain... On the other hand, when you work with KPIs you can implement concrete actions. They can be small actions that, repeated over time, achieve good results.
Friendly advice “as a friend”
Throughout my career, I have encountered a lot of misuse of KPIs. One of the worst uses is pressure. In some shops you see people coming in crouching down so that they don't get caught by the people counter, that's a sign that there is something wrong with the pressure. Pressure paralyses, instils fear, you can't think clearly. I always say:
Replace the P for Pressure with the P for Passion.
It means that the more passion you put into your team, your business, and your customers, the better the indicators will be. This is my advice as a friend, do it intelligently. Because the bad use of it means worse consequences, because pressure, bad feeling and bad atmosphere will never give you good indicators.
Our office receives job offers every day from the most important fashion and luxury brands in the world. The common denominator in all of them is that they ask us every day for staff with knowledge in KPI's, especially if it is for positions such as Store Manager, Assistant Store Manager, Area Manager or Country Manager, among other positions of responsibility. KPIs are the holy grail for fashion and luxury brands when it comes to business figures. Many of them directly discard candidates who do not have this type of knowledge and promote those who do. That's why you should get to know them, as they will be your passport to promotion in the fashion and luxury sector.
What are the key benefits?
Original blog translated from the Spanish site.