Leveraging key performance indicators (KPIs) to improve store performance
Welcome to 2025! How quickly the holidays pass, and now it’s time to embrace the new challenges of the coming year. The question is: what challenges will the convenience industry face this year, and how can we plan for them effectively?
The best advice is to take a few moments to reflect on the past year. What went well in 2024 for your store? Conversely, what could have been improved? If you have established key performance indicators (KPIs), it’s beneficial to review them. How did your store perform compared to the KPI targets you set? From this analysis, you can identify areas that require attention. If your store consistently missed certain KPI targets, take the time to understand why. What changes can be made to improve these outcomes in 2025?
Setting effective goals for 2025
Goal setting is a critical component of running a successful business. Well-defined goals guide decision-making throughout the year. When evaluating new initiatives, ask yourself: “Does this initiative support one of my goals for this year?” If the answer is yes, pursue it. If not, consider shelving it for another year when it aligns better with your targets.
Let’s explore an example of a specific goal and analyze the steps to achieve it.
Optimizing inventory management
Optimizing inventory is a crucial goal because a significant portion of cash flow is tied up in inventory. The objective is to ensure that the inventory is working effectively to generate profits. Eliminating stale inventory or dead stock—items that aren’t selling—should be a priority.
A key metric for measuring inventory efficiency is the inventory turnover ratio. Calculate it by dividing the total cost of goods sold (COGS) by the average inventory value for the year. (Try this tool from Business Development Bank of Canada). This ratio illustrates how quickly your inventory turns. For example, a yearly inventory turnover ratio of two means your entire store inventory turns over twice per year.
Industry benchmarks and best practices
For convenience stores, the inventory turnover ratio typically ranges from two to six, based on industry benchmarks. The goal is to turn store inventory as quickly as possible without experiencing stockouts or disappointing customer expectations in terms of store offerings. Dead stock takes up valuable space that could be used for high-demand products.
Factors influencing inventory turnover include seasonality and product mix, which is why inventory turnover ratios vary by store and certainly by industry. Awareness of your inventory turnover ratio is essential, along with regular monitoring to ensure continuous improvement.
Practical steps to improve inventory turns
If your point-of-sale (POS) system does not provide detailed inventory data by stock keeping unit (SKU), consider running a sales report ranked by SKU from highest to lowest sales. Examine the lowest-performing items. Do you still have stock of these products? If so, consider selling off this inventory and replacing it with fresh, in-demand products. Each year brings innovative new products that can replace dead stock. This is an important step to ensure that your store remains relevant and appealing to the consumer.
The goal is to maximize sales and profitability while minimizing stockouts and stale inventory. Regularly reviewing your inventory helps ensure you’re meeting customer demands while maintaining efficient stock levels.
The art and science of inventory management
Managing inventory is both an art and a science. Your inventory should align with your customers’ needs, striking the perfect balance between having sufficient stock and avoiding overstocking. Achieving this requires diligent data monitoring and a commitment to continuous improvement.
Your customers will appreciate a store stocked with products they want and need. Take this opportunity to review your inventory, identify areas for improvement, and make strategic changes to increase sales and enhance inventory efficiency. By doing so, you’ll not only improve your store’s performance but also ensure a more successful and profitable 2025.
