Tracking Down Performance of Different Product Categories in your Store

An essential part of inventory management is knowing how well each product category is doing in your store. One way of determining performance rating is to analyze dollar sales in light of the space used. These figures can give you very definite guidelines to product development and increase your profitability.

Steps for Getting the Figures

Step 1. The various departments of your store should be reflected by your cash register report. Your departments might include, "Gift Items", "Seasonal", "Electronics", "One dollar Items", etc. At the end of each month, run a report showing department dollar totals for the month.

Step 2. At the beginning of the month, count the running footage of each department. This will not be an exact measurements, but develop your own system and be consistent. As you make changes during the month, record the footage difference for each department affected. At the end of the month, average the footage for each department.

Step 3. Using any spread sheet software program and set up the following horizontal rows: Footage, Percent of total footage, Dollar sales, Percent of total dollar sales, Dollars per foot, and Performance ratio. Head the vertical column with the various departments as mentioned in Step 1. Head the last column Tota1. Note: You can prepare this sheet manually, but will save time using a computer.

Footage.
Enter your actual figures – the month's average footage for the departments. Add the footage for all the departments and enter in the Total column.

Percent of Total Footage.
For each department, divide the department footage by the total footage. This will give you the percentage of space each department used .

Dollar sales. Enter your actual figures, taken from the cash register report. At the end, enter the total sales in the Total column.

Percent of Total Dollar Sales.
For each department, divide the department dollar sa1es by the total do1lar sales. This will give you the percentage of sales each department did.

Dollars per Foot. For each department, divide the dollar sa1es by the footage.

Performance Ratio .
For each department, divide the percent of total dollar sales by the percent of total footage. A 1.0 performance ratio means the department is earning its space. If the Performance Ratio is greater than 1.0, performance is terrific.

For example:
"Seasonal" is using 4.86 percent of the Space and doing 7.64 percent of the Sales. (7.64 percent divided by 4.86 percent = a 1.57 Performance Ratio.) If the Performance Ratio is a lot less than 1.0, the department is not earning its space .

Another example:
"Stationery " is taking 3.94 percent of the Space and doing 2.77 percent of the Sales. (2.77 percent divided by 3.94 percent = .70 Performance Ratio).