Tuesday, October 4, 2011

Discount/Variety stores productivity

I was looking at the "RetailSails 2011 Chain Store Productivity Report" available at retailsails. I do most of my "everyday needs" shopping at Discount/Variety stores and so that section was the most interesting to me.

The table has the following columns:
1. Sales
2. YoY change in Sales
3. # of Stores
4. Average Store Size
5. Sales per Store
6. YoY change in Sales/Store
7. Sales per sqft
8. YoY change in Sales/sqft

So, which companies are doing good?

Total Sales is very much dependent on the number of stores and the size of the stores. YoY change in Sales would have been useful if there was information on the change in the number of stores, YoY.

Sales per store is again strongly associated with size of the store. But does bigger store size always mean higher sales?

Walmart has the biggest stores, with an average size of about 162,000 sqft. But Costco, with an average store size of 145,000 sqft has an impressive sales per store - $58 million more than a Walmart store. A Costco store is about 0.9 times the size of a Walmart store but its sales is 1.9 times that of a Walmart store.

Another interesting comparison is Target and Sam's Club. Almost the same store size, but sales at a Sam's Club store is almost twice that of a Target store. 

You will see a very similar story if you use Sales per sqft instead of Sales per store. But what makes these analyses incomplete is the absence of average price/item. The comparison between Costco and Walmart is obvious - prices will be much lower at Walmart. But what about Target & Sam's Club? Prices at Sam's Club may still be lower but can that alone explain a Target store having twice the sales of a Sam's Club? Other factors that can be the reason behind a Target store's higher sales will be - optimized layouts (more efficient use of space, more items per unit area), higher traffic, larger proportion of high ticket items, etc..   

And how are these companies growing?

Looks good - almost all of these companies are seeing positive trends in both total sales and sales per sqft, YoY. What about Kmart? Sales per sqft is growing YoY but total sales YoY is down. The first thing that comes to my mind - Kmart must have closed some of its non-performing stores. Any other reasons you can think of?