Table of contents
- What is “sales”?
- Fundamentals of store analysis
- markup amount
- Mark-up rate
- interest rate
- gross profit
- loss rate
- Type of profit
- Gross profit
- Operating income
- total profit
- Net income
- Key points of store analysis (sales analysis)
- Point 1. Clarify the purpose of sales analysis
- Point 2. Analyze without thinking too hard
- Point 3. Segment sales data
- Build a real-time store analysis platform
What is “sales”?
Sales are the consideration received for selling products, and when a customer makes a purchase, sales can be obtained through various payment methods such as cash, credit card, electronic money, etc. A common formula for stores is:
Sales = Number of customers visiting the store x Purchase rate x Average unit price
The number of customers visiting the store is the total number of customers entering the store. Please note that there are a certain number of customers who visit the store but do not purchase anything, so the number of store visitors and the number of purchases are not the same. Purchase rate refers to the percentage of customers who actually purchase a product out of the customers who visit the store. The purchase rate is calculated using the following formula:
Purchase rate = number of purchasing customers ÷ number of customers visiting the store
Next, the cost per customer is the amount of money a customer purchases in one shopping trip, and the average cost per customer is the total sales amount divided by all the customers who made purchases.
Average unit price = total sales amount ÷ number of purchasing customers
The reason why I am re-explaining the obvious fact is that in order to improve sales by a method other than “increasing the product unit price”, you need to increase the “number of store visitors,” “purchase rate,” or “average unit price.” This is to make people strongly aware of the importance of
Fundamentals of store analysis
Next, we will explain the difference between sales and profits, which are the basis of store analysis. As mentioned above, sales are the total amount of consideration received from the sale of products. Profit, on the other hand, is calculated by subtracting the costs incurred to sell the product. No matter how high your sales are, if your costs are correspondingly high, you won’t be able to expect to earn much profit. Here, we will introduce the basics necessary to seek sales and profits.
Determining the selling price of a product is called markup. Furthermore, the markup can be calculated by subtracting the cost (the cost of purchasing and selling the product) from the product’s selling price. Markup is the profit you can expect to make when you sell a product.
The ratio of profit to the selling price of a product is called the markup rate. The higher the markup rate, the greater the profit on sale, and the lower the markup rate, the lower the profit on sale.
Markup rate = (estimated selling price – purchase cost) ÷ estimated selling price x 100 (%)
Interest rate represents the ratio of markup to cost.
Interest rate = markup ÷ cost x 100 (%)
Gross profit (gross profit) is the actual profit on sales and sales, meaning the difference between sales and cost of goods sold.
Gross profit = Sales – Cost of sales
If a product cannot be sold for some reason, a loss will occur. In restaurants, this often occurs due to over-purchasing of ingredients or menu changes, and in retail stores, it often occurs due to shoplifting or embezzlement by internal staff.
Loss rate = loss amount ÷ sales x 100 (%)
Type of profit
There are various types of profits. It is important to have a better understanding of profit, so I will explain it here.
The profit obtained by subtracting costs from sales is called gross profit. For example, for bento boxes, the purchase price such as material and container costs is deducted from sales.
Gross profit = Sales – Cost of sales
When selling a product, there are various costs other than the cost of purchasing materials. These expenses are called “selling, general and administrative expenses (SG&A expenses),” and include personnel expenses paid to employees, transportation expenses, store rent and utility expenses, advertising expenses, and entertainment expenses for meetings with business partners. includes. In other words, it is all the expenses incurred to continue the business activities of the company. Operating income is calculated by subtracting selling, general and administrative expenses from gross profit.
Operating profit = Gross profit on sales – SG&A expenses
Income earned from sources other than a store’s main operating activities is called “non-operating income,” and includes dividends and interest earned from stocks and deposits. Total profit is the sum of non-operating income and operating profit.
Total profit = Operating profit + Non-operating income
Net profit is the profit earned from the normal operations of the store. It is calculated by subtracting non-operating expenses, interest expense, etc. from gross profit.
Net profit = Gross profit – Non-operating expenses
Key points of store analysis (sales analysis)
Here we will introduce the essential points to carry out store analysis (sales analysis).
Point 1. Clarify the purpose of sales analysis
Sales analysis begins by clarifying the purpose of the analysis. If the purpose is not clear, it will be difficult to obtain effective information because you will approach the analysis without knowing what the analysis is for. The first thing you need to do to clarify your purpose is to understand the current issues.
If you are in the business world, you are likely to be aware of business and management issues on a daily basis, but if you reorganize them, you may be able to see aspects that were previously invisible. Furthermore, in addition to knowing what kind of issues exist, it is also important to know “what is the cause?”, so before you start clarifying your goals, let’s organize the current issues.
Once you have sorted things out, take the initiative to prioritize the issues that need to be solved, and from there, clarify the purpose of sales analysis.
Point 2. Analyze without thinking too hard
When you hear the words “sales analysis,” you get the impression that it’s difficult, so it’s understandable that people may be reluctant to analyze it. However, before thinking “What is analysis?”, it is important to steadily perform a “simple comparison of sales.”
For example, assume that Company A’s sales were 1 billion yen in 2020, but they dropped to 900 million yen in 2021. Sales analysis is all about comparing two numbers. However, the important thing is to make detailed comparisons, and from there we can find clues to solving the issues listed in the previous section.
Sales to new customers may have declined, or sales to existing customers may have declined. Unless you actually open the lid, the same sales analysis will reveal something completely different. That’s why it’s important to concentrate on analysis without thinking too hard.
Point 3. Segment sales data
By segmenting sales data, you can discover many facts. Break it down into “monthly sales,” “sales by customer,” “sales by product,” “sales by person in charge,” “sales by department,” and “sales by store.” By segmenting sales data in this way, it is possible to highlight “what is the problem” with regard to current issues.
In addition to segmenting sales data, it is also important to calculate year-on-year comparisons and compare sales with other companies in the same industry.
Build a real-time store analysis platform
Data is essential to survive in modern society, and it is no exaggeration to say that businesses can only survive if they analyze this data well and utilize it for management. There are many methods for store analysis (sales analysis), but the first thing that is important is to collect the data necessary for analysis. If you are running a multi-store operation, it will be essential to create a system and mechanism to collect this information. Please take this opportunity to consider this platform for store analysis and store management.