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- Calculating Shelf Productivity
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## Calculating Shelf Productivity

Knowing how much profit each shelf in your store generates is as important to any retail store as product placement in the store. Under certain conditions, not only knowing what the productivity of an individual shelf is will help you **increase profits**but also help you improve __product selection__ and __layout__ in your store. The idea is that you want to get as much profit as possible from every shelf in your store. And I mean shelf space in the broadest sense of the term.

**Step 1: Set the unit of measure**

One of the first things you need to do is decide on a unit of measure. Understand that in order to compare one specific space to another, they must be the same units of measurement. For example, if you use 1 foot of shelf space, you need to apply it to each part of the store you want to calculate. The proverbial “apples to apples” comparison is key to making this work.

**Step 2: Number your shelves for tracking**

Once you’ve decided on the right unit of measurement for you, number your shelf spaces (at least on paper) so you can identify specific locations and shelves. I suggest you use a store map with a spreadsheet. Also, remember that the larger the individual unit of measure, the more imprecise your profitability comparison will be. Thus, using a smaller unit of measurement is likely to prove more valuable. For example, use 1 foot instead of 2 feet.

**Step 3: Define the product**

Of course, if you’ve spent some time on product placement at this point, your store will already have products assigned to specific locations. So it’s easy to associate a product with a shelf location number.

**Step 4: Calculate profit in dollars per item**

While knowing the margin percentages can be useful, the true measure of productivity is **actual dollars earned**. So calculate the gross profit of a __a specific item__ *(revenue – cost of sales = gross profit).*

**Step 5: Use dollar value to calculate dollar value productivity**

Just multiply __number of units sold,__ for a specific product __dollar gross profit__. The most important part of benchmarking is that you have to measure it __over time__. So use 1 week, 1 month, 6 months, or whatever time measurement you want to use. Apply it to every shelf in your store and you’ll soon be able to identify your highest-performing shelves and conversely your lowest-performing shelves. Couple this with the seasons and you’ll soon see what’s producing when.

**Step 6: Take your time, analyze and experiment**.

The amount of information that can be gleaned about your store’s productivity from this kind of analysis is vast and immeasurable. Especially over time. Note, however, that this type of analysis takes time, especially in an environment where there may be multiple cycles. So, make sure that your productivity calculation time matches your store and product types. Of course, you can use this data to calculate, for example, the exact seasons of a particular line.

Summarizing the analysis of yours __shop productivity__ will make you better at retail and definitely increase your profits. The only thing to remember is that you should do it regularly and be patient. Creating a useful statistical database takes time and effort.

I wish you all the best in your endeavors and invite you to share your stories and comments here.

Cheers!

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