Progressive retailers as part of their financial metrics
should continually monitor their sales productivity per
square foot on a monthly basis as well as annually.
Sales productivity per square foot can vary based on the
merchandise line that you carry. It can also vary based on the
square footage of the store you are reviewing. Lastly,
location will affect sales per square foot based on traffic.
In general, large big box stores will usually generate
lower sales per square foot than smaller traditional mall
stores or those in busy street locations.
This is because big box stores will generally dedicate a
lot more space to non-selling floorspace with lounges,
demonstration areas and more displays. Smaller stores
cramped with merchandise and narrow aisles will usually
generate high sales per square foot. They can flourish as
long as they have a customer following that accepts this
type of layout in an era of customer experiences that
focus on astounding the consumer and offering convenience.
What IS an acceptable level for sales per square foot?
This of course will be hard to generalize on. Historically,
big box stores may generate $250 to $350 per square foot
per year, while a well run smaller store of say, 2000 square
feet may generate sales as high as $700 per square foot
per year. Of course the top line of the big box store,
although not as efficient will have a higher top line sales
result. Moreover, big box stores enjoy the economy of scale
and although may not be as economical as smaller operations
per square foot, profits are usually enhanced by these
greater operational efficiencies.
The lowest sales per square foot per year that I
experienced was $220 per foot in a big box chain. Prior
to that, I had managed to generate $1,000 per square
foot per year in a 4000 square foot menswear store
located in a prime downtown location. This store
eventually evolved into the chain's flagship store.
Some years later I managed to elevate sales per square
foot per year in a cramped bookstore to a high of $1,600
per square foot per year. This store almost had the same
top line sales as it's big box competitor!
If you run a kiosk or a chain of kiosks, you'll likely need
sales per square foot per year to run at least $1,000 per
square foot per year to cover your operational costs. Kiosks
can be very efficient operations from a sales per square
foot persepective, however you can only produce so much
income from a kiosk.
Do you track sales per square foot per month and per year
for your location or chain of locations? If not, it's another
retail metric that can help you improve the effectiveness
of your operation. Calculate and benchmark your current
sales per square foot on a monthly and annual basis. Now
you'll have a starting point. You'll be able to see the results
of any strategy you implement. If you positively improve your
cost per square foot month to month, you're on the right
track! You'll also be able to see how seasonality affects
sales per square foot. You can start developing marketing
campaigns and sales that exploit busy periods like the
holidays and those that get you through the slower periods.
This will help even out the wild swings in sales per square
foot per month.
In my next Retail Action Article, I'll offer some ideas on
how to fine tune the sales per square foot analysis, that
will help get the store manager involved in the process.
Monitoring sales per square foot will give you the end result
of all your tactics to increase sales and is an excellent
approach to tracking store by store, their effectiveness
and efficiency.
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