On Sunday I published a post about the importance of calculating what you need to earn per square metre of retail floor space. I want to revisit that topic here in this post. But first a story…
I know a newsagent who is growing sales of magazines, gambling products and cigarettes. They have a good business in a location that has become a convenience for new traffic.
The growth in convenience traffic has come at a cost as sales of higher margin items have fallen.
Here is their challenge: revenue is up and GP is down. The business is worse off for being busier in some categories.
This is why we need to all know what we need to make per square metre of our stores … so we can chase the GP necessary for us to pay the rent and other fixed costs we have in running our business. We need to work hard at balancing our business.
By balancing I mean managing the growth of low margin items versus the growth of high margin items. Yes, it’s tricky as one can drive sales of the other – but maybe not as much as we think. Our data can tell us just how much in our particular business.
A spike in a low margin product category – and by low margin I mean anything at 25% or less – could hurt the business overall. However, growing higher margin product sales is much harder work. It has to be because of the size of the rewards available.
Now more than ever, newsagents need to balance their business – balance their sales based on GP – for the future health of the business.
No supplier will do this for you. It’s up to you. I’d be happy to engage with any newsagent wanting to work on this.
v interested in more detail on this one Mark
Leo it starts with you doing the calculations in the linked post. Then we look at sales y category and space to work out your GP balance.
Mark, this is an interesting post and one the magazine publishers and distributors need an education on. With titles not in the top 100, they allocate stock on the basis of not having sell outs, even if the opportunity cost of carrying the additional copies out weighs the return on the “impulse” sale. They consider you have lost a sale and not that you are gaining more sales in the space with a title which is more current or better performing. That’s the problem in a category that has no direction or leadership, just a collection of self interested parties allocating stock with no regard to space, range or the proper merchandising of the entire category.
Bill there are ways newsagents can address this. The associations were supposed to but they appear to and passed on the opportunities outlined and discussed 18 months ago.