Sales Per Square Footage – The Value of Knowing Your SPSF (Part 3 of 3)
A few months ago, the brick and mortar store owners in the Shopkeepers Lab Group started talking about Sales Per Square Footage (SPSF).
Some shopkeepers weren’t familiar with this metric and many didn’t know how to calculate it for their business.
So I wrote a blog post about how to calculate SPSF and I included a link to a survey so store owners could anonymously share their findings. Later, I followed this up with Part 2 of this series: the results of the survey.
And then someone asked, what is the value of knowing my SPSF?
This is like the conversation that never ends! 😉
But it’s a great question. What can or should a brick and mortar store owner do with this information once they calculate it?
What is Sales Per Square Foot?
SPSF is an indicator of how efficiently a retailer uses its assets (merchandising, salespeople, etc.) to make sales. So, the higher the SPSF, the better.
“Sales per square foot” tracks:
- how well you’re utilizing your retail space/layout and/or displaying products to increase sales. It essentially acts as a “score” for your visual merchandising.
- It’s also a popular retail KPI (Key Performance Indicator) because it demonstrates how effective your retail personnel is at selling product.
How Can I Use Sales Per Square Footage?
When Strategizing To Increase It
Use it as a baseline and then figure out what needs to be done to increase it: do you need to offer training to your sales staff? Do you need to increase add-on products? Use the baseline and future SPSF’s to determine if there have been improvements in your business.
In some cases, landlords set rent for retail tenants based on their SPSF.
When Considering Expansion
Calculating SPSF can help retailer store owners decide which stores to expand, reduce in size, or relocate altogether.
For example, You’re in a 1,000 square foot store, your sales are $250,000/year and your SPSF is $250.
If you are considering moving into a 2,000 square foot space and you want to estimate sales in the new space, multiply your SPSF and your square footage: $250 (SPSF) x 2,000 (new square footage) = estimated yearly sales of $500,000. It won’t always be an exact science but it does help if you’re working on a formal business plan.
REMEMBER to keep profitability at the forefront. It does you little good to increase your sales spsf if you are losing money on each sale – keep margins as high as possible.
When Optimizing Your Floor Layout
Another great way use SPSF is by taking a look at your store’s floor layout. Especially if your store is laid out in zone or product zones. You can calculate how much each zone is generating in revenue and this can help you determine if you should make a zone smaller or larger.
For example, we launched a baby section in our store. We love the baby area because it’s so charming and sweet. Because we were so enamored with this area it slowly grew in square footage but when we ran the numbers, the SPSF in this area clearly indicated that we allowed emotion to make this baby section larger than it deserved. So we scaled it down and dedicated the extra square footage to home decor, which tends to sell better in our store.
Have you learned anything from these SPSF articles? Has it helped your business? I’d really like to know. Please comment below!
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