Profitable Times Newsletter

Retail Math: Part II

Comparing store data with peer institutions can be an invaluable exercise. Creating a database of intra-store information can be equally valuable. But to make any comparative information accurate requires collecting data and making calculations in a uniform manner. This may be particularly important in the next year or two to help track shifting museum store customer patterns through the economic crisis.

The following are the key data to be collected on a daily basis to make comparative calculations. It is important to note that there are multiple renditions of each of the following terms and calculations, but the descriptions below are those that are most easily and uniformly applied to the broadest range of museum store circumstances.

Data Collection

Net Sales (A)
At the core of financial and statistical comparisons is Net Sales. Net Sales is gross revenue less deductions for discounts, returns, sales tax, etc.

Transactions (B)
This is the number of discreet individual sales run through the point of sale process. If someone only buys one item, that's one transaction. If an individual buys multiple items, that's one transaction. If multiple people each select something but only one person pays for all the items, that's still only one transaction.

Number of Items (C)
This is the number of individual products sold regardless of price, type or how combined in a transaction. In point of sale systems these are discreet price look up (PLU) or stock keeping units (SKU).

Visitation (D)
This may be the most difficult number to standardize for inter-institution comparisons. Visitation is counted a hundred different ways in a hundred museums and many of these counts have purposes that affect how the numbers are slanted and interpreted.

For the store's purposes the ideal count is the number of visitors who come in close proximity to the store when the store is open. The most important characteristic is consistency. One difficulty with counts of visitors is that in most institutions it does not include the destination store customer. The destination customer is someone who has come to the museum just to visit the store and is typically not captured in visitation counts especially if there is an outside entrance to the store.

One attempt to create a tally that mitigates this problem is to count the number of people who cross the threshold into the store. Admittedly, if accurate, this would be an interesting and helpful number to collect. There are, however, several accuracy problems with this approach.

  • Counts using a handheld clicker or making hash marks on paper are notoriously inaccurate, especially if there is more than one entrance into the store. Double-counted and missed customers are common. In addition, trying to keep the count distracts the store staff from their far more important task of providing superior customer service.
  • Using an automatic mechanical counter presents different problems. It's difficult to adjust the count for customers entering and leaving the store, for children and others tripping the counter several times or for activity unrelated to being a customer. Sometimes only forty percent or so of the raw count is used but that too is a guesstimate adjustment at best.

Another issue with counting the people coming into the store is that once the data is collected there are virtually no accurate and comparably collected results against which to make comparisons. It is my opinion that data collected in this manner meets the description of 'garbage in garbage out' and its only use may be for internal comparisons.

Store Size (E)
Store size is a less reliable number in cultural commerce because few museum stores are built to an optimum size. In my layout and design consulting experience, even if initial plans for the size of a store are carefully calculated, between the time the initial plans are drawn and construction of the store is completed, the size is changed by demands from other museum departments and additional factors. This does not lessen, however, the value of calculating revenue per square foot by product category.

The base line definition for the calculation of the size of the store is that space to which the customer has general access plus the cash-wrap area. The calculation does not include office, storage, shipping and receiving areas.

Data Calculations

Revenue per Visitor

Net Sales (A)

Number of Visitors (D)

The foremost benefits of knowing this number are:

  • Along with all calculations using visitation as the divisor, this is a way to make reasonably fair comparisons among institutions of different sizes.
  • This helps to evaluate the results in the store compared to changes in visitation. If visitation is down fifteen percent, for example, but store sales are steady or down less than that, it's an indication that the store is doing relatively well compared to the forces affecting visitation.
  • It's a way to estimate future sales based on visitation projections. For example, if a blockbuster exhibit is expected to draw 50,000 additional visitors, taking the increase in visitation times the Revenue per Visitor is one factor to include in an estimate of future revenue.

Revenue per Transaction

Net Sales (A)

Number of Transactions (B)

The foremost benefit of knowing this number is as a measurement of the overall impact of factors in the store on the customer including the appeal of the product selection, merchandising attractiveness, customer service, pro-active selling, retail pricing, general ambiance, etc.

Items per Transaction

Number of Items (C)

Number of Transactions (B)

This is an excellent measurement of the application of incremental sales techniques. In other words, it helps to measure if the suggestive and add-on selling skills applied by your sales staff are affecting how many products, regardless of price, the customer is buying.

Capture Rate

Number of Transactions (B)

Number of Visitors (D)

This calculation is an indication of the exterior appeal of the store including location within the museum and signage, plus most of the internal factors noted above as affecting the number of Items per Transaction. If your store has a significant number of destination store customers, and their transactions cannot be distinguished from purchases by museum visitors, this number will not be an accurate measure of the capture rate of museum visitors.

Revenue per Square Foot

Net Sales (A)

Size of Store (E)

Revenue per square foot is a standard measurement in commercial retail but is less valuable in cultural commerce because few museum stores are built to the optimum size. As noted above, this is an inconsistent number for inter-museum comparisons. However, as a comparative measurement of the performance of product categories within the store, it can be a powerful tool, especially when coupled with the parallel analysis of product category margins and other factors. In this case the calculation is:

Product Category Net Sales

Square Footage Devoted to Product Category

While, with the noted cautions, all the measurements above can be used to compare your performance to other museum stores, the greatest value may be for internal measurements that hopefully reflect steady improvement over a period of time. In the simplest of terms, if the Capture Rate increases along with the Average Transaction the gross revenue of the store is surely also going to increase.

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