Chapter 8: Commercial retail function

Question 1

The commercial concept of sales

Answer 1

The concept of sales depends on the perspective from where someone is active in retail. Consequence: because of different departments, confusion arises. Differences in approach when looking at sales can also occur on the commercial side of the retail company.

Suppliers see sales = average price * quantity sold

This concept of sales makes less sense in retail because retailers are active in many different product markets at the same time.

Question 2

The like-for-like concept of sales

Answer 2

Means the sales derived from the long-time-operational sales floor area.

Like-for-like sales = total sales of the company – revenues of openings and expansions

It is the total sales of the company, excluding new openings, extensions of stare metres in existing locations, expansion and ingrowth effects.

Question 3

Why is it important for a retailer to know the like-for-like sales?

Answer 3

The like-for-like growth is the best measure for assessing the strength of a retail company’s formula. A retailer can show wonderful growth figures, but if these are only caused by the expansion, while like-for-like sales are falling, this means that the formula will eventually run into problems. The cash flow, needed to finance the expansion, comes from the like-for-like performance. If this cash flow runs out, financing the expansion becomes more difficult, while the new branches will also end up in an old-age situation and could therefore also show negative growth figures. The (negative) scissor movement will then have a double effect.