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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 product 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, spacious 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 dazzling the consumer and offering convenience. What IS an acceptable level for sales per square foot? This of course will be hard to generalize on. Traditionally, 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. Analyze 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. Tracking 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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