Where to Measure Sales?

Exhibit 28.3   Variety of ways to measure sales of goods.

As goods flow from manufacturers to retailers and from retailers to consumers, there are multiple points in their path where it becomes feasible to measure sales.

The sales pipeline commences with primary sale, the sale from manufacturer to distributor. Sale from the distributor to the retailer is called secondary sale. Manufacturers also sell directly to the bigger retail chains. At the end of the pipeline, the sale from the retail outlet to consumer is called retail sale, consumer purchases or consumer offtake.

Sales may be estimated by measuring the flow of goods at a number of points in the pipeline as depicted in Exhibit 28.3. The common methods for tracking and measuring sales include the retail index, consumer panel and data pooling. These methods, which are described in the following paragraphs, vary in terms of the "richness" and accuracy of the information they provide. The data collection processes also differ; some are more efficient and cost less, whereas others yield potentially more diagnostic information.

Retail Index (Retail Tracking)

Retail sales or the sale of goods from retailers to shoppers may be tracked through syndicated retail panels, and projected to reflect total sales for the market. Commonly referred to as the retail index, this approach offers the most accurate and efficient measurement of sales and distribution, at relatively affordable costs, for markets characterized by flow of goods through retail channels.

Consumer Panel

Sales may also be tracked at the point when goods are brought home by consumers. Estimates of consumers’ purchases are obtained from a representative sample of homes called a consumer panel.

Syndicated household consumer panels are neither as efficient nor as accurate as the retail indices, for tracking sales. They also miss out on goods that are consumed out of home.

Consumer panels, however, are highly valued because disaggregate data (i.e. household level) is richer, and better suited for diagnosing issues. Intended for this purpose, they are usually not the preferred choice for tracking sales, in markets where retail indices exist.

Consumer panels are covered in detail in Chapter Consumer Panels.

Data Pooling

Data pooling refers to the exchange, among manufacturers, of their sales data. This is usually undertaken by an intermediary agency that collects, compiles and re-distributes the processed data to the participating manufacturers. It is feasible when a few manufacturers control a large proportion of the market. And its prime advantage is low cost.

The pipeline that lies between primary sales and consumer offtake can be long and porous. Furthermore, primary sales tend also to be quite volatile due to trade promotions and other sales efforts that may result in the build-up of stock in the pipeline. As such it is not as good a reflection of consumer demand as the retail index.

Importantly, data pooling relies on data that is sourced from competitors. Instances where the arrangement falls apart due to incorrect or missing data, are not uncommon.

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