Knowing how much profit each of your store shelves produces is just as important to any retail store as product placement in the store would be. Knowing what the productivity of an individual rack is, under certain conditions, will not only help you increase profitsbut they also help you improve product selection and placement in your store. The idea is that you want to make as much profit as possible from each shelf in your store. And I mean shelf space in the broadest sense of the term.
Step 1: Decide on a unit of measure
One of the first things you have to do is decide on a unit of measurement. Realize that in order to compare a particular space to another, they must have the same unit of measurement. For example, if you use 1 foot of shelf space, you must apply it to each part of the store you want to calculate. Comparing the proverbial “apples to apples” is key to making this work.
Step 2 – Number Your Shelves for Tracking
Once you’ve decided on a unit of measure that works for you, number your shelf spaces (at least on paper) so you can identify specific locations and shelves. I suggest you use a shop map combined with a spell spreadsheet. Also keep in mind that the larger an individual unit of measure, the less accurate your profitability comparison will be. Therefore, using a smaller unit of measure is likely to be more valuable. For example, use 1 foot instead of 2 feet.
Step 3: Assign a product
Of course, after you’ve spent some time on product placement at this point, you’ll already have products assigned to specific locations in your store. Therefore, it is a simple matter of connecting a product to a shelf location number.
Step 4: Calculate the profit dollar value per item
While knowing margin percentages can be helpful, the true measure of productivity is actual dollars earned. So calculate the gross profit of a particular element (revenues – cost of sales = gross profit).
Step 5: Use dollar value to calculate dollar value productivity
Just multiply the number of units sold, of a particular product, with the dollar value great benefit. The most important part for comparison is that you need to measure it over time. So use 1 week, 1 month, 6 months, or any other measure of time you want to use. Apply this to all the shelves in your store, and pretty soon you’ll identify the top-producing shelves and, conversely, the lowest-producing shelves as well. Plug it into the stations and you’ll soon see what produces when.
Step 6: Take your time, analyze and experiment.
The amount of information that can be gained about your store’s productivity from an analysis of this nature is immense and immeasurable. Especially over time. However, keep in mind that this type of analysis takes time, especially in an environment that can have multiple cycles. So make sure the time used to calculate your productivity matches your store and product types. Of course with this data you can calculate the precise seasons for a particular line, for example.
In conclusion, having analyzed your store productivity You will do better in retail and increase profit for sure. The only thing to remember is that you have to do it regularly and be patient. Creating a useful statistical database takes time and effort.
I wish you all the best with your endeavors and invite you to share your stories and comments here.
Health!