Sales per square foot is a metric used to measure the profitability of retail stores, calculated by dividing total sales by the square footage of the area. It is used by retailers and property managers to determine the success of stores and malls, and can be used to analyze stores on a level playing field. It can also be used by retailers to determine if it is profitable to open a store in a new location.
Sales per square foot is a unit used to measure the profitability of retail stores. This number is determined by calculating the total sales in question, over a given time period, and dividing it by the square footage of the area being tested. It is generally used mainly by retailers and property managers.
Sales per square foot can be calculated for an individual store, a chain of stores, or an entire shopping center. When calculated for an individual store, it shows how much money the store receives. Sales dollars can be totaled for a month or a year.
When years are used as a time frame to calculate sales per square foot, they are generally referred to as calendar or rolling. A calendar year tabulates the sales that occur between January and December of a particular year. A rolling year adds up all sales within any twelve month period. For example, if a store opened in October, the company might be interested in seeing sales figures from October of the initial year of opening through the following September. This data would show a twelve-month period of sales figures, even though the store had not been open for a full calendar year.
Property management companies often use this measure to determine the success or failure of their malls. This figure may be applicable for full-price retail malls, retail outlets, and shopping malls. To calculate sales per square foot for an entire mall, the property management company would add up sales dollars for each store within the property and divide that number by the total square footage of the site.
Using this metric as an indicator of overall profitability allows both retailers and property managers to analyze stores on a level playing field. The number takes into account the total square footage available in the store to display your products. A store that occupies 15,000 square feet (approximately 1,394 square meters) within a shopping center will generally have higher sales dollars than a store that occupies only 1,500 square feet (approximately 139 square meters). However, overall sales dollars do not indicate which store is using its space most effectively.
For example, that store that occupies 15,000 square feet could achieve a total of $1,000,000 in sales in US dollars (USD) for a month, while the smaller store that occupies only $700,000 USD in sales for that same month. Even though the larger store made more money overall than the smaller retailer, the smaller retailer used its space most efficiently. The largest store would have a sales per square foot of $66, while the smallest store would have a sales per square foot of $466. In such a case, the property management company could, hypothetically, make more money by closing the largest store and opening a series of equally efficient smaller stores in its place.
This statistical number can often be used by retailers to determine if it might be profitable to open a store in a new location. Malls with high sales per square foot numbers often have a higher success rate in opening new stores than malls with low ones. Property managers can also look at a retailer’s numbers to determine if that business is allowed to move into their property. Chain stores with typically low numbers are generally not invited to open in malls that maintain high numbers year-round.
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