Sales commission structures play a crucial role in your ability to increase sales and drive growth.

Incentivizing retail sales associates with a commission based on their sales is by far the most effective way to keep sales reps productive.

And with the retail industry still reeling from the knock-on effects of the pandemic, maximizing sales is more important than ever before.

The mass exodus of employees leaving their current job, or the “Great Resignation,” as experts call it, is not making things easier.

\n Gartner reports that every departing employee costs businesses nearly USD 19,000.

The only way to attract and retain great talent in a highly-competitive market is to offer competitive pay.

If you are trying to figure out where to begin and how to create revenue-driven commission structures, we have got you covered. Here’s everything you need to know about paying commissions to retail employees.

Table of Contents

What is a retail commission structure?

Typically, retail business operators structure sales compensation around two main parts—fixed and variable pay.

The commission structure is a part of the variable pay. Commissions are a certain percentage of the sales attributed to the sales reps. Operators calculate retail commissions on gross profit, revenue, or a predefined quota, along with other factors such as the nature of the business or the level of skill required to close the sale.

Let's look at how commission-based pay helps drive sales performance.

How retail commissions drive more sales

Motivate employees
Reward employees based on performance
Attract top talent

Retail commissions ensure that reps are motivated to close more sales. Speaker and author Sybil Stershic was right when she said:

“The way your employees feel is the way your customers will feel. And if your employees don’t feel valued, neither will your customers.”

Here are some of the key benefits of paying your retail employees based on commissions.

Motivate employees

A commission-based structure motivates retail sales associates to go the extra mile and meet or exceed their sales targets. Employees will be inclined to sell more and increase their earnings, leading to improved sales and business growth. Commissions are also known to incentivize excellent customer service.

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💡 PRO TIP: Try using apps to upsell and cross-sell more effectively. Apps like Marsello and Frequently Bought Together integrate with Shopify POS and recommend products to store staff based on what they’ve added to a customer’s cart, making it easier than ever to suggest relevant products, increase basket sizes and order value.

Reward employees based on performance

According to Gallup’s State of the Global Workplace: 2022 Report, nearly 44% of employees experienced high daily stress levels in 2021. Keep your top performers in the game by recognizing and rewarding their efforts. Compensation and rewards boost their morale and make them more invested in increasing sales and driving business for the company.

Track staff performance with Shopify

Only Shopify POS gives you granular insights in staff sales data. View easy-to-understand staff reports and get insights into their average order value, items per transaction, total sales, and more.

Attract top talent

Regularly rewarding your best employees with a well-defined retail commission structure will also attract the top talent in the industry. High-performing sales reps will be flocking to your company to earn additional money.

Drawbacks of commission-based pay

Complicates payroll
Negative competition among employees
Discourages employee growth

Implementing a commission-based pay structure is an excellent decision for your retail business. However, there are some downsides you should understand before making the switch.

Complicates payroll

Commissions add significant complexity to your payroll process. Calculating the commissions due, based on the items sold by each sales rep and predetermined percentages, can be quite tedious, especially when you opt for a tiered retail commission structure.

Shopify POS can help alleviate some of the complexity of retail commissions. It easily integrates your online and retail store data to track commissions earned per item or transaction.

Negative competition among employees

Another drawback is that unhealthy competition might set in between sales reps. As a result, they become overly focused on earning higher commissions and employ aggressive sales tactics.

Rebekah Kondrat, the Founder of Rekon Retail, believes this gives way to “sharky behavior” which, according to Rebekah, could affect the customer experience:

“Unhealthy competition will trickle down to the customer experience, and it will have the opposite results of what is desired.”

Discourages employee growth

With employees vying to earn more commissions, both personal and company growth in the workplace take a backseat, since all the staff will care about is hitting targets. Make sure you encourage sales reps to look beyond their targets, hone other retail skills, and take on new roles.

5 types of retail commission structures

Fixed commission
Variable commission
Residual commission
Split or team-based commission
Marginal or profit-sharing commission

Designing a retail sales commission structure is a balancing act. Pay too much, and you’ll eat into your profits. On the flip side, paying too little means risking losing your best sales reps.

Identify what works well in your line of business before you decide to go ahead with any of the five types of retail commission structures given below.

Fixed commission

A fixed commission is the most basic commission structure. Fixed commissions work best for retail businesses offering high-value services and luxury goods.

Fixed commissions are straightforward to calculate—retail commission rates are based on either a fixed percentage model or a lump sum model. The sales rep will get a fixed percentage of every sale they make.

Under the lump sum model, however, the sales rep will get a lump sum amount per sale. This commission structure can lead to a net business loss if you’re not careful to measure the exact profitability of each item. This problem becomes worse if you’re paying commissions on staples or low-margin products.

The fixed commission acts as a great motivator. Sales reps will know exactly how much they stand to earn with each sale they make.

Variable commission

Variable commissions follow a tiered model and can encourage sales reps to hit higher targets. The commission set is higher for each new tier of sales.

This scheme is excellent for attracting and retaining high-performing sales reps who love a good challenge. Your sales team is motivated to sell even more with higher commission rates in higher tiers. For instance, if 2% is the commission rate for the first ten units sold, for the next tier of ten units, the commission rate might be fixed higher at 5%, and so on.

Despite the advantages, you might run into trouble when you have a sales rep exceeding expectations and performing exceptionally well. Avoid structuring your commissions in a lopsided manner, or else you could end up facing losses when your team achieves higher tiers of commissions.

Residual commission

A residual commission is ideal if you employ third-party salespeople for your retail business. Every time a sales rep brings in a new client, they will be paid a fixed sum of money for the referral.

The sales rep will also be paid a residual commission for every subsequent purchase made by the client. This structure best suits high-end luxury brands that rely on personal connections to build their customer base.

Residual commissions usually become a smaller percentage as you offer your sales reps a long-term passive income.

Split or team-based commission

The team-based commission structure allows retailers to split commissions among the team members. This model brings the entire team together to work toward shared goals. Top performers are motivated to help the other team members to level up their performance and drive more sales.

Marginal or profit-sharing commission

This retail commission structure is one where the retailer splits the profit margin between the company and the sales reps based on a predetermined percentage. The percentage may vary from product to product, making it an ideal model for retail businesses with a large variety of products.

The marginal commission requires operators to calculate profit for every product sold, making payroll calculations complex.

Nevertheless, the marginal commission is a popular commission structure among retailers, as it helps them identify their most profitable products.

How to create a profitable retail commission structure

Choose the appropriate commission structure
Set realistic targets
Track employee performance
Create safety nets and guardrails for commissioned employees
Consider tax implications
Review POS data regularly

To reap maximum benefits from your retail commission structure, try not to minimize commissions and save money. Instead, design the commission structure to maximize productivity and sales.

Let’s go over a few steps to create an ideal retail commission structure.

1. Choose the appropriate commission structure

Not all commission structures work for every company. You need to identify a structure that works for your line of business and the customer base you serve. It is also essential to consider your estimated revenue and current profit margins.

Commission structure can vary depending on the type of products sold. To make the most out of the commission structure, opt for one that rewards your employees and ensures that you drive greater revenue.

2. Set realistic targets

Make sure you are not setting unattainable goals for your sales reps when planning the commission structure. Instead, establish realistic sales targets that will motivate your sales team.

For example, you might want your team to hit $7000/week during an off-season, but during the holiday season you can set targets of $25,000/week. Realistic targets ensure that your sales team stays motivated and doesn’t burn out.

💡 PRO TIP: Only Shopify POS unifies your online and retail store data into one back office–customer data, inventory, sales, and more. View easy to understand reports to spot trends faster, capitalize on opportunities, and jumpstart your brand’s growth.

3. Track employee performance

Retail commission structures can be great for improving employee performance and identifying your best-performing sales reps. Not only that, by tracking employee performance you will be able to nail down the sales mechanisms and commission structures that work best for your company to reach its goals.

4. Create safety nets and guardrails for commissioned employees

Ensure that you are not leaving your retail commission rates open-ended. It helps to place a cap on the commissions that your sales reps can earn, and to add clearly-defined terms and conditions to your sales contracts. This will help you avoid suffering a financial loss at the expense of rewarding your employees.

💡 PRO TIP: With Shopify POS, you can assign different roles and permissions and set boundaries on what store staff can do in your POS system without manager approval—like changing a product’s price or applying a custom discount to a sale.

5. Consider tax implications

It’s essential to consider the tax implications of the commissions you pay. Various federal and state laws govern commission-based pay across industries. To avoid penalties, ensure that you take proper legal guidance and abide by the rules and regulations that apply to your business.

6. Review POS data regularly

It’s crucial to monitor and upgrade the performance of your commission structure from time to time. Your retail POS system will provide in-depth analytics, helping you identify common trends and arrive at actionable data to improve your commission structure.

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💡 PRO TIP: Analyze your POS data in tandem with your ecommerce data to be more cost effective with your inventory, measure your store’s impact on online sales, repeat purchases, lifetime value, and more.

Implement commission-based pay at your retail store

Retail commissions are one of the best ways to maximize sales. The right commission structure can ensure that your sales reps are productive in bringing in more revenue for the store, which in turn assures the store’s continued growth. Keep your commissions competitive and review them periodically.

Turn store traffic into sales

With Shopify’s mobile POS, you can serve customers anywhere in your store and banish lineups at the checkout counter. Use any smartphone or tablet to process returns and exchanges, accept payments, and check out customers wherever they are.

Retail commission FAQ

What is a typical commission for retail sales?

The amount of commission that a retail salesperson earns depends on the company they work for and the type of product they are selling. Generally, commission rates range from 0-20%, but some companies may offer higher commissions for certain products or services. Some companies also pay their salespeople a salary plus commission.

How do retail salespeople calculate commission?

Commission is typically calculated by multiplying the total sales by a percentage rate. This percentage rate is typically agreed upon by the employer and the salesperson prior to any sales being made. For example, if a salesperson is given a 10% commission rate and they make a sale of $1000, they would receive $100 in commission.

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Incentivizing retail sales associates with a commission based on their sales is by far the most effective way to keep sales reps productive. Learn more about how to implement this system at your store.

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The job of a retail sales employee is to help customers find the right product and ensure a sale goes through. Retail sales employees greet customers, explain products, answer all questions, and, finally, close the sale. They might also try to upsell a similar, but higher-priced item or cross-sell a complementary product to increase the total purchase amount.

Since customers seem to expect retail sales reps to be the Wikipedia of the products they sell, reps must learn all about the product—sizes, benefits, differences from competitors’ products, pricing, and more.

In this article, we’ll take a closer look at product knowledge—its importance, types, and how your sales team can be more effective with it.

Table of Contents

What is product knowledge?

Product knowledge is the information needed to clearly explain a product to a customer.

Product knowledge is a highly relevant skill for customer-facing retail employees, like sales reps. Besides being able to clearly communicate details about the product, the sales rep must be able to explain product benefits, offer alternatives, and even upsell or cross-sell other products.

Importance of product knowledge

If they were not given a clear explanation of a product and its associated benefits, customers would leave your store for a competitor. Product knowledge ensures that won’t happen by arming your retail staff with all the necessary information they need to serve customers well.

Increased sales

From handling objections to clearly explaining complicated products, product knowledge ensures that your sales reps know how to sell.

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Apple store employees are experts. They explain complex things like RAM and SSD drives in layman’s terms that are understood by everyone. Without the explanation, Apple might lose a sale. So, yeah, product knowledge is critical to selling.
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Rebekah Kondrat, Founder of Rekon Retail
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Enhanced customer experience

Let’s say you manage an Outdoor Voices store. A customer walks in to purchase a pair of leggings and they ask about SuperForm fabric (fabric for high-sweat, high-impact exercise). Your retail staff explains in detail why this fabric is ideal for extensive workouts where the customer is likely to sweat a lot. Being satisfied with the benefits, the customer purchases the leggings.

This is overall a good customer experience and helps Outdoor Voices stand out from stores where employees either know little about the products they sell, or don’t bother to explain the details.

Improved employee experience

Employees are put at a disadvantage by not being able to answer a customer’s questions. Being updated on all products helps give them the confidence they need to handle the questions that come their way.

Armed with extensive knowledge about your products, your staff is better equipped to handle complaints and objections. They know what they are talking about, i.e., they know the products you sell like the backs of their hands.

Types of product knowledge

Customer
Brand
Customer journey
Competition and industry
Product features and functionality
Complementary products
Customizations
Common questions

Product knowledge is not a manual on how your products work. It’s a myriad of things, from competitors to “Why don’t the shirts come in blue?”

1. Customer

In the words of author and marketing expert Seth Godin, “Don’t find customers for your products, find products for your customers.” This is especially true when you’re on the floor selling to customers walking in.

As a store owner, you need to ensure that your staff knows their customer—what they’re looking for, their motivations to be at the store, their price point, and so on. Your staff can then quickly analyze their customers’ needs and pick out the products that would be right for them.

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💡 PRO TIP: Sending digital receipts via email is a great way to organically collect customer contact information at checkout and build an email list to fuel your retention marketing. Just make sure they’ve opted in to hearing from you before sending them anything.

2. Brand

A company’s brand is comprised of positioning, mission statement, and vision of the future. Once your employees are acclimated to the brand, they can carry it forward in their daily interactions with customers.

For instance, Allbirds’ employees know the brand’s focus on sustainability. The company is known for educating customers on making better choices for the Earth while also selling them shoes and activewear.

3. Customer journey

While the product details remain the same, questions from customers will vary depending on what stage of the buying process they are in.

If they’re aware of a problem–for example, back pain from sitting for long hours, they might come into the store looking for comfortable office chairs. In this case, they will want to know which of the chair’s features helps reduce back pain. But if they’re already aware they need to buy a new office chair, they may ask more brand-specific questions.

Either way, your staff should be ready. To prepare your team to handle questions at all stages of the customer’s journey, it’s a good idea to share a list of FAQ answers with them.

4. Competition and industry

What happens when a customer asks a Nike store employee how their jogging shoes are better than Skechers? Unless the employee has studied the competition, they won’t be able to explain the differences between the two and the reasons why the customer should choose a Nike.

Employees, in addition to details about the merchandise they sell themselves, should be aware of industry trends and general news, so that they can speak the same language as their customers.

This also comes in handy when interacting with customers. At a Lululemon store, for instance, a customer might ask about the latest low-impact workouts top trainers suggest. Lululemon’s employees should know what workouts are in vogue, so they can better converse with the customer.

5. Product features and functionality

Without knowing the product features, you’re shooting in the dark. This is especially true for products like a car.

If a customer is shopping for a Model 3 in Tesla’s showroom, for example, the store employee is expected to be able to explain features like cruise control, autopilot, and one-pedal driving. Knowledge of product features is instrumental to closing a sale.

6. Complementary products

Smaller and generally lower-priced products that support a bigger, more expensive product are considered to be complementary products. Think of how a case complements a mobile phone, a high-quality webcam complements a laptop, or a pair of socks complements a pair of boots.

Sales reps need to know about complementary products to explain their benefits and increase the customer’s total order size.

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7. Customizations

There are times when companies offer customizations on their existing products.

Levi’s, for example, offers to customize its jeans—the clothing brand can embroider jeans, and even add woven patches and pins. Employees should be aware of the possibility of customization and prepared to discuss it with customers.

8. Common questions

At a clothing store, questions about what materials are used in a given product, and whether it should be dry cleaned or if it is machine washable, are common.

Usually, it’s a good idea to prepare a list of common questions and answers so employees can be ready when encountering them.

Types of product knowledge training

Customer interaction simulation
Shadowing tenured employees
Product quiz
Video training courses
Incentive program
Supplier demos

Product knowledge is critical to the success of a retail store. To turn your retail employees into product experts, you need to conduct product knowledge training.

1. Customer interaction simulation

Commonly known as “roleplay,” a customer interaction simulation is when employees act out various customer interaction scenarios under the guidance of a trainer or senior employee. This helps build employees’ confidence by preparing them for real-life situations.

As part of your training program, have other team members act as difficult customers. These could be shoppers who:

Insist on returning a product beyond the “return by” date
Ask for a discount when none is available
Comment on the supposedly “bad” quality of a product
Ask to speak with a manager who is unavailable
Haggle price
Ask excessive questions because of indecision

Pro Tip: Keep a running list of common and difficult customer interactions and schedule a roleplay training at the end of every month with the new set of difficult interactions.

2. Shadowing tenured employees

Job shadowing is on-the-job training that allows an employee to follow and closely observe another employee with more experience. This is generally designed for new hires but even tenured employees can benefit from it if they need to upskill.

As Rekon Retail founder Rebekah Kondrat puts it,

“You learn different tactics by watching an expert in action. You can then begin to emulate these tactics but don’t be scared to modify them if it gets the job done.”

3. Product quiz

Product quizzes are a great way to jog memories and keep store employees updated on products, promotions, and new releases. These can be conducted online by sending out a Google Form, or even on the floor if the store manager gathers the employees for a pop quiz.

Pro Tip: Host weekly quizzes on Mondays before every shift. This way your employees will start each week with up-to-date knowledge that will help them seamlessly interact with customers.

4. Video training courses

If you want your retail staff to continue their training and development outside work hours, consider video training courses. You can upload these courses to a learning platform like Podia or Teachable so your employees can take them when time allows.

Pro Tip: Consider courses that don’t require hands-on training like product details, buyer psychology, and customer experience best practices. Use Shopify Compass to learn the basics.

5. Incentive program

A great way to keep your retail staff updated on product details is by adding an incentive. Incentive programs aren’t uncommon, but it’s rare to see them specifically tied to product knowledge training.

For instance, every time an employee completes a full course (consisting of x hours), they get a gift card. Alternatively, a friendly competition among retail associates to see who sells the most of a new product can implicitly test knowledge while enhancing the employee experience.

Pro Tip: Incentives tied to money are way more enticing than free lunch or an “employee of the week” badge of honor.

6. Supplier demos

This is where a product supplier comes to your store and demonstrates their product. This happens a lot in the beauty space, where new products are launched every other week. Supplier demos will help your staff sell the supplier’s products to your customers.

According to Rebekah Kondrat,

“When suppliers do a demo, the staff can test this product, put it on their hands, and see how it feels. And then when the associate is in front of the customer, they can say, you know, I've tried this. It feels like X, Y, and Z on my skin. I liked it.”

Tips to improve product knowledge training

Use Shopify’s product meta fields
Let employees demo products
Team huddles about new products
Build a product knowledge repository
Share customer feedback with staff

While everyone at your store is somewhat knowledgeable about the products you sell, improving their product knowledge will only be advantageous for the business. You can expect to see increased sales, a better customer experience, and happier employees.

Use Shopify’s product meta fields

Customers expect store staff to have product expertise above and beyond what they can find online. While learning about products used to be done through supplier training sessions, meetings, or between staff, you can also use Shopify’s product metafields.

Product metafields are a fully customizable way to share product information like care instructions, restock dates, warranty details, or complementary products with staff across each store location through Shopify POS.

Metafields in Shopify POS help you equip store staff with the information they need to serve customers with confidence. You have complete control on what to include in metafields, which makes them a flexible tool for sharing detailed product information and helping staff resolve questions quickly, while reducing dependency on managers and more tenured staff.

Let employees demo products

A hands-on experience is always the best way to learn more about products. Have your staff give product demos to each other first, so they can practice what they will say to customers. Then, when they demo products to customers, assign a senior employee to gauge their performance and share feedback on how they can improve.

Team huddles about new products

Team huddles are a great way to announce new products to your team. This is best done five to seven days before launching a product. Steps include:

Prepare an agenda, set talking points, and create a doc that talks about the product
Set a date and gather everyone on the floor
Explain the product’s features/details, demo it, and share common uses
Open the floor for Q&A
Do a short quiz after the huddle to see if everyone understands the product and can sell it

Build a product knowledge repository

Repositories are a great way to share knowledge about your products and keep your employees updated at all times. You can simply create one in Google Drive or a Notion dashboard. A typical product knowledge repository consists of:

Product origins: How/where the products are made, along with materials/ingredients used
How the product is to be used (and how not to use it)
Who the target audience is for the product
Common questions
Common objections and how to handle them

These repositories are living documents, meaning you should continue adding relevant information that will help your staff sell your products seamlessly.

Share customer feedback with staff

Customers may be your best resource to improve your product knowledge. If you, as the store manager/owner, are receiving feedback from customers that’s pertinent to a product you’re selling, pass it on to your team.

Their feedback could come in the form of a new product use case, a specific feature they like (and why they like it), or how the product improved their life. Your staff can then use this feedback during sales conversations with other customers.

Empower your retail staff with product knowledge

If you want your retail staff to perform as well as they can, you need to arm them with end-to-end product knowledge. Help them find the best products for your customers, guide sales conversations with ease, have intellectual discussions with customers regarding the industry and related topics, and, most importantly, always feel confident on the job.

Sell the way your customers shop

Only Shopify POS unifies online and in-store sales and makes checkout seamless. Get all the tools you need to break free from the counter and sell wherever your customers are without worrying about your tech stack, integrations, or fragmented reports.

","Product knowledge plays a key role in the success of a retail store. This guide talks about the benefits of product knowledge and how to improve it at your company.","

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Product knowledge plays a key role in the success of a retail store. This guide talks about the benefits of product knowledge and how to improve it at your company.

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First, there was cash. Then debit and credit cards entered the fray and revolutionized how we pay for goods and services. Today, upgraded cards with EMV chips are helping to change the payments industry.

EMV-based chip cards became a fan favorite when users of traditional magstripe cards began to have serious security concerns. While magstripe cards carry all the customer details as static data on the magnetic stripe, which can be easily stolen and cloned, EMV cards contain a chip that creates a unique code for every transaction—one that can’t be cloned and is rendered useless after the transaction is complete.

On that note, let’s dive into the world of EMV cards and how they have changed the way we make payments.

Table of Contents

What is EMV?

EMV is a payment standard that stands for “Europay, Mastercard, and VISA”, the three companies behind its inception.

EMV cards come with a chip embedded within the card that interacts with a merchant’s payment terminal and checks whether the card is valid. These cards add multiple layers of security to prevent fraud and are virtually impossible to duplicate.

It’s a massive upgrade from magnetic stripe cards, where all the data (including your bank account info) is stored on the strip, making it easier for fraudsters to lift the data and clone it into a new card.

EMV vs NFC

NFC stands for “near field communication”. NFC cards are equipped with RFID technology that enables contactless pay, meaning you can simply tap your card or hold it close to the point-of-sale (POS) terminal and it will process the payment.

Instead of (or sometimes in addition to) an NFC tag, EMV cards are equipped with chips—you need to “dip” the card into the chip reader to make a payment.

Turn store traffic into sales

Types of EMV cards

Today, payment processing companies are issuing two types of EMV cards: chip-and-signature and chip-and-PIN.

Chip-and-signature

As the name suggests, chip-and-signature cards are where you verify your identity with a signature. After you dip your card at the POS terminal that reads the chip, the merchant will ask you to sign your name to verify the transaction.

Chip-and-signature cards are less secure because a fraudster could steal your card and replicate your signature to make unwarranted purchases.

Chip-and-PIN

Chip-and-PIN is more secure for both merchants and consumers. After you dip your card at the POS terminal, you’ll be asked to enter a personal identification number (PIN), that only you know, to authenticate the transaction. A chip-and-PIN card is safer because even if a fraudster steals your card, they can’t rack up charges unless they know the PIN.

How do EMV cards work?

All EMV cards come embedded with a chip that functions as a mini-computer.

Although it takes only a few seconds to complete a transaction, things are happening behind the scenes:

First, you insert the card into the POS terminal (also called “dipping the card”) that accepts chip cards.
The card creates a transaction code that can be used one time. With this code, the POS terminal (and the issuing payment company) authenticates the card and processes the transaction.
In some cases, you might be asked to enter a PIN code for further security.

📌 GET STARTED: Shopify Payments is the fastest way to start accepting payments in-person, online, and on-the-go. It’s included in all Shopify POS plans, so you can skip lengthy third-party activations and go from setup to selling faster.

Benefits of EMV cards

Both consumers and merchants benefit from the use of EMV cards—the consumer protects themself against fraudulent transactions, and the business ensures that their customer’s debit/credit card information is secured at all times.

Better security than magnetic stripe cards

Magnetic stripes on debit/credit cards store static data, meaning the customer’s information never changes. This is especially problematic when a card is stolen—the fraudster can clone the card and use it to make fraudulent purchases over and over again.

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EMV uses encryption so the card reader only authenticates what it needs to know to capture the payment, which may also be verified by a PIN. All of this means that EMV is safer for merchants and customers alike.
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Alex O’Byrne, Managing Director, We Make Websites
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EMV cards contain a microchip that creates a unique transaction code every time a new payment is initiated. So, even if the fraudster steals the transaction code, they can’t replicate the card since the code is only valid for a single transaction. This makes EMV cards a lot safer than magstripe cards.

EMV cards are more familiar to customers

EMV cards are popular among customers—almost 90% of all card-present transactions in 2020 were made using EMV cards.

Although newer forms of payments like “tap to pay” cards are gaining traction, EMV cards are here to stay, since consumers have become accustomed to this form of payment.

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I use the Shopify POS chip reader for local pop-ups that I run—it’s a fantastic, safer, and more familiar way to take card payments, especially because a lot of cards in the USA don’t yet have tap-to-pay functionality.
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David A. Lindahl, founder of Rainer Watch
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The other tiny advantage is that you can have unmanned payment counters at the store since the customer can easily complete the transaction without merchant intervention.

Limitations of EMV cards

Despite EMV cards’ advantages, they do come with certain limitations that might make you think twice about accepting them from customers.

EMVs have vulnerabilities

EMV cards are still prone to vulnerabilities. For instance, EMV cards can’t secure you against card-not-present (CNP) fraud. A card-not-present transaction happens when you’re paying remotely without ever coming into contact with a POS terminal.

This gives fraudsters an opportunity they can exploit. All they need are a few details from the card, such as the card number, expiry date, CVV code, and the type of card. Once they have those details, they can purchase things off the internet without your consent.

EMV cards also rely on strong encryption from the merchant’s POS system. Each card creates a unique transaction code every time a payment is made. This code is then decoded and authenticated by the POS terminal for processing the transaction. If the security of the POS terminal is weak, a fraudster can potentially steal the decoded information and commit unauthorized purchases.

EMVs are slow

EMVs are slow by nature—you need to dip the card in the reader, wait for it to ask for a PIN, enter said PIN, and then finally your transaction is complete. This entire process is slow and leads to an unnecessary loss of time for both the merchant and the consumer.

Plus, it’s not contactless. Post-COVID, many consumers are more conscious of touching surfaces, preferring to avoid unnecessary physical contact if possible.

As O’Byrne puts it, “contactless is the next iteration, whereby you wave your card (or phone) to make a payment. It’s faster and convenient for both the merchant and the customer.”

💡 PRO TIP: Shopify POS has a fully-customizable checkout experience. Create shortcuts to keep your most-used apps, promotions, and products at your fingertips so you can fly through checkout.

Start accepting EMV cards at your store (if you aren’t already)

By 2030, merchants worldwide are projected to lose approximately $49 billion to payment fraud. Merchants need safer ways to make payments—EMV cards are one such option.

They’re safer than magstripe cards and are widely used and accepted by both merchants and consumers. Even with limitations, EMV cards can easily prevent common fraudulent activities. So, if you haven’t started accepting these cards already, it’s high time you do.

Streamline your checkout with Shopify POS

EMV FAQ

What does EMV stand for?

EMV stands for Europay, Mastercard, and Visa.

Is EMV the same as chip?

Yes, EMV is the same as chip. The EMV standard is a term used to refer to chip-based payment cards, which contain a computer chip that stores and protects cardholder data.

What is a EMV device?

EMV (Europay, Mastercard, and Visa) is a global standard for credit and debit cards that have an embedded microchip. This microchip stores and secures card information, and can be used to authenticate transactions at point of sale terminals that are equipped with EMV technology. EMV devices are used to process payments with chip cards in a secure and compliant manner.

What is EMV in POS?

EMV involves the use of chip-enabled cards and Point of Sale (POS) terminals. It is designed to reduce the risk of counterfeit and stolen cards being used for fraud. EMV technology increases security by requiring a chip-enabled card to be inserted into the POS terminal and authenticated by the bank or credit card issuer before payment is accepted.

","EMV stands for Europay, Mastercard, and VISA, the three founders of this payment standard. EMV chip cards are the most popular form of payment method. Learn more about them here.","

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EMV stands for Europay, Mastercard, and VISA, the three founders of this payment standard. EMV chip cards are the most popular form of payment method. Learn more about them here.

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Tourism is a boon for retailers. The global travel retail market size was valued at $51 billion in 2021 and is projected to grow to over $96.11 billion by 2029.

Retailers located in tourist centers serve a different type of consumer than everyday buyers. This poses an opportunity to capitalize on shopping tourism, where a traveler’s choice of destination is moderately or heavily influenced by shopping.

In this article, we’re deep-diving into shopping tourism—what it is, and how you can leverage tourists to grow your store.

Table of Contents

What is shopping tourism?

Shopping tourism is a new phenomenon in tourism in which travelers visit a destination for the sole purpose of purchasing goods.

Shopping at a destination is generally considered a leisure activity. But for travelers whose sole purpose is to buy things, it’s a complete travel experience; they prioritize which shops they will buy from and the time they will devote to shopping.

However, this doesn’t mean that shopping is the only reason for them to visit new places. Often travelers have an amalgamation of different motivations, like cultural interests, checking out famous monuments, and shopping.

Benefits of shopping tourism

There are shops worldwide that rely on tourism to keep their lights on. Regardless of travelers’ reasons for visiting, shopping tourism contributes directly to the growth of the local economy.

Supports the local economy

With shopping tourism gaining traction, more and more travelers are choosing to visit spots based on what they can buy. More tourists mean more revenue for shops which, in turn, means additional tax revenue for the local government.

Start taking in-person payments instantly

Every Shopify plan includes built-in payments processing with quick payouts and low rates, starting from 2.4% + 0c USD. Skip lengthy third-party activations, accept all popular payment methods, and start taking payments online and in-person faster.

Share local culture

Besides buying cool stuff at a destination, shopping tourism implicitly involves promoting the local culture. Whether they’re shopping at The Grove in LA or Portal de l’Angel in Barcelona, tourists can expect to discover different cultural traits.

10 shopping tourism strategies to attract more customers

Offer in-store events
Help travelers acclimatize to the destination
Spruce up the outside
Get coverage in local media
Provide services travelers need
Leverage Google Maps
Join local tourism groups
Offer ship-to-customer
Endless aisles
Experiential retail

Tourists are different from your average shoppers. Their shopping style is more spontaneous and, most of the time, they discover new stores by chance. If they like the ambiance of the store and the quality of the products, you can expect them to buy.

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Don’t position yourself as just a local shopkeeper. Bring the power of your brand and experiences to attract traffic to your store.
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Steve Ubsdell, Chief Creative Officer, Checkland Kindleysides
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With that in mind, here are a few strategies that will help a retail store to stand out from the crowd and deliver a stellar experience for travelers.

1. Offer in-store events

In a sea of product options, your retail business needs unique differentiators that will help you distinguish your store from the competitors. In-store events are great retail experiences that attract crowds. And there’s data to prove that—nearly 60% of consumers say they expect retailers to dedicate more than half of the floor space to experiences.

For instance, Alo Yoga holds regular yoga classes at their retail locations; Outdoor Voices hosts a series of events called #DoingThings which includes Joggers Club, Endorphin Hour (yoga and dance), Basketball Club, and a whole array of other activities.

2. Help travelers acclimatize to the destination

Running a retail store at a tourist destination means travelers will often ask your advice on local attractions. This is your chance to create a great experience for them—hand out local maps, tell them about the locally sourced materials for your product, or give them a complimentary (or chargeable) local tour.

The Clark Store in Clark, Colorado is located near parks and lakes that are popular for travelers, especially in the summer and winter. They sell trail maps of the place but the best recommendations come from Clark employees happy to share their wealth of local knowledge.

3. Spruce up the outside

With hundreds of stores competing for attention, you can stand out by adding something unique to your store’s outside design.

Alice + Olivia in New York set up a window display that showcased mannequins in front of a giant backdrop of sugary cereals and salty snacks. This wasn’t so much to attract a new audience as to invoke the nostalgia of young buyers who grew up eating Frosted Flakes and Corn Pops.

Another example is Exquisito Chocolates in Miami, where they painted the outside of the building with a bright color and added the simple phrase “We Make Chocolate 🍫”.

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4. Get coverage in local media

Getting coverage in local magazines or being reviewed by a famous blogger can help your retail store get much-needed public credibility and third-party opinion. The data backs it up—93% of consumers say online reviews influence their buying decisions.

Suppose you have opened a store in LA. You can start finding a list of local bloggers, like the LA Girl, and pitch them your story. You can also sign up for HARO (a service that connects journalists with expert sources) and keep an eye out for any relevant “calls to pitch” where your store can be highlighted.

5. Provide services travelers need

If you can anticipate tourist needs and offer products and services catering to them, you can potentially increase your store’s foot traffic.

For instance, if your store is located near Lake Morey (a frozen lake in Vermont famous for ice skating), you’d benefit from selling or renting out skates and apparel that the tourists might need.

Another example is the Bozeman Fly Supply in Montana. They primarily sell flies for fishing, but they also sell and rent out relevant gear for customers, as well as offer free/paid classes and special events.

💡 PRO TIP: With Shopify, you can get your products found by more nearby shoppers looking for what you sell on Google. List your products on Google for free, show pickup availability to increase store visits, and measure how your listings impact store sales from Shopify.

6. Leverage Google Maps

It’s no secret that people research on Google about a shop before visiting it— 46% of all Google searches are looking for local information. “Near me” or “close by” searches on Google grew by 900% in just two years; you can exploit this trend to get more travelers to your store.

Optimize your Google Business Profile to show up more when tourists search for “[insert product here] near me”:

Fill out and update as much information as possible.
Keep posting photos and videos of your store. Got an event or a weekend discount? Post about it.
Add your products; let people see what you sell and what’s available.

💡 PRO TIP: Use the Google & YouTube app for Shopify to manage your Google Merchant Center, Google Business Profile, and Google Ads accounts from Shopify’s back office. Get all the perks of marketing your business on Google without jumping between accounts.

7. Join local tourism groups

Another way to get your business in front of travelers is to join local tourism groups. This could be your local chamber of commerce, a state-sponsored association like the Guides Association of New York City, or something managed by private individuals.

According to Shray Joshi, founder of Good Peeps, you can also leverage local Facebook groups:

“I think Facebook groups are a great option. We have worked with a couple of local groups (think couch surfing communities) where we load up their fridges and pantries with some products based on where they are located. (Think if they are in Arizona and it's super hot outside we will make sure to get them some beverages, as opposed to maybe Colorado, where we will get them some snacks if they are more outside.)”

8. Offer ship-to-customer

“A tourist likes a product but you don’t have it in-store? Just ship it to their hotel,” says Rebekah Kondrat, founder of Rekon Retail.

Kondrat is spot on—with ship-to-customer, you no longer need to have all the products in stock. Travelers can browse your entire catalog before ordering products to ship from a local warehouse or another store offering that product.

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💡 PRO TIP: Ship-to-customer order fulfillment is the easiest way to turn your store into a showroom. Rather than being limited to selling products you have in stock, you can sell products in-store and ship them to customers from your warehouse or another store location that has inventory.

9. Endless aisles

Similar to ship-to-customer, endless aisles offer retailers the flexibility of holding limited items in-store while allowing customers to browse through their entire catalog.

With endless aisles, however, you can send a virtual cart of all the items a tourist wants to purchase to their email address. This is useful when the tourist is in a hurry and you won’t be able to ship it to their hotel in time.

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💡 PRO TIP: Use Shopify POS email carts to recover abandoned store sales and ensure showroomers buy from you rather than competitors. Add items to customers’ virtual cart, send their wish list by email, and credit your store for making the sale—even if it happens online.

10. Experiential retail

One of the best ways to attract more travelers to your store is to add unique experiences that complement the products you sell.

For instance, if your stores sell beauty products, you can add free makeup sessions every Friday; customers who come in for the makeup session might just purchase some of your products.

An example of experiential retail that was named “best retail experience of the year” is Canada Goose’s winter room.

The brand specializes in winter wear, but customers weren’t able to test the product in the comfortably heated store. So, Canada Goose created a cold room (-27 degrees Fahrenheit) in five of their stores, where customers could stand while wearing their coats to truly understand the benefits of the product.

Types of tourist stores

Family-oriented businesses
Classes/workshops
Personalized products
Local markets
Shipping stores
Stores + services
Souvenir shop

There are many ways to attract tourists to your store, such as selling quality products, adding creative experiences, and doing local marketing. You can also create a unique identity for your store that targets a particular niche of shoppers, which, in turn, will increase your sales.

Let’s look at a few examples.

Family-oriented businesses

Family-oriented businesses are stores where adults and their children can have a great experience together. These stores generally have a section of the store tailormade for kids, where the kids can play while the adults can do their shopping.

A good example of this is CAMP, a family experience store in the US. It’s a toy store with an innovative concept—the excitement of shopping for a toy outweighs buying it.

Camp stores have theme-based interactive experiences like Travel Camp, Cooking Camp, and Toy Lab Camp, where children can play accompanied by adults. While it’s free to play in Camp’s stores, the walls, tables, and even the floors are packed with toys available for purchase.

Classes/workshops

Today’s retail landscape demands a complete experience, not just a shopping storefront. This is especially important for tourists, as a store’s experience can also count as part of their larger travel experience.

Apple stores are well-known for this. A program called “Today at Apple” hosts in-person classes and workshops for people wanting to learn creative activities like photography, videography, music, art, and design.

Similarly, Michaels hosts in-store creative events like making a “balloon arch” or canvas art.

Personalized products

Who doesn’t like to stick their favorite quote onto a coffee mug? People love personalized items, and some stores specialize in them. This is pretty common in beach communities and in theme parks, where visitors can buy custom-made t-shirts.

Personalization works. Levi’s is one brand that leverages it, with their Tailor Shops—”a creative space for customizations, repairs, and design.”

You can walk into one of these tailor shops and ask them to customize your jeans with pins and patches. You can also ask them to repair your jeans or upcycle them into something new. The options, says Levi’s, are endless.

Local markets

Tourists love to engage with local culture. Retailers can tap into this by supporting makers in their area.

The Working Artist in Belmar, New Jersey, is an art studio where local creatives rent out space to make art—and shoppers can visit the store to watch them in action. Customers can also purchase a work of art to take home with them.

If you can’t build your entire store’s business model around local artists, perhaps you can host an occasional pop-up shop at your store featuring products from local makers.

📌 GET STARTED: Shopify POS is the fastest way to accept in-person payments, sell at events, or open a pop-up shop. Download the Shopify POS app onto any smartphone or tablet and rent a mobile card reader to start selling wherever your customers are.

Shipping stores

Whether they’re on a quick weekend getaway or a long overseas trip, there’s one thing that’s common among tourists: they need to mail something. This is a great opportunity for shipping stores to sell postcards, packaging, and gifts alongside mailing materials.

The Mail Room and Copy Center in Durango, Colorado, has an entire section of the store where visitors can find postcards that feature the local landscape to send back home.

Stores + services

With travelers hopping on the shopping tourism trend and ready to buy new things, adding relevant services to your existing retail offering can help attract more customers.

A great example is The Well, a wellness center with headquarters in New York.

They help customers with health coaching sessions, different kinds of therapy, mindful movement, and meditation classes, while selling products that complement these wellness treatments.

Souvenir shop

Tourists love to take back souvenirs for their friends and family. That’s why souvenirs create a great way for retailers to bring more travelers through the door.

Western Prince Whale Watching in Seattle does this well, using its storefront not only for tour bookings but also to sell whale-oriented souvenirs.

If your store is located in a tourist spot, consider selling popular souvenirs that will attract tourists, thus allowing them to browse your other products.

Shopping tourism trends

International travel
Multi-lingual and multi-currency
Livestreaming

The shopping tourism phenomenon is growing by the day as pandemic bans are being lifted across the world and more tourists can travel to their favorite destinations.

Here are a few trends that are fueling this growth.

1. International travel

Shopping tourism is alive, well, and growing. Global international tourist arrivals in the US more than doubled (+130%) in January 2022 compared to 2021. Although the growth in international tourist arrival is slow, 58% of tourism experts predict a rebound in the third quarter of 2022.

This growth has a direct correlation to shopping spending in the US. International travelers spent a whopping $9.5 billion in February this year on tourism and related activities, an increase of 98 percent compared to February 2021.

2. Multi-lingual and multi-currency

Offering multi-lingual services helps you to easily communicate with international customers and thus serve a larger market.

“Multi-lingual services can help retail stores cater to a wide array of international customers, thus expanding your target audience,” says Jason Goldberg, Chief Commerce Strategy Officer at Publicis Groupe and founder of Retail Geek.

For instance, the salespeople at David Yurman, a jewelry retailer, speak multiple languages like Mandarin, Arabic, and Farsi to help international tourists feel at home. And top retail stores like Walgreens, Bloomingdale’s, Saks Fifth Avenue, and Nieman Marcus have already started accepting AliPay as a method of payment.

3. Livestreaming

As shopping tourism grows, retailers are trying to find new ways to reach travelers and get them to visit the store. Livestreaming is proving to be a way for retailers, like Walmart, to meet the customers where they are.

To be top-of-mind for future tourists, retailers can host live streams regularly; these can be product launches, store launches, offers, events, or collaborations.

Optimize your retail store for shopping tourism

Shopping tourism helps create more jobs, aids in the local economy’s development, and ensures that retailers dependent on tourism can thrive. If you’re running a retail store located in a tourist spot, you should have strategies in place that ensure your store attracts travelers.

Grow store sales with Shopify POS

Shopify POS has all the tools to help you convert more store visits into sales and grow revenue. Make more relevant product recommendations, turn abandoned store sales into online sales, and track both store and staff performance from one easy-to-understand back office.

Shopping Tourism FAQ

Is shopping a part of tourism?

Yes, shopping can be a part of tourism. Shopping is a popular activity for many tourists, who visit local stores and markets for souvenirs, gifts, and traditional items that reflect the culture of their destination.

What is retail tourism?

Retail tourism is when people travel to a certain destination primarily to shop and take advantage of the local retail environment. This type of tourism often involves shopping for luxury items or unique souvenirs, exploring local markets, or attending retail events such as fashion shows or craft fairs. Retail tourism can also involve taking advantage of special offers and discounts available in the destination.

What are shopping destinations?

Shopping destinations are places where people shop. They can be specific retail locations such as a mall, outlet center, or big box store, or they can be broader areas like downtown shopping districts or shopping streets. Shopping destinations often feature a variety of stores, restaurants, and entertainment venues.

","Shopping tourism is quickly gaining traction. Learn how retailers are figuring out ways to capitalize on this phenomenon.","

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Shopping tourism is quickly gaining traction. Learn how retailers are figuring out ways to capitalize on this phenomenon.

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In-store retail events may have lost some popularity due to COVID, but they’re still a staple of the retail marketing world.

In-store events are an excellent way to create a community of consumers for your brand, focus on creating connections, and provide brands with an opportunity to promote their products to a broader set of audiences without hard selling. More than 75% of marketers say live in-person, live (hybrid), and online events are valuable.

How do you create a successful in-person event and market it effectively, so it reaches your ideal audience? This guide discusses the benefits of retail events, popular types of retail events, retail store event ideas, how to plan an event for your retail store, and how you can market it.

Table of Contents

What are retail events?

Retail events are in-person events hosted by brands to create a memorable shopping experience for customers.

Customers are getting more selective about the brands they associate with, and the in-store experience can help you stand out from the crowd. In an age of cut-throat competition, retail events are a great way to engage with your customers and form relationships. It engages and invites them to experience your brand in person.

3 benefits of in-store events

Hosting an in-store event is expensive and takes a lot of time and manpower. Is it worth it? Here are three benefits of in-store events for your brand.

1. Attract new customers

Post-Covid, shoppers are looking for experiences and are willing to shop in-store rather than behind a screen. 59% of consumers say the ability to feel, touch, and try the product makes shopping in-store preferable to online.

Hosting retail events lets you attract customers outside your normal reach—people who you’ve never targeted with your ads or content. These people have no way of learning about your brand and products otherwise—but the buzz of in-store events can knock on such people’s doors with the right strategy and marketing.

2. Build brand loyalty

Over 40% of consumers feel they become more loyal to brands after attending their events and experiences.

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With events, you can have an intimate conversation with your customers and you can find out what drove them to the event. You learn about your customers and therefore can make better decisions about what products to put out in the future.
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Rebekah Kondrat, Rekon
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We cannot agree more with Kondrat. Say you’re an environmentally friendly clothing brand, and your differentiator is using natural colors to dye your clothes. You might organize an event to demonstrate your process, from extracting the color to making store-ready clothes.

The information you provided is like an exclusive experience to the attendees. Whenever they think of purchasing such clothes, your store will be at the top of their minds.

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📌 GET STARTED: Choose from hundreds of loyalty apps in the Shopify App Store and start rewarding shoppers for purchases they make both online and in-store.

3. Increase sales

In-person interactions also encourage prospective customers to spend—and to spend more. When you host a retail event, people come to your stores without any concrete purchasing plan. With the proper interaction, you can help them choose the right products, resulting in increased sales. 91% of consumers say participating in events and experiences convinces them to purchase from the brand.

Grow store sales with Shopify POS

Popular types of in-store retail events

Launch events
Classes or workshops
Meet-ups or hobbyist groups

Retail events are highly personalizable—there is an infinite number of options. Here are the three most popular types of in-store retail events.

Launch events

Launch events are the most popular types of retail events. A new product launch is an excellent opportunity to build a relationship between suppliers, customers, and producers.

Beauty pop-up Beautyque hosted a launch event for their new pop-up NYC store with Doors. It was a week-long event, featuring its makeup and skincare brand and including a skincare consultation with an esthetician, a makeup tutorial with a pro makeup artist, and a manicure with a professional manicurist.

Such events attract significant foot traffic, giving consumers the perfect opportunity to interact in person with the brands. They feel like a part of an exclusive club with all the additional benefits it offers.

Invite people to your retail launch event, create a buzz around your new products, and generate sales by forming a relationship with your customers.

Here are examples of retailers who can benefit from launch parties:

Beauty brands
Book stores
Fashion and apparel
Home and decor
Health and wellness brands

Classes or workshops

Educational retail events like hosting classes or workshops can set you apart from competitors by positioning you as a thought leader in your niche.

For example, during Fairtrade Month in October 2018, West Elm hosted a workshop series where guests could make coasters using felt balls that fair trade artisans handcrafted at Everest Fashion.

As West Elm was the first home retailer to offer Fair Trade Certified goods, hosting an event series during Fair Trade Month was a great idea. They also donated all of the proceeds from the workshop to Everest to support their Fair Trade initiatives.

Meet-ups or hobbyist groups

Meet-ups or hobbyist groups aim to create both a recurring set of events supporting your industry and a community comprising your target audience.

Outdoor fashion brand Arc’teryx hosted Arc’teryx Academy in 2018. It was a four-day experience that brought outdoor enthusiasts such as mountain guides and professional athletes together through seminars, expert-led clinics, and films.

They offered three experiences—Alpine Climbing, Backcountry Skiing, and Snowboarding. They sent a perfect message to their competitors: if you’re a retail store owner, it doesn’t mean you have to stay within store boundaries.

Retail event ideas

Partnership events
Charity events
Educational events
Fun events
VIP events
Experiential events

The best retail events offer something valuable to the people attending them. It could be something they learn for the first time, an exclusive launch offer, or something experiential. Here are some event ideas that you could implement for your store.

1. Partnership events

Partnering with other businesses can be a win-win, bringing additional exposure and revenue for both parties.

Sephora partnered with Dr. Dennis Gross, a world-renowned dermatologist practicing in NYC. At this event, his National Medical Esthetician was there to consult all about the skin and perform an exclusive peel available only in his office.

Sephora had an offer—shoppers spending $150 on DG products get a free goodie bag and a $250 medical-grade peel by our medical aesthetician. This resulted in more foot traffic and increased sales as Dr. Gross’s exclusive peel is among the most famous skincare products.

2. Charity events

Hosting a charity retail event can drive a lot of value and increase your brand awareness. People are emotionally connected with charities, and when you support causes they most believe in, they relate with your brand personally.

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Charity retail events are really effective because then you get customers that really care for the cause and maybe new to your brand.
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Rebekah Kondrat, Rekon
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A good example would be Stance, a sock brand that hosted a benefit event where they collaborated with Rihanna to design a special collection of socks and tights, with all the proceeds going toward initiatives to make health and education more globally accessible.

3. Educational events

Many retailers are attracting customers with educational learning experiences to attract more people in-store and demonstrate their expertise.

Kendra Scott collaborated with Splash for an event exclusively for retail marketers to network and learn about the brand’s event strategy. This event was held at their store in New York’s SoHo.

Guests got all the tidbits from the director of retail marketing about their in-store event program. Not only did they walk away with rich insights, but they also got to take home a custom jewelry piece.

4. Fun events

Fun events are a fan favorite—people come and engage in fun activities while the retailer benefits from increased foot traffic and a ton of brand awareness.

In 2017, John Lewis launched an in-store event focusing on celebrating the British summer. It was named National Treasures, and it featured 220 life-size cartoon displays by Paul Thurlby in storefront windows.

It was fun and interactive with videos, live workshops, fitness sessions, and Q&A sessions with a gardening society-themed rooftop space on London’s famous Oxford Street. The event led to better relationships between John Lewis and its customers.

5. VIP events

If your brand offers a loyalty or insider program, hosting a VIP event for members only can make your customers feel special. As you please them with an exclusive retail event, their relationship with you gets stronger and gives them a reason to come back again.

PINK organized an exclusive and private shopping event for their PINK Nation members. It was themed after a Back to School Brunch, with early access and discounts on new arrivals both in-store and online.

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#PINKNation members, come brunch with us on Sunday, August 19th from 10 AM -12 PM in stores + at https://t.co/tmj6NCHPoA! Score major deals on your fave NEW PINK! Click the link in bio to download the app & get your invite! 🍩 https://t.co/jh2UCWFj6P pic.twitter.com/HDJ7G0MxHa
\n— vspink (@VSPINK) August 17, 2018\n

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6. Experiential events

Ads come and go, but experiences stay forever in peoples’ minds. These days retail brands are discovering new and innovative ways to engage with customers.

Chanel made an impression in New York’s SoHo with its experiential pop-up store Atelier Beauté Chanel in 2019. It was an interactive store that offered guests the chance to try out their collections, get expert skincare and makeup services, and plenty of photo ops.

They also hosted a series of “makeup happy hours” where visitors could book a slot for 20 minutes of one-on-one consultation with a Chanel makeup pro.

How to plan events for your retail store

Set goals and budget
Plan around a theme
Create a unique experience
Tie your event to a charity or cause

The best events require end-to-end planning to be successful. Follow these four steps to plan a stellar event.

1. Set goals and budget

Every marketing campaign starts with good planning, and organizing an event is no different. Before you just throw yourself into planning your event, you need to have an end goal for it, for example:

Generate brand awareness
Launch a new product
Generate more sales
Get media coverage
Build better customer relationship
Get social media mentions
Sell your old inventory

After deciding on the purpose of your event, set numeric values against your goal. Because if you can’t measure it, you can’t track its progress.

For instance, your goal could be to get at least 50 percent of the attendees to mention your event on their social media handles.

The next step is to make a budget. The last thing you want is to overspend on the event and run out of marketing funds. Make a list of everything you’ll need to make this a successful event—inventory, staff, marketing materials, videos, banners, and anything else you can think of.

After your list is ready, take a note of the price of each required item, total it, and add 10-20% to give your budget some flexibility. If you’re looking to decrease expenses, consider partnering up with another brand and splitting the costs of the event.

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2. Plan around a theme

A theme sums up your event in a couple of words. It helps visitors visualize your in-store event better. Rather than just hosting any event, you can connect it with an occasion or concept.

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The Elfridges are in town http://t.co/JWowIQ5d pic.twitter.com/eX6qrWxl
\n— Selfridges (@Selfridges) December 2, 2012\n

Let’s take a page out of Selfridges’ book. They launched festive events to make their customers feel special with breakfast with Santa, an in-store show, and personal shoppers named ‘Elfridges’ to assist them with their needs.

You can host similar events around different themes. For instance, a “Winter is Coming” product launch event that ties into Game of Thrones, or maybe a quiz event after a major movie release where the winner gets 90% off their purchases.

3. Create a unique experience

Creating a unique and memorable experience that leaves the guests awestruck is part of the goal of a successful retail event. You need to get creative to stand out from the crowd and think of how you can entice the guests—Under Armour did just that.

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We came, you saw, we lifted you up – that’s a wrap on UA HOVR House LA! Next stop: ATX in March #UAHOVR pic.twitter.com/FtD4OnNiHx
\n— Under Armour News (@UAnews) February 17, 2018\n

Under Armour (UA) launched their new kicks called the UA HOVR at an LA pop-up experience. These shoes absorb impact and provide energy return to deliver a zero-gravity feel. To give guests this exact feel, UA created a gigantic geodesic dome where its visitors could try out UA HOVR shoes on treadmills.

4. Tie your event to a charity or cause

People care and they love donating to charity—more than 56% of Americans donated to charity last year. Hence, events tied with a charity have a ‘do good and feel good’ element, and customers will want to associate themselves with brands tied up with a good cause.

Remember to keep your charity events simple. You can donate a percentage of your sales to an organization or create a campaign donating a significant sales percentage to the rightful cause.

How to market in-store events

Social media
Email lists
In-store promotion
Leverage loyalty programs
Partner with other retailers

Once you have a solid idea of the type of event you want to host, your next step is strategizing how to market the event.

Social media

Harness the power of social media to market your retail event. Add an event to your Facebook page, including the required information for the event.

When is it happening?
Where is this event happening?
Why should they attend?

Post stories on your Instagram, creating awareness for your in-store event. You can also run ads for better visibility.

Sephora collaborated with Dr. Dennis Gross for the Peel Mobile Event. They posted it all over their social handles. For instance, this was a post made from Dr. Gross’s Instagram handle—notice how they create the buzz with a video and precise dates and timings.

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A post shared by Dr. Dennis Gross Skincare (@drdennisgross)
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Email lists

You want to attract new customers with your retail events, but you cannot forget the loyal customers you already have. Send email invites to your existing customers, including an iCal or Google Calendar invite. This makes your customers’ lives simpler and increases your attendance rates, as the event is on their calendar.

Influencers can help you reach a massive audience without running ads—you can send invitations to local influencers in your industry if they have an engaged audience and content aligning with your needs.

Bobbi Brown hosted a three-day event in New York City and invited beauty and lifestyle influencers. There were 25 influencers with a collective social media reach of more than 25 million. Bobbi Brown expanded this campaign by encouraging their users to share a selfie with their new lipstick for a chance to be featured on their website.

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💡 PRO TIP: Want to create beautifully branded emails to promote your next product launch? Use Shopify Email to create, send, and track campaigns, all from within Shopify—no coding experience required.

In-store promotion

Let’s go back to the old school for this. As you already have regular visitors to your store, you can print flyers and banners to highlight your upcoming event.

Whenever a regular customer comes in, you can hand out flyers to them and invite them to your event. There are higher chances they will attend because they’re warm to your brand and an existing customer.

Also, they can bring more people to your event by simply spreading the word amongst friends and family.

Leverage loyalty programs

If you have loyalty or insider programs for your brand, you can gain referrals. To do it, add an extra gift for the members, such as a hamper, exclusive offers, or the chance to be the first to buy a limited collection.

This extra gift can vary according to your industry, but when done right, it can result in more attendees for your store event.

Partner with other retailers

Hosting in-store events can be expensive, but you can ease your burdens by inviting another business to be your partner. But make sure you don’t invite your competitors here. You want brands that complement your business in one way or the other.

Get brands who share your target audience, and you both benefit from a larger audience with less expense.

Examples of in-store events

With numerous brands pulling off in-store events, here are our three favorite picks.

Chanel’s product launch

Chanel knows how to make its customers feel valued and special by offering them a chance to attend a product launch before it goes on general sale. They attracted customers to their London pop-up store, dedicated to the newly launched perfume, Gabrielle. It was the first major fragrance from Chanel in 15 years, focused around an imaginary flower from Olivier Page.

The event started with a graphic film on the life of Chanel; later there was a visit to the ‘wall of flowers,’ where at the press of a little button, the scents of ylang-ylang, jasmine, orange blossom, and tuberose spread into the air.

This experience was very exclusive and limited to very few people. After the experience, each visitor was handed one of the unique goody bags.

Warby Parker’s green room

Retail eyewear store Warby Parker has found innovative ways to stand out from the crowd with unique events. At their LA Melrose Avenue store, they converted one of their empty rooms into a giant green screen—a photo booth experience allowing customers to record short videos with entertaining props and backgrounds.

They dedicated this event to the fact that they were so close to Hollywood and the entire film industry. Their primary goal was to drive people into their store with unique and engaging experiences.

They gave customers a reason to come and encouraged them to share on social media for better exposure.

Westfield’s Christmas grotto

Westfield shopping center in London seized an opportunity on Christmas with a special grotto for adults and children. By making their grotto bigger and better than those of other stores, Westfield attracted shoppers that would otherwise have gone to a different retail store.

Young visitors were allowed to enjoy the snow factory at the North Pole where Santa’s elves make all the snow in the world. Children could create their snowflakes and explore other activities in the factory. They could also take a photo with Santa and get their gifts from him.

Such an event resulted in more sales, promotion on social media, and people in their store. You can do something similar if you’re looking for a way to attract people with a unique experience.

Start hosting retail events at your store

Consumers are enjoying in-store shopping now more than ever before. They’re not just looking for better products but a better experience, customer support, and in-store experience.

Retail events are a great way to showcase all of them; it’s a consumer-approved marketing method because they’re fun. You get the chance to form lasting relationships well beyond emails and social media posts.

Turn store traffic into sales

","Retail events can help you attract new customers, create brand loyalty and dramatically increase sales. Learn all about it in this end-to-end guide.","

$\"\"$

Retail events can help you attract new customers, create brand loyalty and dramatically increase sales. Learn all about it in this end-to-end guide.

",{"_3406":3434,"_2946":3556,"_2428":3553},"Retail Events: Ideas and Examples (2022)",{"_3406":3438,"_3439":3440,"_3441":3442,"_3443":2622},[-5,-5,-5,3559,3561,-5,3563,-5,-5,3564,-5],{"_3406":3447,"_3448":3560,"_3450":3451,"_3452":-5,"_3453":-5},"{\"x-default\":\"https://www.shopify.com/blog/retail-events\",\"en\":\"https://www.shopify.com/blog/retail-events\",\"en-us\":\"https://www.shopify.com/blog/retail-events\",\"en-ca\":\"https://www.shopify.com/ca/blog/retail-events\",\"en-gb\":\"https://www.shopify.com/uk/blog/retail-events\",\"en-au\":\"https://www.shopify.com/au/blog/retail-events\",\"en-id\":\"https://www.shopify.com/id/blog/retail-events\",\"en-nz\":\"https://www.shopify.com/nz/blog/retail-events\",\"en-za\":\"https://www.shopify.com/za/blog/retail-events\",\"en-ng\":\"https://www.shopify.com/ng/blog/retail-events\",\"en-ph\":\"https://www.shopify.com/ph/blog/retail-events\",\"en-sg\":\"https://www.shopify.com/sg/blog/retail-events\",\"en-hk\":\"https://www.shopify.com/hk-en/blog/retail-events\",\"en-ie\":\"https://www.shopify.com/ie/blog/retail-events\",\"en-my\":\"https://www.shopify.com/my/blog/retail-events\",\"en-in\":\"https://www.shopify.com/in/blog/retail-events\"}",{"_3406":3447,"_3448":3562,"_3450":3456,"_3452":-5,"_3453":-5},"[{\"title\":\"What Is Inventory Management? How to Manage and Improve Stock Flow\",\"url\":\"blog/inventory-management\"},{\"title\":\"Mobile Point-of-Sale (mPOS) Systems Explained\",\"url\":\"blog/mobile-pos-system\"},{\"title\":\"Event Marketing: Benefits, Types, and Ideas for Retailers\",\"url\":\"blog/event-marketing\"},{\"title\":\"The Art of Reputation Management: What Retailers Need to Know About PR\",\"url\":\"blog/the-art-of-reputation-management-what-retailers-need-to-know-about-pr\"},{\"title\":\"The Ultimate Guide to Geotargeting in Retail\",\"url\":\"blog/geotargeting-retail\"},{\"title\":\"What Retailers Need to Know About Voice Shopping\",\"url\":\"blog/voice-shopping-what-retailers-need-to-know\"},{\"title\":\"6 Examples of Retail Gamification to Boost Engagement and Sales\",\"url\":\"blog/6-examples-of-retail-gamification-to-boost-engagement-and-sales\"},{\"title\":\"Affiliate Programs for Retailers: What Are They and How They Can Boost Your Revenue\",\"url\":\"blog/affiliate-programs-for-retailers\"},{\"title\":\"10 Ideas to Help Retailers Reach New Audiences (and New Customers)\",\"url\":\"blog/10-ideas-to-help-retailers-reach-new-audiences-and-new-customers\"},{\"title\":\"The 8 Best Podcasts for On-the-Go Retail Entrepreneurs\",\"url\":\"blog/best-podcasts-for-on-the-go-retail-entrepreneurs\"}]",{"_3406":3447,"_3448":3458,"_3450":3459,"_3452":-5,"_3453":-5},{"_3406":3447,"_3448":3565,"_3450":3462,"_3452":-5,"_3453":-5},"https://cdn.shopify.com/b/shopify-brochure2-assets/627f8d9807ce4b545d06ca21048b65b7.png","16 Jun 2022",{"_3406":3407,"_2823":3568,"_2921":3569,"_2946":3570,"_3411":3571,"_2418":3572,"_3422":3576,"_3308":3577,"_3429":3578,"_3431":3579,"_3025":3580,"_3436":3581,"_3444":3582,"_3463":3589,"_3464":3570,"_3465":-7,"_3466":-7,"_3467":-7,"_3468":3590,"_3470":3571},"gid://shopify/Article/564184580130","google-local-inventory-ads","How to Reach Nearby Shoppers with Google Local Inventory Ads","2022-06-01T17:51:00Z",{"_3406":3414,"_2426":3573,"_3416":3570,"_3418":3574,"_3420":3575},"https://cdn.shopify.com/s/files/1/0070/7032/articles/Google_Inventory_Ads_908c39e4-1395-4012-a554-6238e53df7fa.png?v=1769197426",1850,970,[3424,747,3425,3427],"

Shoppers are searching for and buying products locally more than ever. In fact, searches including “near me” have grown 3x in the past two years.

To help merchants have their products discovered by local shoppers, Google offers local inventory listings and ads. With them, shoppers can see which stores near them carry the product they’re looking for, whether it’s in stock, and if options like in-store pickup are available.

Local inventory listings and ads are an accessible way to promote your store’s inventory, bring more local shoppers into your store, and increase store sales. And now, it’s easier than ever for merchants using Shopify POS to sync their store’s inventory with Google and get found by more local buyers.

Keep reading to learn more about Google local inventory listings and ads and how to set them up in Shopify.

Table of Contents

What are Google local inventory ads (LIA)?

Local inventory listings show shoppers products that are available at nearby stores, and are designed to help brick-and-mortar stores get their products found by more local buyers searching for products on Google.

Local inventory ads are when you pay to boost an inventory listing and have it seen by more shoppers. These are also known as Smart Shopping campaigns, which you can run and manage from the Google & YouTube app for Shopify.

You can distinguish local inventory listings and ads in Google by the labels “In store” and “Pick up today.” This indicates the product is available at a store near you. Use them to bring more shoppers with intent to buy to your store.

$\"Example$

How do Google local inventory ads work?

A local inventory listing is triggered whenever a shopper searches for a product within a given geographical parameter (set by the merchant in their store’s Google Business Profile), and appears at the top of Google Search’s results page. Local inventory listings also appear in Google Maps and the Google Shopping tab.

Shoppers see which stores have the product they need in stock, its description, price, rating, and even get directions to the store. Businesses can choose where shoppers pay: on their website, at your store, or directly on Google using Buy on Google.

Once you’ve listed your store’s inventory on Google for free, you can pay to boost your listings and get them in front of even more customers.

Sync store inventory with Google in seconds

Use the Google & YouTube app for Shopify to list your store’s products on Google for free, launch Smart Shopping campaigns, and track performance from Shopify’s back office.

Benefits of Google local inventory ads

Today, consumers search online before buying at their local store. In fact, 83% of US shoppers who visit a store say they’d searched online beforehand, and 78% search for info about local stores at least once a week.

Google local inventory ads are an accessible way for brands with physical stores to increase their online presence, promote their inventory, increase foot traffic, and—most importantly—make more sales.

Bring your store online

“Local inventory ads open up the possibility for retail stores to meet their consumers where they are,” says Tony Chopp, Director of Paid Search at Common Thread Collective.

Chopp is right—LIAs help brick-and-mortar stores come online for the first time. If you don’t already have an online store, you can create a virtual storefront with Google that pairs with your physical store and shows online shoppers vital information like store hours, product availability, and directions.

🛒 ECOMMERCE TIP: Creating your own online store can feel intimidating. Where do you start? What mistakes should you look out for? Read our guide to learn how to start an online store with Shopify in 9 steps.

Promote your store’s inventory

With more shoppers using Google to find products and nearby stores carrying them than ever, local inventory listings are a practical way to reach them. You can list products for free or spend to boost them and increase their reach, which makes them an accessible marketing tool no matter what your budget is.

Drive store foot traffic with in-store pickup

Use in-store inventory listings to highlight fulfillment options like “Pick up today”, “Curbside pickup,” and “Pick up later.” These options not only drive more foot traffic, but also let shoppers reserve an item before pickup or buy it online.

🦶 FOOT TRAFFIC TIP: Offer in-store pickup to increase foot traffic and give shoppers the flexibility to buy how they want from local inventory listings—online, at your store checkout, or directly on Google.

Women’s clothing retailer Ann Taylor benefits from in-store pickup every day. Once a customer clicks through Ann Taylor’s local inventory listing, they can schedule an in-store pickup to get a new dress in a matter of hours—which is significant considering online shipping can take days.

Help local customers find you

Once you upload your local product inventory feed, your products are eligible to show up in Google Search, Google Maps, Google Images, and Google Assistant.

Google Search

Google’s “See what’s in store” feature lets you list store inventory for free in your Knowledge Panels—that’s the box that appears in the right-hand column of the search results for your business.

$\"Local$

Google Maps

The “See what’s in store” knowledge panel applies to both Google Search and Google Maps. Once you set up local inventory listings, your products will be seen by shoppers on both those surfaces free of charge.

📚 FURTHER READING: How to Set Up Google Maps Ads for Beginners

Google Images

In a Google Consumer Survey, 50% of online shoppers said they browse Google Images to research and find which product they want to buy. Google local inventory listings show up in Google Images too, expanding your products’ reach even further.

Google Assistant

In the US, 33.2 million consumers are expected to shop using voice search in 2022. Local inventory listings help you capitalize on this trend. Google highlights in-stock products to nearby shoppers searching with Google Assistant.

Boost inventory listings to increase reach and sales

By listing your inventory on Google for free, you make it easier for nearby shoppers to discover and buy from your store. But boosting local inventory listings will help your listings reach even more online shoppers and increase sales even further.

What makes local inventory ads so valuable is that they’re only seen by shoppers that are close by and looking for products you sell. Every dollar you spend to boost your listings will help your products be seen by people actively looking to buy. Maximize your ad bids during store hours to improve their efficiency even more.

“Local inventory ads are a great way to reach our customers with relevant product information when they go online to search,” says Rahel Götz, Team Lead for Online Performance at SportCheck. In fact, local inventory ads led to 108% more shop visits and over two times more revenue from store traffic driven by local inventory ads.

Measure your listings’ performance

One standout benefit of local inventory listings is being able to easily measure store transactions and that attribute back to an online ad. Many merchants find it challenging to quantify how online activities influence store sales, but local inventory ads make it straightforward.

You can use a few different metrics to track your listings’ performance and return on ad spend (ROAS) for local inventory ads.

\nStore visits. Customers often research products and stores online before buying in person. If they have opted to share their location history, Google can tell you if they visited your store after viewing an ad online. You can find these results in your Google Ads reports.\n
\nLocal ad clicks. If you enable local inventory ads in your Shopping campaign, you can promote products you sell online, in-store, or both. As for tracking local ad clicks, segment your report by clicking: Shopping > Product > Local. This will track clicks in the area where an ad was shown. \n
\nLocal storefront interactions. Once shoppers click through an ad for your product, they arrive at your Google-hosted “local storefront,” where they can find available products, store hours, directions, and more. Additionally, you can set up a Google Analytics property for this storefront to monitor user behavior. Then you can track the number of people asking for directions, the devices they use to visit the page, the time of day when they visit the page, and more. \n

💡 PRO TIP: You can set up, track, and manage local inventory ads and Smart Shopping Campaigns from Google & YouTube app for Shopify. Get all the perks of marketing your business on Google without jumping between accounts.

How are you charged for local inventory ads?

It’s free to list your local inventory on Google, which makes your products eligible to show up across Google’s properties. You can pay to boost your listings with local inventory ads to reach even more local shoppers.

The bidding format for Google local inventory ads is the same as standard Google Shopping campaigns. You’re only charged after a potential customer clicks your ad and visits either your Google-hosted landing page or your own website if you have in-store pickup options enabled.

How to set up Google local inventory listings in Shopify

Now that you’re familiar with local inventory listings, ads, and the benefits of each, you’re ready to learn how to set them up. If you use Shopify POS, you can easily sync your store’s inventory using Google & YouTube app for Shopify.

💡 PRO TIP: Before setting up Google local inventory sync in Shopify, you need to have already set up the the Google & YouTube app and link it to your Google Merchant Center account. Follow this guide to learn how to add the Google & YouTube app to Shopify.

1. Launch the setup guide for Google local inventory

Go to the the Google & YouTube app in your Shopify admin and scroll to the Google local inventory section. Click Get started to launch the setup guide.

$\"Step$

2. Create a Google Business Profile

Click “Create profile” to sign up for a free Google Business Profile. Google Business Profiles allow you to add your retail stores to Google so that your locations appear in Google Maps and search. When adding locations, be sure to use the same address as your retail locations in Shopify so that inventory information can sync seamlessly.

If you already have a Google Business Profile, click “I already have a profile”.

$\"Step$

Since Shopify is a trusted Google partner, setting up a Google Business Profile takes just a few minutes. Being on Shopify, your business can be verified instantly so you can start using Google's tools faster.

3. Link your Google accounts

Once you’ve acknowledged the requirements to prepare products for syncing, you must link your Google Business Profile to your Google Merchant Center account. You can do this right from the Google & YouTube app in Shopify by entering the email address you used to create your Business Profile and clicking “Link”.

$\"Step$

Get started with Google local inventory listings

More customers are searching for local products and stores every day. As a retail store owner, it’s your job to meet their needs, find new growth channels, and scale your business. Now you can capitalize on these opportunities with Google local inventory listings from the Google & YouTube app for Shopify.

Reach more nearby shoppers with Shopify

Shopify comes with built-in tools to bring more online shoppers to your store. List your products for free on Google, create Smart Shopping campaigns, track ad performance, and manage orders from Google purchases from the Google & YouTube app for Shopify.

Google Local Inventory Ads FAQ

What is the difference between Google Shopping and local inventory ads?

Google Shopping is an online shopping search engine and local inventory ads are ads that show potential customers if a product is in stock at a local store near them. Google Shopping searches are global and show products from multiple retailers and local inventory ads are only shown to local customers who are searching for a specific product and within a certain distance.

How do I run local inventory ads?

Sign up for the Local Inventory Ads program. To participate in the program, you must first sign up with Google Ads.
Create your product feed. This is a list of your products and associated product attributes, such as product name, price, availability, and image.
Add local inventory ads extensions to your ads. This is done through the Google Ads interface.
Monitor performance. Monitor your ads and adjust your campaigns as needed.
Promote local inventory ads. Use local inventory ads-specific campaigns to drive more in-store traffic.

","Google local inventory listings and ads are an accessible way to promote your store’s inventory, increase store foot traffic and sales. Learn how to sync your Shopify store's inventory with Google and get found by more local buyers today.","

Google local inventory listings and ads are an accessible way to promote your store’s inventory, increase store foot traffic and sales. Learn how to sync your Shopify store's inventory with Google and get found by more local buyers today.

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As Peter Drucker said, “What’s measured, improves.” Today, retail store owners rely on metrics to make crucial decisions and steer their business in the right direction.

Measuring inventory turnover, for example, you can gauge whether you’re ordering enough products. And by calculating gross margin return on investment (GMROI), you can easily tell how much profit your inventory investment generates.

In this article, we’ll take a closer look at GMROI—a key indicator of your retail store’s success.

Table of Contents

What is gross margin return on investment?

Gross margin return on investment (GMROI) is a metric used to evaluate the profitability of every dollar you invest in inventory. To calculate GMROI, divide the gross margin by the average inventory cost.

GMROI is a crucial indicator of whether a retail business is on track to end the year in the black or the red. Considering that 70% to 80% of a retailer’s assets are tied up in inventory, GMROI helps you to see if that inventory is driving profit.

For instance, you might start losing money if a particular product isn’t moving off the shelves and you don’t see how to correct course. This is where inventory analysis comes into play—metrics like GMROI will help you determine whether this particular product is worth your investment.

GMROI is a versatile metric as well. You can calculate and compare GMROI for two stores, five product stock-keeping units (SKUs), or even color variants within a particular SKU. GMROI can take you as broad or as deep as you need to go to measure your store’s profitability.

How to calculate GMROI

There are multiple ways to calculate GMROI depending on a retailer’s business model and the accounting systems they use. But the standard method, according to Investopedia, is simply:

GMROI = Gross profit / Average inventory cost

Let’s break it down.

Gross profit

The gross profit accounts for variable costs like labor and supplies. Here’s the formula to calculate gross profit:

Gross profit = Revenue - Cost of goods sold (COGS)

Measuring gross profit helps you see how your company can get the most value from its variable costs.

Average inventory cost

Retailers use the average inventory cost metric to measure how much inventory they have had over a specific period of time.

Measuring average inventory cost helps you understand the amount of inventory needed to support sales. It’s also used to determine inventory losses from theft, shrinkage, damages, and product expiration.

Manage inventory from one back office

Shopify POS comes with tools to help you manage warehouse and store inventory in one place. Forecast demand, set low stock alerts, create purchase orders, know which items are selling or sitting on shelves, count inventory, and more.

The standard formula to calculate average inventory cost is:

Average inventory cost = (Current inventory + Previous inventory) / Number of periods

However, if you wish to calculate the average inventory cost for a year, first, you must add the inventory cost at the beginning of every month, along with the ending inventory cost of the last month of the time period, and then divide it by 13.

Average inventory (over a year) = (Sum of beginning inventory cost for every month [Jan.–Dec.] + Ending inventory cost for December) / 13

💡 PRO TIP: Want to skip the manual calculations? See your entire product catalog’s gross profit, beginning and ending inventory cost, and more, view the Profit by product report in Shopify admin.

Example: calculating GMROI

Let’s imagine that Sarah’s Family Clothing, a retail clothing store, needs to calculate GMROI for a year, based on the following figures:

Annual revenue: $400,000
COGS: $75,000
Inventory cost of the year:

$\"Monthly$

From the above data, let’s calculate GMROI using the formulas above:

STEP 1: Find gross profit

$400,000 - $75,000 = $325,000

STEP 2: Find average inventory cost (for the year)

$1,561,520 / 13 = $120,117

STEP 3: Find GMROI

$325,000 / $120,117 = $2.70

This shows that for every dollar she spends on inventory, Sarah’s business makes $2.70.

GMROI should always be more than one, which would indicate that the business is profitable. However, you should also consider the industry’s GMROI benchmarks to ensure your business is competitive.

Fortunately, retailers have many reliable benchmarks. In 2021, the average GMROI for family clothing stores was $2.56.

With a $2.70 GMROI, Sarah’s Family Clothing is well above the industry average, indicating a healthy retail business that is efficiently managing its inventory.

Why GMROI matters so much to retailers

Some retailers rejoice after seeing stellar gross profit reports without taking the time to calculate GMROI, which may well reveal problems in their inventory management.

There are many reasons why retailers should always keep an eye on GMROI, but the two main reasons are: understanding profits on inventory and making informed product decisions.

Understand profits on inventory

If Sarah’s Family Clothing had a GMROI of $2.70 this year, which is well above the industry benchmark, does that mean all of the business’s products are performing equally well?

No. If, for example, the GMROI for anime tees is 92¢, that would suggest that Sarah isn’t selling enough anime tees to profit from them.

Sarah could solve this problem by finding a way to reduce the cost of anime tees. She could also clear out her inventory by bundling the tees with fast-selling products to finish the month/year in the black for that category.

Informed product decisions

\nGMROI can be used to make smarter product decisions.\n

\n
GMROI helps you tailor your merchandising strategy to your most profitable items.
\n
Rebekah Kondrat, retail expert and founder of Kondrat Retail
\n

Kondrat is right—GMROI data can strengthen your balance sheet by helping you decide when to ramp up production on high-selling SKUs and cut prices on low-selling ones until they sell out.

What is a good GMROI for retail businesses?

While a GMROI above one is necessary to profit off your inventory, Investopedia considers $3.20 to be a strong showing.

However, determining a good GMROI for retail businesses is difficult, as it tends to vary by geography (Los Angeles, California vs. Scottsdale, Arizona), vertical (hardware store vs. clothing store), and market segment (consumer packaged goods [CPG] vs. luxury).

It also depends on the type of products you’re selling. While a clothing retailer with high-selling products typically operates with low margins, a luxury watchmaker typically waits a significant amount of time to sell through its products, which reduces GMROI.

Fortunately, independent studies provide reliable benchmarks that can help gauge your niche’s GMROI performance.

Here are a few examples of GMROI in common industries based on 2021 data:

Family Clothing: $2.56
Furniture: $2.50
Convenience: $6.69
Sporting goods: $2.10
Electronics: $6.21
Cosmetics, beauty supply: $2.68
Hardware: $1.77

How to improve GMROI

Beside following the standard industry benchmarks, you should maintain internal GMROI reports based on past data. Because if you’re not happy with the profits you’re making from existing inventory, you’ll want to study and take concrete steps to improve your GMROI, such as:

Reduce inventory costs

For small retailers, an increase in sales is great news—but it comes with higher overhead costs. And when adding new products, you’re also incurring additional purchasing costs (supplier charges), carrying costs (warehouse fees), and shortage costs (when a product goes out of stock).

Follow these three steps to increase your GMROI by cutting inventory costs:

Forecast your true demand by accounting for past data, seasonal buying patterns, competitive landscape shifts, and any other factors that bring consumers to you. If you’re using the Shopify POS, you can easily forecast demand with all these factors in mind.
\nLeverage past data to effectively time your inventory purchases. Be vigilant of what—and when—you buy. For instance, if you buy inventory too early without predicting demand appropriately, you might end up with deadstock.
Shed any deadstock immediately. You may want to bundle deadstock with fast-moving products, return them (if your supplier agreement allows), or donate them to charity and enjoy tax rebates.

Optimize pricing

Price modification can be tricky. Increasing product prices may seem like a reliable way to drive up both sales and GMROI, but this isn’t always the case.

Suppose you visited Sarah’s Family Clothing on a Monday and found a polo shirt you liked priced at $35, but when you returned on Tuesday to make the purchase, the price of the same shirt had jumped to $60. You would probably walk out of the store and buy the polo somewhere else.

However, from Sarah’s perspective, since A-list celebrity LeBron James had recently been seen wearing her polo shirt, its perceived value went up, and she decided to charge more for it.

Alternatively, you could also reduce your product price. If your deadstock is eating up shelf space and you estimate a price that should move it all, then this may be a viable option.

You might also negotiate down your supplier costs to automatically increase your margins.

Leverage sales data

Historical sales data can provide helpful insights for improving GMROI.

\n
Identify the products that your repeat customers are buying, talk to your manufacturers to get those costs reduced, and in turn, get a hike on the margins.
\n
Rebekah Kondrat, retail expert and founder of Kondrat Retail
\n

Kondrat says you can leverage sales data to get more out of top-selling products, accurately predict demand, and increase your GMROI.

Leveraging sales data is especially crucial for business owners with multiple stores. Using past sales data, you can estimate the number of SKUs you need to allocate toward each location.

Take control of your GMROI

At any given time, 70% to 80% of a retailer’s assets are tied up in inventory. Measuring how profitable your inventory is—by calculating GMROI—isn’t just helpful, it’s practically essential.

GMROI is a powerful metric that can differentiate winning products from deadstock, successful product categories from losing ones. It can also tell you which of your stores is likely to bring in the greatest ROI this year. Take control of your GMROI, and you’ll be set for success.

Manage your inventory with confidence

Only Shopify POS helps you manage warehouse and retail store inventory from the same back office. Compare inventory costs to revenue, see which items are selling out or sitting on shelves, forecast demand, and more.

GMROI FAQ

What is a high GMROI?

A high GMROI is typically considered to be any figure that is above 1.0. This means that for every dollar spent on goods, the company is able to generate more than one dollar in profit.

What is the difference between ROI and GMROI?

ROI (Return on Investment) is a measure of the profitability of an investment, calculated by dividing the return of an investment by its cost. It is expressed as a percentage or a ratio.

GMROI (Gross Margin Return on Investment) is a measure of the efficiency of an investment, calculated by dividing the gross margin of an investment by its cost. It is expressed as a percentage or a ratio. GMROI takes into account the cost of goods sold and other sales related expenses, and is a more comprehensive measure of profitability than ROI.

How do I calculate GMROI in Excel?

Calculating GMROI in Excel requires a few simple steps:

Start by entering the total gross margin (GM) of the product or service in question.
Next, enter the total invested capital into the product or service.
Then, divide the gross margin by the total invested capital to calculate the GMROI.
Finally, format the result as a percentage.

","GMROI tells you how much you're making from your inventory investments. You can calculate it by dividing your gross margin by average inventory cost.","

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GMROI tells you how much you're making from your inventory investments. You can calculate it by dividing your gross margin by average inventory cost.

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