By Jamie Sershon, merchandising analyst, for the Resolutions blog series
One way to maximize sales in your front end is to evaluate the item sales of a department compared to how much space is allocated for it. By doing a quick space-to-sales analysis, you can see what adjustments should be made to capitalize on sales.
In order to perform a space-to-sales analysis, you will need to know the sizes of your departments in linear feet. It may take some time to record these measurements, but keep in mind you won’t need to do this again unless you change the size of a section. I recommend linear feet because some departments only take up a shelf or two in a four foot gondola, and this makes the analysis more accurate.
Pick a time frame to analyze your front-end sales. Ideally you are using your POS system to its full potential and you will easily be able to pull these reports. If you do not use this part of your POS system, I recommend that, at minimum, you start recording your sales by department and by item number. Being consistent where items are categorized is an important part for accurate analysis, so cross-train all employees who check out customers to record this information as well.
Once you have the sales for each department and the linear feet, you just need to do a little math. Take the sales units (not sales dollars) for a particular department and divide that by the total sales units for all departments. Then take the linear feet from that same department and divide that by the total linear footage for all categories. The percentages you end up with for both of these should be fairly similar. By calculating all categories at the same time you’ll be able to see trends and if the sales for a department warrant the space allocated to it, what items you’ll want to continue stocking, and what items may not be worth reordering.
A few things to keep in mind: only a few items within a department may account for a majority of its sales. On the other hand, the size of individual items in a department can make your analysis seem skewed. For example, larger items that take up more shelf space, such as incontinence or feminine care paper products, may show that there is too much space allocated compared to the sales. By tracking sales by item number, you will be able to see this and adjust your reordering accordingly.
You’ll also want to keep in mind that some items and departments have higher margins, thus adding more profit. For example, the Health Supports section typically has higher margins while feminine protection products and men’s and women’s razors generally have lower margins. Being aware of this will help in making adjustment decisions, but keep in mind, if you don’t carry some of those lower margin items because they don’t make a big profit, those customers may shop elsewhere leaving you with no profit instead of a small profit.
A space-to-sales analysis is a simple way to get a quick glimpse of how your front end is performing in comparison to its potential. You know your store and what your customers are seeking better than anyone else, so use your judgement when completing this analysis and making changes. Make it a goal to do it on a regular basis. If you don’t review your space to sales ratio every few months, you may lose out on sales and profit opportunities you could otherwise realize.