Five Minute Friday: 5 Common Retail Acronyms Every Retailer Needs

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Business can be a lonely game, but it doesn't have to be. Welcome to Boutique Chat where we explore community over competition and how to scale your company with the balance and the happiness that we all seek. We'll hear from product based businesses of all types, retailers, e commerce and wholesale brands along with industry experts shaping the.

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I'm your host Ashley Alderson from the Boutique Hub and I can't wait to chat.

Hey guys, welcome back to the podcast and a brand new series that we are launching on Fridays called five Minute Fridays. There are so many bite sized, quick actionable tips that I know in business if you just put them into place you could see some immediate results. And so my goal is on Fridays to bring you these quick tips so you can get some fast results inside of your business. Some of these are going to be like aha moments, right? New ideas. And some of these are going to be reminders on things you've probably heard me talk about a lot in passing, but maybe just have never taken the time to put into action. My goal is to bring you things that don't take a lot of time but maybe can yield you some pretty big results. So let's get started this week with our very first five Minute Friday and I want to share with you five retail acronyms that every retailer, no matter what type of retailer in in, should be using and really understanding on a regular basis. So first one is this. What is your roi? ROI is a general term that we use across any business. It doesn't matter what it is to simply measure return on investment. So when you hear me talking about being a CEO versus being a hustling entrepreneur, the main focus of a CEO versus an entrepreneur is what is the ROI of my time working on this project? What is the ROI of our investment? Building something new. ROI is a general term so the calculation doesn't matter, but it's making sure you understand that what you are inputting into a project has to have a greater output than the input that went in. So what is your ROI number one? Number two, what's a KPI? A KPI is a key performance indicator. So you've heard me say what matters? You measure or measure what matters. A KPI or a key performance indicator is going to help you understand what are the most important metrics that drive my business forward on a regular basis and how am I going to measure them. So I'm a huge advocate for a company scorecard. It's something that we do company wide for our leadership team. But Then also each department in our company has their own KPIs. So for example, if you have social media, your social media team, or maybe that's you, has your own social media spreadsheet where you're measuring your most important KPIs. If you're running ads, you have KPIs. If you have inventory, you have KPIs. And of course your cash flow statement has KPIs as well. So. So key performance indicators. The third is AOV. This is a really, really important retail acronym. AOV stands for average order value. This is simply understanding the amount of revenue that you sold in this particular period of time divided by the number of orders or transactions that you had in the same period of time to understand what is the average value per order. Because the cool part about this acronym is the more traffic that you're able to drive and the higher conversion rate you're able to drive in your business, the lower average order value you're going to need. But when you increase the average order value, have the less traffic it's going to take to get to your goals in business. So the higher the average order value, the better because it's going to take a lot of work or a lot less work getting to that real end financial goal that you have in your business. So again, revenue divided by orders in the same period of time is your average order value. And keep in mind, your average order value in store is probably going to be a little bit different than your average order value online. So measure them separately. Fourth acronym to know is UPT units per transaction. This is the total items that you sold in a period of time divided by the number of transactions that you had in that same period of time. This is important because we are not in the business of selling one thing, right? We are in the business of selling multiple things. So if you're in gift, this is bundles and all kinds of little add ons and upsells. If you're in apparel, this is selling full outfits, right? I don't know about you, but I'm the kind of shopper that when I go to a store or I go to a website, if I can't find at least two things and a lot of times three things to justify the free shipping I'm going to get with those three things, I'll abandon my cart, I'll abandon my checkout. It's not worth it for me to buy just one item. So units per transaction is very similar to average order value in understanding. The more that I have, the Higher the UPT I have or the higher the AOV I have, the less work I have to do in terms of driving traffic to get to that end. Financial goal. All right, finally, the last acronym I want you to know is your ROAS return on ad spend. For those of you running ads, this is critical. Now, there are lots of different ways people look at return on ad spend, but I'm going to give you this very important advice. Your return on ad spend is the revenue that is associated with the ad that you're running divided by the cost of the campaign, right? So let's say that you had a $600 attribution on a particular ad. It cost you $300 to run that campaign. You have a 2 to 1 ROAS, and that's really important. What is really critical when you are measuring your return on ad spend is two things. Number one, if you hire an agency, agency fees have to be included in your roas. Because if you have an agency fee that is greater than the investment you're making, and let's say you have a 2 to 1 roas, it really kind of cancels itself out. Like you're probably only breaking even or in some cases we've seen people actually be money behind when they didn't consider agency fees in their roas. The second thing I would encourage you to think about is making sure the attribution to each ad is correct. If you have a wide open attribution and you're counting all traffic, all views, all sales on your website to be attributed to that campaign, your ROAS is going to be completely jacked up. Because that means the Facebook live you did, the email you sent, the organic social media you did, is all being attributed to the success of the campaign. So making sure your attribution window is nailed down and you're using UTM codes or something that can really specifically allow you to track performance by performance, ad spend and attribution. And that is really important. So hopefully these quick tips helped you again. Roi, KPI, aov, UPT and roas, they are all critical to retail and hopefully they help you grow your business. If this was helpful you guys, and you want to hear more, Five Minute Fridays again, please let me know. Shoot me a message over at AJ Alderson or the Boutique Hub on Instagram or let us know on any of our social channels or in our membership groups at the hub if you would like to know more about retail acronyms, I have a whole sheet for you. To be honest, a whole bunch. I think it's actually two full sheets if I remember correctly. But if you want to download that, I'm going to include that into today's show notes. So go hit that download. It's completely free. It'll go instantly to your computer and hopefully all of these acronyms help you grow your business. Thanks for tuning in. I hope you love this new segment. You guys, I will be back and I will see you here next week.

Thanks for listening guys. I hope you took away all kinds of nuggets and new ideas from this week's episode. Don't forget to subscribe and leave a rating and review. We love to hear your feedback and give you a chance to be featured on the show each and every week. For more information on our spirit of community over competition and to access guest downloads and bonuses and all the resources we talked about on the show, head on over to the boutiquehub.com and join the community. We'll see you next week.