Sales per Squaremeters or Concentration on the Essentials
Artikel vom 17.12.2014What is important? What is not? Many reports and statistics show how little people understand. We like to add as much data as possible and usually more than asked for. More is better is what most people think. Rarely nobody asks what the purpose is and so as many numbers as possible are added. When asked „WHY?“ the answer is often: It takes no time at all, we can do this quickly. Our IT is able to do this without any effort. Piling up data and complex reports is obviously a lovely battlefied for market researchers, Controllers and even for Top Management. That is where many of them spend and waste their time.
In the retail industry it is a common practice (consulting companies would call it „Best Practices“) to talk about sales per squaremeter. It is one of the most irrelevant numbers without any sense at all.
Example
| Store | sqm | October | Sales/sqm | September | Sales/sqm | ||
|---|---|---|---|---|---|---|---|
| 1 | 280 | 350,000 | 1,250 | 320,000 | 1,140 | ||
| 2 | 410 | 330,000 | 805 | 360,000 | 880 | ||
| 3 | 390 | 530,000 | 950 | 440,000 | 1,160 | ||
| 4 | 620 | 590,000 | 950 | 720,000 | 1,160 | ||
| Total | 1,700 | 1,800,000 | 1,060 | 1,840,000 | 1,080 |
Very ambitious experts would add:
- one or better two decimals,
- changes versus previous periods in %,
- accumulated values.
However, all the data which may be added does not answer any question and does not help to develop the business. More important than sales per sqm is the comparison of each store with the past as well as the comparison with other stores.
From the above statistic we see that store 1 and 3 have improved, store 4 has significantly decreased. The questions which arise are: Why? What happened? What could be the reasons? Now: What does this have to do with the sqm? Any important lesson here? Should we reduce the size of store 4? Let us be clear: There is no lesson and no sense at all! The development of store sales has nothing to do with the size of the store. Store size is a fixed number just like the rent of the store or the number of kids we have.
This is what the report should look like:
| Store | October | September | ||
|---|---|---|---|---|
| 1 | 350,000 | 320,000 | ||
| 2 | 330,000 | 360,000 | ||
| 3 | 530,000 | 440,000 | ||
| 4 | 590,000 | 720,000 | ||
| Total | 1,800,000 | 1,840,000 |
Now, the essential can be seen right away. No more „nice-to-have“ in the report. No irrelevant numbers. We would like to add a quote from Jack Welch:
„Everyone wants to put all the data that they can think of on a page. All the data does not help. What they need to know is: What are the strategic questions? and What are the variables?“
In our example, sales per sqm is not a variable. Impossible to change short term. The only variable is sales. Instead of wondering about sales per squaremeter we have to ask a different question from time to time: What is the best store size for our business model? This is a consideration once every 5 years maybe.
With these questions we are separating what is „nice to have“ from what is important. Today, most statistics and reports are full of „nice-to-haves“, of irrelevant and confusing data. People love to impress with it. If it gets worse they try to make it with colours, in Power Point and graphical.
The advantage of reducing reports and statistics to the essentials is also the following: The important data can be seen immediately. Nobody has to search for what is important. The essential is clear right away.