Understand Retail Performance With Sales Estimates

When Would You Need Sales Estimates?

Sales data is crucial for decision-making in the retail space, especially in today’s ever-changing environment. Retailers need to analyze their own sales numbers to see if they are meeting customer needs, positioning products effectively, and maintaining a healthy flow of revenue. But what happens when other stakeholders need access to a retailer’s sales data but don't have it? In this case, alternative datasets could help generate accurate sales estimates that allow third parties to dive deeper into retailers’ performances.

Retail sales estimates can help you gain visibility into the performance of competitors, obtain insights into tenants’ revenue, sharpen financial models to predict revenue, margins, and cash flows, and identify anchor businesses within communities.

How Different Stakeholders Use Retail Sales Estimates

Retailers

• Benchmarking & Competitive Intelligence - Retailers generally have little visibility into the actual sales performance of other industry players. But even without direct sales data, retailers can use sales estimates to contextualize their store and chain performance by comparing traffic patterns to those of competing brands, venues, or industry averages.

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• Understand Market Potential - Retailers can use sales estimates to compare sales and sales-per-square-foot metrics against regional and national benchmarks. This helps to identify stores and markets with the potential to overperform.

CRE Professionals

• Improve Property Performance - Void analysis is the process of identifying gaps in a shopping center’s current tenant mix by comparing the available retail and service offerings to local consumer demand. It is used to quickly and efficiently discover the best tenants for a venue. By supplementing the void analysis with retail sales estimates, CRE professionals can evaluate the historical performance and future sales potential of prospective tenants and decide which would be the best fit.

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• Bring Transparency to Lease Negotiations - Property owners often lack visibility into their tenants’ revenue performance. Sales estimates give them insights into key tenants’ financial strength, removing the fog of negotiations and facilitating more favorable lease agreements.

Franchises

• Support Operations - Franchisors can gain unprecedented visibility into the performance of their franchisees to better understand how they can support marketing and operations, as well as inform contract negotiations.

Finance Professionals

• Generate More Accurate Sales Forecasting - Retail sales estimates feed into financial models to predict revenue, margins, and cash flows.
• Enhance Creditworthiness Assessment - Banks and financial institutions use retail sales estimates to assess a retailer’s ability to repay loans.
• Conduct Market Valuation - Private equity and venture capital firms assess sales estimates to evaluate a retailer’s financial health before investing.

Civic Professionals

• Monitor Regional Activity - Civic professionals can use retail sales estimates to gauge the performance of local retailers, identify anchor businesses within their communities, and strengthen economic development planning.

Estimating Retail Sales

There are different methods one can employ to estimate a retailer's sales, from indirect approaches such as manually counting customers to technological solutions that involve location analytics. A few approaches are:

• Observation-Based Methods - Counting the number of people entering a store at different times of day and on different days of the week, and multiplying by the average basket size.
• Market Research & Surveys - Asking customers how often they shop at a competitor and how much they typically spend.
• Financial and Public Data - If your competitor is a public company, you may have access to their total revenue, which you can break down by segment or region.
• Benchmarking - Using known data from similar-sized competitors in the same industry and geography to infer sales performance.
• Supplier and Distributor Insights - Suppliers sometimes have insight into how much product a retailer is moving.
• Credit Card Data - Credit card companies and data aggregators collect millions of anonymized transactions. This data can be sliced by merchant name or category, location (ZIP code, city, region), or time (daily, weekly, monthly). By aggregating these transactions, analysts can estimate total spend at a specific retailer or store over time.
• Location intelligence - Today, developments in AI and machine learning make it possible to gain actionable insights into a retailer’s performance using foot traffic data. Location analytics can be combined with third-party transactional data to generate estimated store-level sales insights and visibility into customer spending over time. This process enables you to:
  
  • View sales estimates per location, sq ft, or ticket size
  • Identify unique patterns of local consumer spending over time by daily, weekly, monthly, or annual aggregations
  • Examine transaction size at each store to identify unique shopper behavior at different locations

Using several methods to quantify and validate the estimation will probably yield the most accurate result.

Placer.ai’s Retail Sales Report

When analyzing any property, it’s important to consider key insights such as foot traffic, demographics, and sales data. Placer.ai, with its user-friendly platform, offers you insights into all of these. If you don't have access to actual sales data, Placer.ai’s Retail Sales Report can deliver estimates for retail properties or chains at the store level across a variety of categories, including grocery, superstores, restaurants, home improvement, and more.

The Retail Sales report combines Placer.ai's visitation analytics with third-party transactional data to generate insights about sales performance at a variety of retail locations over time. The resulting process generates sales estimates and a new understanding of spending patterns.

Case Study - Retail Sales Estimates in Action

Northmarq Capital’s client, a grocery-anchored retail shopping center in Staten Island, NY, needed help finding a lender to secure $22M and refinance the center. As with many retail deals, they did not have tenant sales data to help a lender get comfortable with the deal. This is where Placer.ai’s Retail Sales Report was necessary. It helped Northmarq show that the tenants were strong, and this data helped secure the loan.

Key Takeaways

Accurate retail sales estimates provide a crucial layer of visibility in an increasingly competitive landscape and are a powerful tool for businesses across industries. By leveraging sales estimates, stakeholders can make more informed decisions, optimize operations, and uncover new opportunities for growth. With solutions like Placer.ai’s Retail Sales Report, businesses can gain a deeper understanding of consumer behavior and retail performance without needing direct access to sales data. Embracing these insights can unlock new levels of strategic planning, ensuring sustained success in an ever-evolving market.