Retail Space Allocation

Retail Space Allocation

To determine the optimum stock mix, retailers must first identify their core merchandise - that is, the merchandise that makes the statement that defines the range. Then, using this core stock as a foundation, they can build the rest of the range to complement and augment it as shown below.

FRINGE STOCK

(special)

SUPPORT STOCK

(selective)

KEY STOCK

(never out)

CORE STOCK
(never out)

The skill lies in getting each of these categories of stock in the correct depth and breadth.

Sales versus Space Allocation Analysis

One simple analysis that can be performed to see if your store is maximising its productivity is to conduct this relatively simple review.

Step 1 From your sales history (six or twelve months) conduct a sales analysis of sales coming from all departments as a percentage of the whole store.

Step 2 You can then do a similar analysis of the space allocations per department as a percentage of the entire store ( just count linear metre-age for speed’s sake).

Step 3 Compare the percentages against each other to see if there are glaring anomalies. The simple toy store example below displays a format you could use.

Sales Analysis

TOTAL SALES $1,000,000 100.0%

TOY DEPT $289,000 28.9%

BOOKS DEPT $175,000 17.5%

SPORTING DEPT $160,000 16.0%

BIKES DEPT $376,000 37.6%

Space Allocation Analysis

TOTAL SPACE: 3012 100.0%

(LINEAR METRES)

TOY DEPT 589 19.5%

BOOKS DEPT 1053 35.0%

SPORTING DEPT 793 26.3%

BIKES DEPT 577 19.2%

	% SALES	% SPACE	% VARIATION
TOY DEPT	28.9	19.5	(9.4)
BOOKS DEPT	17.5	35.0	17.5
SPORTING DEPT	16.0	26.3	10.3
BIKES DEPT	37.6	19.2	(18.4)

The above example although simplistic, shows that there are drastic anomalies between where the sales are coming from compared to the space that has been allocated. Toys for example has thrown a variance of negative 9.4%. This is in effect is saying that toys are short of space by 9.4% of the store total. Books on the other hand, are over-space by 17.5%.

This example is too simplistic to draw any real conclusions from as books do require a lot of space to lay out a range. Bikes on the other hand require little space, compared to the price, which is very high and generates big sales per unit.

This analysis can be of use in determining store layout, design and space allocation. The emphasis of the store may change due to this type of analysis. For example the sales may be coming from an area of the store that you thought was not a store strength.

N.B. This type of analysis can also be conducted within departments to see where the sales are coming from by sub-class or even down to individual ranges or lines. This could be as a percentage of the departments or even entire store’s sales and space.

Hymie Zawatzky