Sales Index: Improve Your Performance in Mass Retail

If your brand sells its products in large retail, you are probably wondering how to increase in-store sales. The sales index is a crucial KPI in this process, as it allows you to make performance comparisons by periods, products, or points of sale.

But you still need to know how to measure, interpret, and improve it. That is what we are going to look at here !

Definition of the sales index

The sales index, or IDV (Indicateur de Vente), is a sales indicator that measures the number of products purchased by a customer during a single purchasing transaction. It is calculated by dividing the number of products sold by the number of cash register receipts.

The IDV is a key performance indicator for measuring sales trends. It can relate to a brand, a point of sale, a product, or a category of products, and can be calculated over a day, a week, a month, or a year.

It is therefore an indispensable tool for boosting sales in large retail.

The term index is explained by the fact that it is generally compared to a baseline value, such as a result achieved in a past period, an objective to be met, or a reference score.

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Formula for calculating the IDV

The formula for calculating the IDV is extremely simple: 

Sales index = Number of products sold / Number of cash register receipts.

Once you know the number of items sold per receipt, you can compare it to a baseline value, and present it as a percentage or a numerical index.

Example of IDV calculation

You sold 100 products to 80 customers in February. This gives you an indicator of 1.25, corresponding to the average number of products purchased by customers.

If you use the January IDV as a baseline value, and it was 1.21, then your IDV can be formulated as follows: 

• Percentage = +3.3% ;

• Index = 1.033

It is up to each economic player to determine their baseline value(s). The most common are: 

• IDV over a previous period;

• IDV target;

• Performance of the best store in a network;

• Average performance of stores in a network;

• Performance of a competitor;

• Etc.

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Purposes by types of economic players

Like any performance indicator, the IDV is intended to provide the necessary insights for making commercial and marketing strategy decisions. However, while most economic players in a market are interested in the sales index, it is generally calculated for different purposes. Here are the main ones:

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Interpretation of the IDV and continuous improvement

While the method for calculating the IDV is extremely simple, its interpretation can be complex because many factors can impact its analysis.

Example

You are a sales director in a skincare products company. During the last annual negotiations with your distributor X, you managed to secure different mandatory assortments by region: 

• Brittany: 3 mandatory items per point of sale;

• Normandy: 5 mandatory items per point of sale.

With the next negotiations approaching, you decide to compare your IDVs by sector. You observe a sales index of 1.2 for both regions. This means that over the past year, your customers bought an average of 1.2 products, whether they were in Brittany or Normandy. Performance seems identical, and yet it shows a glass ceiling for the Normandy region, since a larger number of available items did not lead to selling more.

In other words, in Breton stores, customers bought an average of 40% of the available offer (1.2 / 3), and in Normandy, only 24% (1.2 / 5).

This finding leads you to two levels of analysis: 

1) Cross-referencing the sales index with other key figures

This example clearly shows that it is essential to analyze the sales index in light of other indicators and factors to compare apples to apples. Many KPIs can shed light on your analysis, such as the mandatory assortment, the store's assortment (number of competing products), or even prices, which can vary from one store to another.

2) Reactive actions

But when you achieve a reliable and meaningful result, you must take action, with the goal being to implement sales and loyalty initiatives that will increase in-store sales. 

However, without conducting your shelf assessments rigorously and regularly, you will find it difficult to understand why your IDVs are rising or falling in the stores.

Because in large retail, the factors impacting the sales volume of your products are diverse: 

Let's go back to the example of your skincare brand.

In order to implement an appropriate action plan, you decide to compare the performance of 4 stores. Over the past 12 months, the mandatory assortment was 3 products for each of the stores: the hero product + two complementary products.

Here are the sales levels observed through checkout data:

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This reporting reveals significant variations from store to store. The gaps concern both overall performance, per customer, and per product: 

• Store A generated the highest volume of sales;

• Store B achieved the best volume of complementary products;

• Store C has the highest sales index;

• Store D has a very low volume of sales;

• Complementary product 2 performs almost at zero across all stores.

This analysis allows you to build the following action plan: 

• Show the sales volumes of store A to the others to demonstrate that they can sell more; 

• Understand how store B managed to boost complementary product 1 and duplicate these methods in other stores;

• Try to understand why complementary product 2 is not selling, and, without an obvious reason, plan to replace it in the mandatory assortment with another product;

• Schedule a meeting with the department head or store management of Store D to understand the near-zero level of sales and implement an action plan.

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Techniques for increasing the sales index in large retail

Thus, when you reach this level of precision in reporting, you can act on all the impacting factors mentioned above: assortment, merchandising, pricing policy, etc.

There are also techniques to stimulate cross-selling.

For example, to find the right assortment for each of their tiers, retail chains use rules of nesting (gigognité). These allow each store to choose which products to shelve based on structural criteria. For your brand, understanding this nesting concept and knowing which tier each store belongs to can help you improve the mandatory assortment and picking.

Endcaps can also help you increase your sales index. These setups generally serve three purposes: 

• Promote a loss leader product, and place complementary products in adjacent aisles. You can also place your loss leader product in the aisles, so that customers can recognize it and become interested in the complementary products;

• Increase brand awareness and therefore facilitate purchases of your products through brand recognition; 

• Leverage promotions to increase sales volume.

Another key point: the complementarity of your products can favor cross-merchandising initiatives. The objective of cross-merchandising is to encourage customers to buy more by offering them complementary or related products within the same area, which can stimulate sales. For example, placing razors next to shaving creams in the personal care aisle. This technique is widely used in supermarkets and hypermarkets to encourage impulse buys, facilitate the discovery of new products, and create relevant associations between different product categories.

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Finally, loyalty card systems can encourage gathering different products of the same brand!

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