The Retail Guide to Utilizing Sales Per Square Foot to Grow Your Store (2023)

If you’re a retailer, it’s important that you keep a constant eye on how your store is performing. One of the most effective ways to do this is to rely on hard facts and data about your business—in other words, retail metrics.

Tracking retail metrics is essential to improving store productivity, maximizing efficiency, and making the best use of your time and resources. Data on sales, inventory, employees, and customer relations will help you determine whether you are meeting your business goals.

According to a recent report from McKinsey, the gap between retail-industry leaders and laggards has widened. To pull ahead and stay on top of the game, you need to understand the economics of your business and track the metrics that matter to its success.

What metrics should you look at to be more efficient? That depends; every business is different. Some metrics, or key performance indicators (KPIs) will be more important to you than others.

For brick-and-mortar stores, measuring sales per square foot is a way to gauge how well you are using your available retail space. In this article, we will help you understand more about the sales-per-square-foot metric, taking a close look at its importance and limitations.

Table of Contents

  • What is sales per square foot?
  • Why is it critical to track sales per square foot?
  • Limitations of sales per square foot
  • How to calculate retail sales per square foot
  • What is a good sales per square foot in retail?
  • How to increase sales per square foot

What is sales per square foot?

Sales per square foot is a calculation of the average revenue earned per square foot of your retail space.

For years, this metric has been a critical measure of success in the brick-and-mortar retailing industry. A high sales-per-square-foot number indicates that your store’s management is efficient in driving sales in the space allotted to them. It means they are apparently doing all the right things when it comes to choosing and displaying products in-store.

Why is it critical to track sales per square foot?

  1. Measure and compare store performance
  2. Inform merchandising decisions
  3. Analyze staff performance
  4. Identify trends over time

Basically, sales per square foot helps you understand if you have theright product at the right place at the right price.

Sales per square foot is a measurement of productivity. It also gives the business an idea of whether the merchandising mix and the amount of merchandise out on the floor are doing their job.

Let’s take a look at a few reasons why, even in the age of omnichannel marketing and monitoring, this metric is crucial for brick-and-mortar retailers.

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1. Measure and compare store performance

In many ways, sales per square foot is a way to rank a store’s visual merchandising efforts. It’s a great indicator of how well you as a retailer are using your resources (store layout, merchandising, and staff).

For instance, let’s say you have a 5000 sq. ft. store with only three fixtures in it. You clearly don’t have enough merchandise displayed to make effective use of the space, which you can verify by calculating the (almost certainly low) sales-per-square-foot figure.

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2. Inform merchandising decisions

Retailers often worry about whether they have the right merchandise out. Curating a merchandising mix that hits the mark is not an easy task, and this is where the sales-per-square-foot metric comes in handy. It will help you identify which products are more popular than others, and to make smarter merchandising decisions.

For example, let’s say, you have a hero product that takes up 80% of your store’s display space. According to the sales-per-square-foot metric, this hero product only accounts for 50% of your overall sales, which could be a good reason to allot less store footage to your hero product.

3. Analyze staff performance

Sales per square foot also helps you measure sales reps’ performance, i.e. how well they use what's out on the floor to generate sales. This will help you figure out if your sales reps need training, or if you need to replace them.

You can even drill down to measure the human productivity of your staff by comparing sales per square foot with sales per man hour (or SPMH or sales per labor hour).

4. Identify trends over time

A comparative analysis of your sales per square foot data over month-on-month or year-on-year will help you identify certain trends. These trends, especially seasonal trends, are key in improving your sales performance.

Let’s say, for example, that in the last holiday season, you saw a spike in the sale of mugs for hot chocolate. You can be well-prepared for the upcoming holidays by stocking up on a wide range of mugs.

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Limitations of sales per square foot

Sales per square foot has been a great metric to evaluate the store’s performance. Given the pandemic-driven shift to ecommerce, however, this metric may slowly be losing its relevance.

1. Doesn’t account for omnichannel

Retailers are now taking a hybrid approach to sales, using both physical stores and online sales channels. Given this, sales per square foot may be a less effective tool for evaluating the performance of today's retail businesses.

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2. Comparative metric

Owing to factors like the industry’s continuing shift to online sales, you cannot consider sales per square foot in isolation as a metric for success. You will have to use it in conjunction with other relevant industry metrics to evaluate your business’s overall performance.

3. Does not apply to Ecommerce

For example, ecommerce sales account for a large chunk of global retail sales. As sales per square foot only works for physical stores, it is of no use to today’s growing number of purely or largely online retailers.

How to calculate retail sales per square foot

Now that we have a better understanding of sales per square foot and its importance, let’s look at how you calculate arrive at it.

To calculate this metric, divide total in-store sales by the available selling area in the store.

Sales per square foot = Sales / Store’s total square feet of sales space

In the last month, for example, Jenny’s Apparel Hub, a family clothing store, sold $1 million worth of merchandise in its 2000-sq-ft shop. In this case, the store’s sales per square foot will be:

$1,000,000 / 2000 sq. ft. = $500 per square ft.

What is a good sales per square foot in retail?

Sales per square foot is a metric that varies across the retail industry. Leading the charts are the retail giants—Apple Inc. and Tiffany & Co.—selling high-value goods at smaller stores. Apple generates $5,500 per square foot, and Tiffany & Co.brings in nearly $3,000 per square foot.

There is a stark difference in brands from other sectors. Walmart and Target, for example, reportedly generate $400 and $300 per square foot, respectively.

To obtain actionable data, in other words, you need to compare your store’s sales per square foot against that of your direct competitors. You also need to make sure you are considering competitors who work in comparable or similar retail categories—you can’t compare a high-end clothing store that sells $1000 jackets with a boutique family store selling $20 t-shirts.

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How to increase sales per square foot

  1. Increase basket size
  2. Improve store layout
  3. Build loyalty programs
  4. Host in-store events
  5. Increase local marketing
  6. Train employees on upselling and cross-selling
  7. Optimize product assortment
  8. Leverageyour online audience

Here are a few key strategies that you can implement to generate higher sales per square foot.

1. Increase basket size

As noted, stores that sell high-ticket items like jewelry or electronics always generate higher sales per square foot. To increase your sales per square foot, therefore, you need to increase your transaction value. Merchants that sell everyday products need to look at ways to increase their basket size and get their customers to buy more.

💡 PRO TIP: Try using apps to upsell and cross-sell more effectively. Apps like Marsello and Frequently Bought Together integrate with Shopify POS and recommend products to store staff based on what they’ve added to a customer’s cart, making it easier than ever to suggest relevant products, increase basket sizes and order value.

2. Improve store layout

Your store’s layout plays a crucial role in improving your sales per square foot. Optimize spaces that look crowded and clean up untidy or messy corners. Ensure that your store is spacious and move fixtures and signage around to enable a smooth flow of in-store traffic.

3. Build loyalty programs

Loyalty programs are a great way to get your customers to shop more at your stores. It also encourages them to keep coming back for more rewards. Points per purchase are one of the most common loyalty programs: the customer earns redeemable points with every purchase.

📌 GET STARTED: Choose from hundreds of loyalty apps in the Shopify App Store and start rewarding shoppers for purchases they make both online and in-store.

4. Host in-store events

The global lockdowns brought about a pent-up demand for in-store experiences. This explains the 43.8% spike in customer foot traffic across stores in the US last year. In-store events are a great way to improve the shopping experience for customers.

5. Increase local marketing

Targeting your local audience, in the same town or region as your business, is another great initiative to increase sales per square foot. This works well for a restaurant or a boutique retail store tied to a specific location.

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6. Train employees on upselling and cross-selling

Another effective strategy is to leverage in-store mechanisms like cross-selling and up-selling. This will ensure the customer walks out with more products. Train your sales reps at selling items that complement the product the customer is purchasing. You can even consider promoting a pricier version of the product the customer has chosen.

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7. Optimize product assortment

Your store’s floor space is precious. You cannot waste space displaying products that are not selling. Your sales and inventory reports for a particular time will help you nail down products that are selling faster than others. Make sure you sort your product assortment and stock up on the best-selling products and collections.

8. Leverageyour online audience

Online sales have seen a sharp rise in recent times. By 2025, online sales will account for a quarter of total global retail sales. While shoppers like to browse online, many of them prefer an in-store experience when it comes to purchasing the product.

  • BOPIS: Buy Online, Pickup In-Store (BOPIS) is a trend that is now coming to be a hit with customers. BOPIS follows the ‘click and collect’ model, where customers can select their products online and head to the nearby store to pick them up in person. The home improvement chain Lowe’s introduced the concept of BOPIS back in 2019. Today, they are also deploying pickup lockers at their stores in the US.
The Retail Guide to Utilizing Sales Per Square Foot to Grow Your Store (1)
  • BORIS: Buy Online, Return In-Store (BORIS) is another omnichannel strategy that can increase sales per square foot. In this case, online customers come to physical stores only to return their products. This concept helps them return products with ease. While this is beneficial during slow periods, however, it can create congestion during busy seasons.

Improve sales per square foot at your store

While sales per square foot is important, it should not be the only metric you use to measure your store’s success. Look at ways to continuously improve your in-store experience—the more people you have walking into your store, the more sales you drive!

Grow store sales with Shopify POS

Shopify POS has all the tools to help you convert more store visits into sales and grow revenue. Make more relevant product recommendations, turn abandoned store sales into online sales, and track both store and staff performance from one easy-to-understand back office.

Sales per square foot FAQ

Who has the highest sales per square foot?

Costco is generally considered to have the highest sales per square foot of any retailer, with an average of $1,638 per square foot.

Is sales per square foot a reliable measure of store performance?

Yes it is a reliable indicator of store performance and helps to efficiently management stores and resources.Retail stores should aim forhigh sales per square footthan direct competitors.

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FAQs

How do retailers increase sales per square foot? ›

How to increase sales per square foot
  1. Increase basket size.
  2. Improve store layout.
  3. Build loyalty programs.
  4. Host in-store events.
  5. Increase local marketing.
  6. Train employees on upselling and cross-selling.
  7. Optimize product assortment.
  8. Leverage your online audience.
Sep 7, 2022

How can I make my retail store grow bigger? ›

How to Grow Your Retail Business: 6 Expansion Ideas You'd Want to...
  1. Expand to other locations. Opening new stores is a common expansion strategy for many retailers. ...
  2. Expand to other sales channels. ...
  3. Grow your product and service offerings. ...
  4. Expand to other markets. ...
  5. Pop up in other places. ...
  6. Team up with other businesses.
Feb 9, 2022

What is the importance of sales per square foot? ›

Importance of Sales per Square Foot

Sales per square foot can be used to determine the efficiency of a company's retail store. A higher sales per square foot indicates a retail shop that demonstrates strong efficiency and performance.

What is sales per sq-ft in retail? ›

What Are Sales per Square Foot? The dollar value of sales per square foot has, for many years, been a measure of success in the brick-and-mortar retailing industry. It is simply the average revenue earned for every square foot of sales space.

What increases price per square foot? ›

What Is Price Per Square Foot? Price per square foot is a metric used in the real estate market to evaluate a home's value. There are a lot of factors that go into determining the price per square foot of a given property: location, age, condition, number of rooms, lot size, upgrades and renovations and more.

What are three possible growth strategies for retailers? ›

Some common growth strategies in business include market penetration, market expansion, product expansion, diversification and acquisition.

What are the growth strategies? ›

A growth strategy is an organization's plan for overcoming current and future challenges to realize its goals for expansion. Examples of growth strategy goals include increasing market share and revenue, acquiring assets, and improving the organization's products or services.

What is the most important rule in sales? ›

Golden rule: you should always listen more than you speak. The focus should be on discovering customers' needs, so as to tailor your sales techniques to truly point out how your product/service benefits them. Get to know your customers.

What is the square foot rule? ›

Measure the length and width, in feet, of each room. Then, multiply the length by the width to calculate that room's square footage. For example: If a bedroom is 12 feet by 20 feet, it is 240 square feet (12 x 20 = 240).

Does price per square foot decrease as size increases? ›

Generally speaking, smaller homes will sell at more per square foot than larger homes. As a home gets larger in size, the price per square foot often drops. This is another danger of using prices by square footage to put a value on a home.

What are 4 general ways to increase sales? ›

Increase the number of customers. Increase the average transaction size. Increase the frequency of transactions per customer. Raise your prices.

What are the 4 sales strategies? ›

The four basic sales strategies salespeople use are script-based selling, needs-satisfaction selling, consultative selling, and strategic-partner selling. Different strategies can be used with in different types of relationships.

How can I improve my sales performance? ›

5 Tips to Improve Sales Performance
  1. Embrace Technology and Digital Transformation. ...
  2. Understand & Optimize Revenue Generation. ...
  3. Tailor Incentives to Strategies that Increase Sales. ...
  4. Maximize Your Forecasting Accuracy. ...
  5. Make Customer Experience Your Top Priority.
Sep 16, 2022

What is a good rate of sale in retail? ›

The industry-wide standard for a good sell-through rate is 80%. The average sell-through rate typically falls between 40% and 80%.

How is retail square footage calculated? ›

To measure commercial square footage for a rectangular space, multiply the length of the room in feet by its width. For example, a room that is 12 feet long by 12 feet wide is 144 square feet.

How do I calculate price per square foot for sale? ›

The formula to calculate price per square foot is price divided by size (in square feet). So for example, if you have a 2,000-square-foot house selling for $300,000 you take the total price, then divide it by the square footage, which would give you $150 per square foot.

What is good cost per square foot? ›

The national average cost per square foot to build a house is $150, according to Home Builder Digest. The average cost can range from $54 to $270 per square foot based on a home size of 2,600 square feet.

Which store generates the highest sales per square foot? ›

Apple is the top retailer overall with the highest sales per square foot of $5,546, while Tiffany & Co. leads the jewelry retail business with sales of $2,951 per square foot.

What does price per square foot mean? ›

The average price per square foot of a home is the cost or current market value of a home divided by the square footage of the home.

What are the four major growth strategies examples? ›

What are the four major growth strategies?
  • market penetration.
  • product development.
  • market development.
  • diversification.

What are the three 3 most important things in retailing? ›

The four Ps - Product, Price, Place, Promotion - are the basic foundations of a successful retail business.
  • Product. You need products that your customers want to buy, and a product range that will satisfy your customers' needs and desires. ...
  • Price. ...
  • Place. ...
  • Promotion.

What is the fastest growing form of retailing? ›

It's no coincidence that one of the fastest growing retailers—nearly doubling its revenue year-over-year—is an e-commerce company that spiked in new customers given the convenience it offered during lockdowns.

What are the 5 stages of growth? ›

Using these ideas, Rostow penned his classic Stages of Economic Growth in 1960, which presented five steps through which all countries must pass to become developed: 1) traditional society, 2) preconditions to take-off, 3) take-off, 4) drive to maturity and 5) age of high mass consumption.

What is a good growth strategy in business? ›

One growth strategy you can use is market development. This approach uses market segmentation to find potential customers within your existing market. It's meant to help you tap into a new segment with your existing offerings, or lead to product development to reach a new type of customer.

What are the four business growth strategies? ›

There are four major growth strategies in business: market development, market penetration, product development, and diversification.

What are the 4 common sales mistakes? ›

4 Common Sales Mistakes and How to Avoid Them
  • Not Valuing the Talent Around You.
  • Failing to Take Notes and Keep Records.
  • Poor Listening and Defensive Posturing.
  • Wasting Time on Fruitless Calls.
Nov 7, 2019

What 5 things are important in sales? ›

  • No. 1: Understand what the buyer wants. ...
  • No. 2: Sell in a buyer-responsive manner. ...
  • No. 3: Use psychology to engage the buyer. ...
  • No. 4: Establish trust with the buyer. ...
  • No. 5: Communicate succinctly. ...
  • No. 6: Act on what the customer is saying. ...
  • No. 7: Demonstrate subject matter expertise. ...
  • No. 8: Help (as opposed to close) prospects.

What is the 1st rule in sales? ›

NO MATTER WHAT PRODUCT YOU ARE SELLING, THE FIRST RULE OF SELLING IS ALWAYS, ALWAYS, ALWAYS AGREE WITH THE CUSTOMER.

How do you answer square feet? ›

Multiply the length by the width and you'll have the square feet. Here's a basic formula you can follow: Length (in feet) x width (in feet) = area in sq. ft. Tip: If you can't picture what a square foot is, try drawing a square that is 1 foot tall by 1 foot wide—you've got one square foot!

How many square feet does the average person occupy? ›

In a loose crowd, a person occupies roughly 10 square feet. This means each person is about an arm's length from the body of the next person. In a more tightly packed crowd, a person occupies about 4.5 square feet.

How many square feet per person do you need? ›

The average house size for a family of four to live comfortably is around 2400 square feet. It is widely believed that each person in a home requires 200-400 square feet of living space.

Why are Lululemon's sales per square foot so high? ›

Why are Lululemon's sales per square foot so high? Lulu's turnover their inventory at such a fast rate. By keeping low stock of each unit, the company puts pressure on a customer browsing items in the store to make an impulse purchase, because the item is unlikely to be there the next time, they visit the store.

How do I increase sales on square? ›

This article covers key strategies and tips for driving sales directly to your online store.
  1. Step 1: Announce your eCommerce site. ...
  2. Step 2: Maximize orders from search engines and social media platforms. ...
  3. Step 3: Build a long-term marketing strategy that drives customer loyalty.
Jan 1, 2023

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