When you own or manage a retail company maximizing each inch of retail space will contribute to the success of your business. An effective method for determining if you are efficiently utilizing your retail space is to calculate sales per square foot. The tools required to analyze sales per square foot are a measuring tape, an annual sales by store report and optionally an annual sales by department report.
What to measure led to a debate with our seasoned retailers that work at Advanced Retail Management Systems. According to our research industry experts recommend measuring the selling space of the store in square feet. Our resident experts insist the entire store be measured in square feet including any stock rooms and offices since most leases do not exclude non-selling areas from rent. Total Net Sales / Square Feet of Space = Sales per Square Foot For example: if you have 1000 square feet of space and annual sales of $300,000 your sales per square foot are $300 ($300,000 / 1000 sq ft = $300). In other words each square foot contributes $300 to net sales during the course of a year. In general you should strive for $300 per square foot depending on location and type of business. The national average for regional malls is $341 per square foot.. To calculate sales per linear foot of shelf space or sales by department or product category to determine a product’s allotment of space use the following formulas: Total Net Sales / Linear Feet of Shelving = Sales per Linear Foot Category’s Total Net Sales / Store’s Total Net Sales = Category’s % of Total Store Sales If sales per square foot are less than $300 it is a good indication you are not getting enough performance per square foot and you will need to evaluate your product selection, future inventory purchases, pricing, and the amount of real estate occupied by slow moving product lines and expand square footage for products with higher averages.
