How to Optimize Your Retail Operations [2020 Guide]

By Abby Heugel

To say that 2020 has been a challenging year for retail would be an understatement. Due to COVID-19, shelter-in-place orders and retail shutdowns, overall sales in March were down 6.2 percent year-over-year. That monthly drop is the largest ever recorded, making it even greater than the 4.3 percent decline in November 2008 during the Great Recession.

But the good news is that U.S. retail sales rose by 17.7% in May 2020. And e-commerce saw the biggest surge, with total online spending totaling a whopping $82.5 billion in May, up 77 percent year-over-year. 

Things are gradually starting to open back up, and while the environment will still be quite challenging, now is the time for retailers — online and in brick-and-mortar — to make sure that they’re optimizing their operations to ensure maximum efficiency. From implementing a retail management system to omnichannel selling, here are five ways to get started. 

Determine your key performance indicators 

Before you can improve your retail operations, you need to know what you’re measuring. Key performance indicators (KPI) help you establish baseline numbers for your business that give you an accurate starting point from which to build and improve. The easiest way to do this is with a reporting and analytics tool like Vend, which allows you to easily track and monitor your store’s performance, helping you make better inventory, sales, and marketing decisions.

While each business will have it’s own specific metrics to track, the KPIs below will get you started:

  • Total sales
  • Sales by store (if you run multiple locations)
  • Sales per square foot
  • Gross margin return on investment (your profit return on the dollar amount invested in inventory)
  • Top-selling items
  • Worst-selling items
  • Average sales per employee
  • Inventory turnover rate
  • Conversion rate
  • Cost of goods sold
  • Profit margin ((Gross profit / total revenue) x 100)

Further Reading


Need more info on the specific metrics you should be tracking in your business? Our post on the top retail KPIs will give you everything you know.

Learn More

Improve inventory management 

Surprisingly, 43 percent of small businesses in the United States don’t track inventory, and retailers are sitting on approximately $1.36 of inventory for every $1 in sales, as of 2019. The good news is that you can lower your overall inventory costs by 10 percent by reducing overstocks and stock-outs. In other words, inventory management is of utmost importance. 

The best way to optimize your inventory processes is to use inventory management software, as this will give you insight into the most critical areas, such as gross margins, inventory turnover ratios, and sales performance. The software can also provide comprehensive reporting so you know what’s selling and what’s not. This helps you forecast trends and make data-driven decisions that allow you to keep your stores stocked with products that sell — and get rid of the ones that don’t.

Not only does this save you time, but this also saves you money in that If you sell something with an expiration date, you’re in a better position to avoid unnecessary spoilage. Proper inventory management also reduces dead stock — items that don’t necessarily have an expiration date, but that will quickly go out of season or style. 

Finally, inventory management can even affect warehousing costs. When you have too much product to store at once or if you’re stuck with a product that’s difficult to sell, storage costs increase. When you can avoid those costs, that’s money that can be better used in other areas of business.  

Provide an omnichannel customer experience

Today’s shoppers aren’t just walking into a store for all of their purchases. Some look for an item online and then go to the brick-and-mortar location to make the purchase. Others might be at a brick-and-mortar location, see an item they’re interested in, and then pull out their phone to compare prices before making the purchase. Whatever the situation, the important thing is that retailers are optimizing the omnichannel shopping experience, ensuring all these channels are interconnected and providing a seamless purchasing process.

In fact, businesses with a solid omnichannel strategy see 91 percent greater year-over-year customer retention rates than businesses that don’t. So how do you capitalize on this? First, make sure you provide a stellar mobile experience, as one survey found that 90 percent of customers have had a negative mobile experience, which makes them less inclined to do business with a company. Ensure you have fast load times and an easy-to-navigate display and searchable site. 

Next, improve your response times on social media and make sure your employees are providing quick and effective solutions, as one study found that consumers are willing to pay more after a positive response from a business on social media. If resources allow, consider implementing live chat on your site because 63 percent of visitors are more likely to revisit a site if that’s offered as an option. If they’re able to quickly access help, it reduces customer frustration and can even increase sales, as it gives the employee the opportunity to also present an upsell. 

The key is to make sure that the customer is getting a consistent experience — whether they’re interacting with you in person or online. 

Automate processes

When you’re running a business, there’s always something to do. And by implementing automation for certain tasks, there will be less for you to actually do because those routine tasks can take care of themselves. 

For example, instead of managing your employees’ hours by hand, you could use a POS system to track when they work. Instead of manually ordering products, inventory management software can be programmed to automatically fill orders when stock gets to a certain level, meaning customers won’t ever be disappointed at out-of-stock products.

The tasks that you choose to automate will be specific to each company’s individual needs, but a good place to start is by tracking what you do in a week to see how much time you spend on each task. This will help you figure out where you can better be spending your time and energy, and what can be automated to free up more of your time. Next, ask your employees, as they’re often the ones also doing the tedious tasks and will have ideas on how things could run more efficiently. 

After taking stock of the situation, ask yourself the following questions: 

  • Is the task repetitive?
  • Is the workflow simple and easy to automate?
  • Will automation save both time and money?

Remember that not every task can — and should — be automated, but knowing which areas could benefit from this process is a huge step towards optimizing your retail operations. 

Use a retail management system

Speaking of automation, it’s critical that you implement a retail management system to make sure your business is operating at the highest efficiency possible. Beyond just being a way for customers to pay, a solid retail platform can also:

  • Manage inventory counts
  • Streamline marketing
  • Provide customized reports to help make data-driven decisions
  • Improves staff training
  • Check stock levels in multiple locations
  • Manage returns
  • Get customer and product insights
  • Integrate with e-commerce systems
  • Make staffing decisions 
  • Implement and manage loyalty programs

POS systems provide retailers with the necessary tools to streamline processes, make data-driven decisions, and help with everything from sales reporting to employee and customer management. Be sure to work with a provider that can help you harness all that your system has to offer, ensuring that every move you make will be of benefit to your business. 

Moving forward with your retail operations 

As a busy retailer, you know that you need to find any way to make the most of your time and your money, and the tips above will help you make the most of both. Whether it’s streamlining and automating tedious tasks or improving your use of key metrics for data-driven decisions, optimizing your retail operation will leave you more time to do what you want to do — grow your business. 


About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.