Measuring Success in Retail Outsourcing: Key Metrics and KPIs
As summer 2024 draws to a close, the big customer experience (CX) events start returning. On September 24-25, one of the biggest events in the US for anyone following retail CX will be the CX Retail USA Exchange hosted by IQPC in Dallas, Texas. This event has a formidable agenda and a list of speakers.
Our team is already looking forward to talking about the key metrics and Key Performance Indicators (KPIs) associated with retail outsourcing. But is this such an important and challenging issue in retail?
Where the Retail Industry Stands
Retail is a complex business that requires knowledge of products, branding, marketing, technology, customer service, and logistics. Some products sell in-store but never online, some only at certain times of the year, and some just don’t sell at all. Retailers need to understand why and anticipate what will be the next big thing for their business.
But if retail executives need to spread their knowledge and experience across so many areas, then it can become very thin indeed. Sometimes it makes sense to find a trusted partner to handle specific parts of the business so you can focus on the more important core tasks.
Retail Management Strategy
The retail software company Shopify published an excellent article on retail management strategy, which highlighted some examples of this process. They suggest that three basic questions should help retailers decide which business processes could be handed to a partner:
- Is it commonly delegated? Is there an industry full of specialist firms ready and experienced in this type of work?
- Is it cost-effective? Would it be cost-effective to outsource these processes, or would it just cost too much to manage the process?
- Can the tasks be described to someone else? Is it simple to do?
This is a great summary. The Shopify article suggests processes such as content marketing, IT and web development, warehousing and fulfillment logistics, and admin processes—all of which could easily be outsourced to a specialist partner.
Key Metrics and KPIs
In our experience, customer service can also be added to that list. In this case, the metrics and measures mentioned earlier will be important. If a partner is managing your customer service, then there are several metrics you will want to monitor that are very focused on the customer experience, such as:
- Customer Satisfaction (CSAT) Score: Use surveys or feedback forms to assess customer satisfaction with the service provided. High CSAT scores indicate that the outsourced partner is meeting or exceeding customer expectations.
- Net Promoter Score (NPS): Measure customer loyalty by asking how likely customers are to recommend your brand. A high NPS reflects positive customer experiences, often driven by effective outsourcing.
- First Contact Resolution (FCR): Track the percentage of customer issues resolved during the first interaction. High FCR rates indicate efficiency in customer service, reducing the need for follow-ups.
Secondary Performance Indicators
However, good customer experience can also impact many aspects of the business performance for a retailer, so you may also want to explore metrics such as:
- Sales performance: Does an improvement in CX improve revenue or sales? Are average transaction sizes increasing? Are we converting more visitors and browsers into customers?
- Efficiency: Are we reducing the time from when an order is placed to when it is delivered? How quickly is inventory being replaced? Are we improving order accuracy so that there are fewer errors that need correction?
- Costs: Are we reducing operational costs thanks to the outsourcing strategy? Has this impacted the cost to do business associated with each order? Is the CX outsourcing reflecting a positive return on investment?
- Customer Behaviour: Is an improved level of CX changing customer behavior, such as reducing churn or increasing the number of repeat customers? Are we retaining more customers and therefore increasing loyalty or even advocacy, where the customer is so satisfied they are promoting our business on their social channels?
These are just a few important metrics to consider when building a CX partnership for retail. Many more could be considered, such as quality, employee performance, risk management, innovation, and the use of technology. To explore every retail metric, you would probably need a book!
Turn Metrics Into Meaningful Retail Outcomes
Retail businesses must define the key outcomes they expect from a partnership with a specialist supplier and establish KPIs accordingly. If customer loyalty is a priority, CX metrics should be tailored to focus on achieving and enhancing that loyalty.
The agenda at the event in Dallas will explore these retail metrics – and many other CX-related subjects – and our team hopes to see you there in person.
For more information on the CX Retail USA Exchange, please click here and contact us for all your retail needs.
FAQs About Measuring Retail Outsourcing Success
Monthly reviews provide sufficient frequency to identify trends and areas for improvement without overwhelming stakeholders. Weekly real-time dashboard monitoring helps track critical KPIs like service level compliance and first contact resolution rate for immediate adjustments. Quarterly business reviews enable deeper analysis of ROI and cost reduction progress. Annual assessments evaluate overall outsourcing success and determine if the outsourcing partnership still delivers the expected benefits of outsourcing effectively.
Review service level agreements to confirm whether the outsourcing provider meets contractual obligations or if expectations need clarification. Analyze performance data to identify specific areas for improvement. Schedule stakeholder meetings with the outsourcing company to discuss root causes and collaborative solutions. Consider whether internal team support or process adjustments could improve outcomes. If persistent issues exist, evaluate whether the right outsourcing partner was selected or if the outsourcing model needs revision.
Gather baseline performance data from in-house operations before outsourcing to establish comparison points. Research industry best practices for similar outsourcing projects to set achievable targets. Consider complexity and service requirements when defining expectations. Work with the outsourcing provider to set mutually agreed benchmarks reflecting business goals and operational realities. Use analytics tools to monitor progress and adjust targets as the outsourcing relationship matures, ensuring continuous improvement without unrealistic pressure on deliverables.
Prioritize metrics aligned with primary business success objectives; if customer satisfaction is paramount, it may justify higher costs. Use weighted scoring systems where critical KPIs carry more importance than secondary measures. Implement dashboard views showing relationships between metrics to understand trade-offs. Communicate priorities clearly to the outsourcing company so they understand which performance tracking areas matter most. Successful outsourcing partnerships balance cost savings with quality through transparent discussions about acceptable compromises.
Organizations often track too many KPIs simultaneously, creating confusion about what drives outsourcing success and diluting focus on essential metrics. Measuring only cost reduction while ignoring quality metrics like customer satisfaction score provides an incomplete picture. Failing to establish clear service level agreements with specific targets leads to disputes. Not using analytics tools or real-time dashboards means reacting after damage occurs. Avoid measuring what’s easy instead of measuring what matters for actual business goals and outcomes.
