Margin trends that reflect changes in
commodities prices suggest something is askew
Sales for the month of March averaged $104,960 across our sample store data, up 2.7 percent from the same period in 2015. Year-to-date rolling sales reached $1,623,630, up from February’s rolling 12-month figure of $1,620,876. Unit sales for the month at 314 were down 20 percent from 2015’s figure of 395, however a 27 percent increase in average sale from $242 to $307 ensured a positive sales increase.
This article originally appeared in the June 2016 edition of INSTORE.
Margin stayed steady at 46 percent, meaning the higher sales figure created a slight increase in gross profit from $47,153 to $47,829, up 1.64 percent month on month.
Each month we spend a little time delving into these figures but it’s important to understand that they consist of a composition of stores of varying sizes in different locations, and in many cases aiming at different parts of the market. The real value in the data is breaking down the details, which we aren’t able to do within the confines of this summary, and looking at the specifics that relate to your own individual situation.
The real value in data is not in the answers they provide, but in the questions they pose. What do I mean? Seldom does overview data provide an answer in itself. Invariably a discrepancy or variation in numbers leads to a question, which the numbers then highlight. Summary data such as this is the overview from which to drill down to specifics. For example, if your own average sale is lower than the data average for comparable stores then the obvious question is “Why am I not achieving the average sale that others are achieving?” At this point, the question has been framed, and further data may provide the answer you are seeking.
A lower average sale may be the result of one of two things: a lower average sale being achieved by the sales staff, or a lower average retail value of items being held as inventory. Let’s address issue No. 1. The starting point for this would be the sales report by staff members. Print this report and compare the average sale being achieved by sales staff. Is it consistent? Do you have one staff member who is achieving a high sales volume but at a sharply lower average sale than his peers? If so, this is the problem. How is this problem made up? Does he achieve a good average sale by department but no sell many higher ticket items like gold or diamonds? Or does he exhibit a lower average sale across all departments? This matter needs to be addressed, either by dealing with training, (your staff may lack strong product knowledge in diamonds and the confidence that comes with it) or it could be their belief system around how much someone should be paying.
Now, what if all staff are achieving a comparable level of average sale? This may be symptomatic of a lack of training across the board, or a poor level of sales staff. It might also be a reflection of the average retail value of product held in-store. Here’s how you can check: Print a summary by department of your inventory and determine the average retail value of the product you are holding. Your average retail sale achieved should represent no more than 20 percent below this figure. If it is less, then your staff is achieving a low average retail sale relative to the product you have in-store. If the average retail price being achieved is, however, closer than 20 percent to the average retail value of what you are carrying, then the issue may be your inventory.
A business hoping to achieve an average sale of $150 for example would find it difficult if the average retail price of inventory is only $140. This is based on the 20 percent differential you would need to hold inventory at an average retail price of $180 ($150 plus 20 percent) to give your staff a fighting chance of achieving the goal.
This is just one example of how data can pose a question, and more data can then be used to delve further into the answer. The value of performing this exercise can have a tremendous impact on a store’s performance. If your reports are little more than dust collectors, then now could be the time to use them to their full potential.
David Brown is president of the Edge Retail Academy. To learn how to complete a break-even analysis, contact inquiries@edgeretailacademy.com or (877) 569-8657.