6 POS Software Performance Metric Thrift Stores Must Track

Thrift shopping continues to grow in popularity, particularly with millennial and Gen Z shoppers. For retailers, thrift stores have become part of the ‘mainstream’, managed with many of the key disciplines of ‘regular’ retail. But thrift retail also has its own unique characteristics and store performance indicators. We explore the key metrics that retailers should track to ensure that they are operating efficiently and raising as much money for their charity as possible.

The popularity of buying items that are good for the planet and the pocket has seen thrift shops becoming a regular feature in high streets and shopping strips – there are over 10,000 secondhand stores in the UK (3.3% of all retail units), and 25,000 in the US. It follows that thrift sales are growing – the last two years have seen an increase of 7% per annum in the US.

Key features of thrift store retail

Operating a thrift store has a lot in common with ‘regular’ retail: stores must have the goods people want to buy at the prices they want to pay, and must attract, engage and retain customers. But there are also key features that are unique to the thrift sector:

1. Inventory Management – with stock coming from donations, every item is unique.
2. Receipt of Stock – because items don’t come pre-labeled with barcodes and identifying information, the store must sort, categorize, price and label each item, making receipt of goods highly labor intensive.
3. Rotation Pricing – many thrift stores encourage turnover by discounting items based on the length of time they have been in the store – they use different color labeling each week, and then discount the colors on rotation.

They accept financial donations – many thrift stores operate a ‘round up’ option, so that shoppers can add a financial donation to the price they pay for their goods.

What metrics should a thrift store measure?

So when it comes to the metrics for managing the business, what should thrift stores measure to track their store performance?   Here’s our top six:

1. Turnover rate of merchandise based on color rotation – This helps stores to identify if they need to adjust their pricing and color rotation program. For example, are goods failing to sell until week three? This might indicate that that week one prices are too high, or that the first discount needs to be made earlier.
2. Store performance – comparing stores’ turnover rates and the type of goods that sell well in different locations helps operators to move key stock items to the store where they are likely to sell fastest.
3. Sales tracking – insights into revenue by store, by product type, by date, by staff member helps retailers to plan for revenue optimization and efficiency. Comparisons to previous periods show useful trends and the direction of the business.
4. Customer retention and loyalty – understanding the behavior of regular customers, such as what is their average transaction size, how frequently do they shop, and what do they most like to buy helps retailers to develop loyalty and promotion programs that will drive customer retention, satisfaction and spend.
5. Donations management – tracking the split between revenue for goods sold and donations shows how well the round up process is working and can uncover opportunities for revenue optimization.

The role of POS software

The most efficient way to capture these metrics is through POS software that is designed specifically for thrift – one that includes specialist thrift features:

• Inventory management – real time donation management process for categorizing, pricing and labeling stock.
• Color rotation management – automating the discount levels based on labeling color.
• Monetary charity donations – automating the process of asking customers if they’d like to round up.

as well as general retail functionality all retailers need:

• Point of sale – fast, efficient transactions
• Mobile POS – helping staff to engage with customers as they shop, leading to higher conversion rates and transaction size and greater customer retention.
• Customer loyalty and promotions – rewarding customer loyalty, repeat visits and increased spend.
• Business intelligence and retail analytics – instant access to real time dashboards, from any device.

For thrift stores, managing their operations with specialist POS software drives efficiency, visibility and increased sales.

FAQs:

How does color rotation discounting work?

In thrift stores discounting is an important strategy. Rotation discounting offers a discount based on the length of time the goods have been in the store. So, for example, they might be offered at their full price for the first two weeks, then at a discount of 25% in the third week and 50% in the fourth week. The process is managed with color-coded labels. If the store was operating a four week rotation, they’d have four label colors. So the goods that come in in week one will have, say, a blue label, week two a red label and so on. Each week, there’s a discount promotion with different rates on goods with different colored labels. With Thrift Store specific POS software, the discounts are applied automatically based on the color of the label.

Why is turnover of stock important in thrift stores?

In thrift stores, because the stock comes from donations, there’s no option to send unsold items back to the manufacturer or wholesaler. Goods have to be sold in the store or go for recycling or landfill. Added to this, most thrift stores are raising money for charities and are highly motivated to make the most of the donations they’re given and turn them into cash for their causes.

Turnover is also important as a way of getting customers to return more frequently. The thrill of thrift shopping lies in the promise of finding a hidden gem – something new, unique, a bargain. If shoppers come in each week and see the same items, the store starts to appear tired and boring and they’re less likely to return. High turnover allows thrift stores to keep putting new donations out into the store, encouraging frequent visits.

Content Sources:

BBC

BCIT News

Charity Retail

Gitnux