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  • 1.  Retail Sales Space Increase Impact

    Posted 12-22-2020 03:00 PM

    I'm volunteering with a non-profit organization that, as part of its mission, runs a small gift shop.  The managers have proposed remodeling to increase the size of the sales floor from 800 square feet to around 960 (20% increase).  They maintain that doing this should increase sales volume by 20%.  Within certain ranges, is it reasonable to assume that the ratio of sales to square feet is linear for ROI analysis?

    Thanks for any insight you can offer.

    Pem



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    Pemberton Smith CMA, CFM
    Other
    Solana Beach CA
    United States
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  • 2.  RE: Retail Sales Space Increase Impact

    Posted 12-23-2020 01:13 AM
    Hi Smith,

    I really doubt if we can linearly relate the sales floor area to the Revenue growth. There will be a number of other factors such as product mix, Target mix, etc. In fact, we may go for a regression analysis to find out how far the sales area is dependent on the revenue and then we can go for an ROI analysis.

    Waiting for others' thoughts...

    Regards
    Muhammed Luqman
    +966 53081 2862





  • 3.  RE: Retail Sales Space Increase Impact

    Posted 12-23-2020 11:06 AM
    I agree.
    Floor space is mostly used as a way to allocate fixed or overhead cost.  I have not seen it used to project sales, even at the retail level.  Unless the size of the location is a restriction on store traffic, (do you have lines out the door?) or a restriction on SKU space, (do you have a lot of restocking problems with your shelf space?) the concept of, "build it and they will come" is not a analytical tool.
    Sincerely,

    James M. Wilber CMA, MBA
    IMA Chicago, President
    president.chicago.ima@...
    https://linkup.imanet.org/chicagochapter/home





    Original Message


  • 4.  RE: Retail Sales Space Increase Impact

    Posted 12-23-2020 03:23 PM

    In general, I believe  space has strong +ve co relation to fixed cost like rent and utilities etc. Where it will have weak +ve co relation to sales. 

    Specific cases could differ.



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    Hari Gopal Yugandhar Gokavarapu CMA
    Novi MI
    United States
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