INDUSTRY INSIGHT
YOUR SPACE? ARE YOU MAKING BEST USE OF
Andy Campbell, independent business development consultant, specialising in the gardening and DIY sectors, offers advice on optimising space utilisation in order to maximise profitability.
I
n physical retail businesses, after people, space is the most valuable resource to use wisely or to waste
at your peril. Invariably the selling area you have, particularly internal covered space, is limited without the possibility of extending it; and it is always expensive when rates, heating, lighting and maintenance are considered. Therefore, if profit generation is to be maximised, the utilisation of this space must be optimised. In essence, this means ensuring you have the right ranges allocated the right amount of space, at and for the right amount of time.
DIYWK-30OCT20-DK Tools_Layout 1 27/10/2020 18:02 Page 1
Understanding net profitability To achieve this successfully, a good understanding of the net profitability of the current ranges is required. This involves taking the gross profit for the range and then deducting the variable costs associated with selling the range and an appropriate share of the fixed costs to arrive at the net profit on an annualised basis. A record of how much space the range takes up and for how long can then be combined with the net profitability figure to come up with a metric of net profit per square metre per year. This then gives a measure that can be used to compare the performance of different ranges and against which potential new ranges can be benchmarked. The
underlying question being, “are we making the best use of the space we have and how can we improve it?” This type of analysis will then start to tell you whether you are giving too much space to some ranges and not enough to others. It might tell you that it would be better to apply the 80:20 rule more vigorously, i.e. where 20 percent of lines tend to account for 80 percent of sales and vice versa. This could lead to a decision that it would be more profitable to reduce space given to range A and introduce range B, on the basis that it is better to achieve 80 percent of the potential of A and 80 percent of B, rather than 100 percent of A and nothing from B. It may highlight that improvements
on timing of seasonal ranges can be made, e.g. introduce a little later, get out earlier and allocate the space to a follow-on range that will generate additional profit. It will certainly make you think how important it is to make full use of the vertical dimension above the floor footprint.
A valuable tool This is a valuable tool to inform and support the use of commercial judgment rather than replace it in terms of high-level decision-making. You may also feel it requires a great deal of information recording and analysis which is true, but simplified models can be adopted and only you can decide on the level that is appropriate for your business and whether you will get value from adopting it. However, if all you do after reading this is think more about the value of your space and how you use it, then it will have been worth it.
Andy Campbell is an independent business development consultant, specialising in the gardening and DIY sectors at both the retail and production ends of the supply chain.
www.diyweek.net
OCTOBER 2020 DIY WEEK 11
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40
