Sales and Distribution — Average Sales per Store

The average sales per store is equal to:

$$\frac{\text{Sales Volume}}{\text{Number of stores distributing the product}}$$ $$\text{Number of stores distributing product = Numeric Distribution × \# of stores in Universe}$$

For example, if sales volume =10,000kg, numeric distribution =50% and the number of outlets in market breakdown = 800, then:

$$ Average \,Sales = \frac{10,000}{0.5 × 800} = \frac{10,000}{400} = 25 \,kg\,per\,store$$

This measure, though simple and easy to comprehend, can be misleading as it does not account for the quality of distribution. For instance, consider the following data for Nescafe and Maxwell House.


Exhibit 30.4   Rate of sales per store for Nescafe and Maxwell House (fictitious example).

Nescafe:

Sold in 2,000 outlets,

Average sales per store = 200 kg/month

Maxwell House:

Sold in 100 outlets,

Average sales per store = 300 kg/month

The average sales per store suggests that Maxwell House is selling at a faster pace than Nescafe. But intuitively, this does not sound right. If Maxwell House can sell at a faster rate than Nescafe, why is its distribution confined to only 100 outlets, compared to 2,000 for Nescafe?

On drilling into the data, we find that Nescafe is selling 1,500 kg per month in those 100 stores where Maxwell House is distributed (see Exhibit 30.4). The average sales per store fails to account for the size of stores. Smaller brands tend to be distributed only in the big stores that carry a wide assortment, and account for a much larger share of trade than the average store. As a brand’s distribution expands its average sales per store tends to drop, because of the effect of store size.

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