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8 Dec 2011

Seeking your ideas: how to calculate the turnover of a supermarket?

Here’s a guest post from Fiona Ward, setting the Transition community a brain teaser…

As part of the Economic Blueprint work we are doing in Totnes, Manchester and Hereford (part of the wider REconomy project) we are collecting data about the current local economy in each place. In particular, we want to understand much more about the current businesses; what they do, how many people they employ, what skills those employees have etc. In particular we want to know their turnover.  We can then use this information to give us a full picture of our local economy, and we can better understand where our local community spend their money.

For most businesses we can get this as it’s public data. But we can’t get this for the big supermarkets, as their revenue data is not reported publicly by store location. Clearly this is an area of great interest for us. There’s general stats we can use such as “almost three-quarters (72%, £37.70 per week) of food and non-alcoholic drinks were purchased from large supermarket chains, an increase of £1.20 on the previous year” (ONS Family Spending Edition 2010). But we’d like to know the true picture where we live, if we can.

Being a creative lot, we wondered if anyone out there has any ideas or experience in how we can best estimate what a big-6 supermarket’s turnover might be, in a specific location. This would need to take into account things like store size and what they sell i.e. super store, food only, food and clothes etc.
If anyone has any (legal!) suggestions as to how we might fill this gap in our knowledge, please do let us know. You can post comments below or email fiona.ward (at) ttandc.org.uk.  Thanks!

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11 Comments

Jan
8 Dec 11:47am

become a shareholder of Morrisons? Presumably shareholders have some access to info.

&&&&& ….seems a naive q…but, has anyone talked to the local Manager?

Fiona
8 Dec 7:06pm

Yes, I had no response so far. Given the level of competition in this sector, this is not the kind of information made publicly available at store level (would be delighted to be proved wrong here).

Thanks to those who have emailed me directly. We will share anything workable that we come up with.

Luis
8 Dec 8:43pm

Hi,

Collect all the information regarding wages, goods, energy costs, rent to be paid for the dependencies, capital…all the money they have to spend to be there. Then add taxes and propose different scenarios to reach turnover: 10% average margin, +20% average margin, +30% average margin. Which one is the likeliest?

Just an idea to begin with…

Luis

Brad K.
8 Dec 10:26pm

I think I would start by . . asking to see the manager. Explain your interest, explain you want the simple turnover, not profits, costs, etc.

Turnover is annual revenue divided by average inventory, right? That particular number should be relatively simple for the store(s) to put together, and reasonably secure for them to tell you.

You might, at the same time, let them know what you are doing, how you intend to use the information, describe how you intend to attribute the information — and ask if they would be interested in getting more involved with your plans.

Big stores aren’t the enemy. As times continue changing, they will become ever more aware that maintaining market position will make knowledge of what the local community is doing even more valuable. Agribusiness and commercial food industries will have be an important part of keeping transitions reasonably stable for the greater community.

Blessed be!

Kate Leslie
8 Dec 11:33pm

Hi Fiona,
I used to do this for a profession in Australia.
I would suggest this methodology:
* Take the average spend per person on Food & Grocery. – 37.7 a week you say * 52 for a year.
* Multiply it by the number of people living in your town.
* Multiply it by the average share the supermarkets have in your country (72% you say – similar to Aus)
* Add whatever % of turnover you think reasonable for the supermarket outside its core business of food & groceries (e.g. kitchen stuff, small electrical)
* Add whatever % of turnover you think reasonable for people living beyond your town (possibly the largest variable in this methodology)
* Divide by the number of other supermarkets in your town.
You should be able to find an estimate for its floorspace (sq.ft). A check is to divide turnover by floorspace- is it reasonable?
In Australia proposed developments have to produce an Economic Impact Assessment. I worked for a firm that did some EIAs in the UK for Westfield shopping centres. They should be in the public domain. EIAs will give you an idea of benchmarks for the above.
When you get an idea of what it could be and if you have a friendly store manager, you could ask him/her if its in the ballpark (off the record). Only Aldi has a super-secretive reputation – can’t imagine getting anything out of them.
Hope it helps.
Kate
PS Shareholders don’t get that level of info.
PPS I’ve seen the light now – not helping that industry any more!

Andrew Ramponi
9 Dec 1:51pm

Kate’s response seems comprehensive, but I’m not sure what value there is in just knowing a businesses turnover in the first place?

Apart from being a question akin to asking individuals what their actual income is (many people won’t say) turnover/revenue doesn’t necessarily relate to profit. Just as income doesn’t mean much without liabilities/debts.

Also, even if you were given a businesses revenue, gross and net, you wouldn’t know what particular items they might be discounting to entice shoppers in the door? Headline numbers are often quite misleading and you could spend a lot of time getting nothing much apart from bits of paper with numbers on them.

I think supermarkets are about convenience and choice. It’s almost impossible for a small business to compete directly with these advantages so service and quality seem to be where local enterprises might win. Much harder things to measure.

Sorry to be a bit negative. Of course I might be missing something.

treaclemine
9 Dec 2:33pm

This looks slightly relevant from a historical perspective at least: http://www.henley.reading.ac.uk/web/FILES/management/049.pdf

“The value of Sainsbury’s sales data in assessing the impact of self-service methods on food retailing in post-war Britain”

by

Bridget Williams 2007

JamieB
10 Dec 12:06pm

You can refine the number slightly as people in the South West pay more than average for food. See Table A35 – Detailed household expenditure by UK countries and regions, 2008-2010:

http://www.ons.gov.uk/ons/rel/family-spending/family-spending/family-spending-2011-edition/index.html

[Click 'data in this release' and go to page 3]

But it doesn’t cut the number by supermarkets vs other retailers, just giving total food spend. And Table A2 doesn’t break it down regionally.

Supermarket spend in the South West will exist and I would recommend emailing the contact at the link above as they can usually re-cut the data on request.

But I can imagine that in Totnes supermarkets might have a lower market share than the average for the South West? I expect that the survey doesn’t have enough resolution to go down to local authority level but you could ask. I doubt it’ll go down further than that.

There are also some sales per square metre figures from 2005 here which could give you an upper and lower range (it’ll be worth inflating the figures though):

http://www.competition-commission.org.uk/rep_pub/reports/2005/fulltext/501ac.pdf

JamieB
10 Dec 12:13pm

One more link, some trends of average annual sales per sq metre by retailer can be found here:

http://www.competition-commission.org.uk/rep_pub/reports/2008/fulltext/538_3_1.pdf

Fiona
13 Dec 1:14pm

Thanks to everyone here (and those who emailed me directly) for your excellent input and ideas. It feels like together, we can figure out how to do just about anything.

We will take all of this and see what we can come up with, try it out, and then share it back here as soon as we can…

Thanks, Fiona

Mike Grenville
15 Dec 4:53pm

This article highlights how sensitive supermarkets can be about people checking their prices in store:

Now it’s illegal to write down prices in a Tesco supermarket. I am nearly arrested for the ‘crime’ of doing a price check on some bottles of water
http://www.guardian.co.uk/money/blog/2011/sep/16/tesco-shopping-supermarket-prices-check-writing