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Sales per square foot is a unit used to measure the profitability of retail stores. This number is determined by calculating the total sales in question, over a given period of time, and dividing it by the square feet of the area being analyzed. It is generally used mostly by retailers and property managers.
Sales per square foot may be calculated for one individual shop, a chain of stores, or for an entire shopping mall. When calculated for one individual store, it shows how much money the store is receiving. Sales dollars may be totaled for one month or one year.
When years are used as a time frame for figuring sales per square foot, they are typically referred to as calendar or rolling. A calendar year tabulates sales that occur between January and December of one particular year. A rolling year adds together all sales within any given twelve-month period. For example, if a store opened in October, the company might be interested in viewing the sales figures from October of the initial year of opening to the following September. This data would show a twelve-month period of sales figures, even though the store had not been open for one full calendar year.
Property management companies often use this measurement to determine the success or failure of their shopping malls. This figure may be applicable for full-price retail malls, outlet centers, and strip malls. To figure sales per square foot for an entire shopping center, the property management company would add together sales dollars for every store within the property and divide that number by the total square footage of the site.
Using this measurement as an indicator of overall profitability allows both retailers and property managers to analyze stores on an equal standing. The number takes into account the overall square footage available to the store to showcase its products. A store occupying 15,000 square feet (about 1,394 square meters) within a mall will typically have higher sales dollars than a store occupying only 1,500 square feet (about 139 square meters). Overall sales dollars, however, do not indicate which store is using its space most effectively.
For example, that store occupying 15,000 square feet might achieve a total of $1,000,000 in sales in US Dollars (USD) for one month, while the smaller store occupying only achieves $700,000 USD in sales for that same month. Despite the fact that the larger store made more money overall than the smaller retailer, the latter used its space with the most efficiency. The larger store would have a sales per square foot number of $66 USD, while the smaller shop would have a sales per square foot number of $466 USD. In such an instance, the property management company could, hypothetically, make more money by closing the larger store and opening a series of equally efficient small stores in its place.
This statistical number may be frequently used by retailers to determine whether it might be profitable to open a store in a new location. Shopping malls that boast high sales per square foot figures often have a higher success rate in opening new stores than those malls with low ones. Property managers may also look at a retailer's figures to determine whether to allow that company to move into their property. Chain stores with habitually low numbers are typically not invited to open in malls that maintain high figures all year round.