Every action you take in your business will cost time and money. Whether you need to turn on the lights in your brick-and-mortar store or hire associates to man the floor, there is always an expense.
This isn’t a bad thing, though. For every dollar you spend running and improving your business, you can generate a return that makes your business profitable. But how do you know which initiatives are worth the money and which are a waste of time?
Instead of doing what you think is right, take a data-centered approach to your retail store by looking at return on investment, or ROI. When you look at every task through the lens of ROI, you’ll be able to evaluate what’s working for your retail brand and what needs to change. Learn how to calculate your returns with the retail ROI formula and follow some ROI retail strategies to boost sales.
What is ROI in Retail?
ROI looks at the money you spent to make something happen in your business. Based on how high (or low) ROI is, you can determine if that was a wise use of your resources. The greater your ROI, the better the investment in your business.
While it’s tempting to look at store earnings and leave it at that, ROI is more useful than revenue alone—it also accounts for expenses. For example, one of your stores might have record-breaking sales, but if its expenses eat up 50 percent of the profits, it isn’t a very effective store after all.
As far as calculating ROI in your retail business, it comes down to what you want to know. If you implemented contactless pay in your stores, you can calculate its ROI to see if that was a smart investment. You can use this simple retail ROI formula to understand your returns:
ROI = (how much you earned / cost of the investment) / 100
For example, if you earned $10,000 from an advertising campaign that cost $2,000:
($10,000 / $2,000) / 100 = 500%
In this case, your ROI would be 500 percent, meaning you earned $5 for every $1 spent on the advertising campaign, which is pretty good. The higher your ROI, the greater your returns and the more efficient your business.
But calculating ROI is just half of the equation. If you know your ROI isn’t high enough, you’ll need to take action to improve your returns. If you need to see more returns from your retail stores, try these four ROI retail strategies to run a more profitable business.
1. Roll Out Omnichannel Retail
A brick-and-mortar store helps you interact with shoppers in a way that you just can’t in an online space. But that doesn’t mean that online shopping is a bad idea. Actually, the strongest retail brands are unifying in-store and online in a holistic approach via omnichannel retail.
With an omnichannel approach, you can give shoppers a consistent experience both digitally and in-person. Omnichannel shoppers have a 30 percent higher LTV (lifetime value) than single-channel shoppers, so your brand needs to embrace this new type of customer journey. Since omnichannel enables personalization and data gathering, you can use this approach to build deeper relationships over time.
In practice, omnichannel for your retail brand could look like:
- Monitoring customers’ in-store interactions with shopper journey analytics
- Adding NFC technology or QR codes in-store for shoppers to access app content
- Creating VR or AR features for online shoppers that mimic the in-store experience
- Personalizing shoppers’ in-store experiences based on their online shopping history
(Check out our article on the must-track omnichannel retail metrics.)
2. Provide a Valuable Service
Shoppers can buy just about anything online; why should they visit your store? Give shoppers a boutique experience that they just can’t find elsewhere. This might mean offering low-cost but useful services to shoppers like:
- Curbside pickup
- Makeup consultations
- Jewelry cleaning
- Free sizing or fittings
This might sound like an added expense, but if shoppers know about these perks, they often feel compelled to return the favor, thanks to the Law of Reciprocity.
3. Improve the Checkout Experience
How easy is it for shoppers to complete a purchase? You can minimize abandoned carts and lost in-store profits by making the checkout experience as easy as possible. For online shoppers, minimize form fields, add a progress bar, and allow guest checkout. In-store, try offering faster checkout options like contactless pay.
4. Build a Social-friendly Space
Want shoppers to brag about you on social media? Make your physical space as inviting as possible. This means adding:
- A beautiful selfie wall
- Free high-speed Wi-Fi
- Custom hashtags in your store signage
Work with an interior designer to build an Instagrammable space that invites shoppers not only to buy but to share their experience with others online.
Learn How to Calculate ROI for a Retail Store
Once you know how to calculate your ROI using the retail ROI formula, it’s just a matter of making changes to see what sticks. Start calculating the ROI of your retail store to invest your time and budget into ROI-positive activities. These four retail ROI strategies are a great start, but remember to customize your approach to optimize the retail experience for your brand.
Instead of trying to do everything yourself, use a platform like NewStore to do the heavy lifting. See how NewStore’s omnichannel solutions combine your POS, fulfillment, and more to do modern retail for modern brands.