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How Much Does a Big Box Really Sell?

November 8, 2008

Every year or so, one of our trade magazines carries a story ranking big box stores by their annual sales in outdoor furniture. Casual Living printed that store in their November, 2008 issue. You can read the whole thing at:

http://www.casualliving.com/article/CA6612578.html

This is how the top five big box retailers ranked along with their annual sales and the number of stores they have:

Company                   Estimated                Number of Stores        Sales per Store
                            Sales in Millions                                                      in 2007   
Wal-Mart                   $640                               3,418                         $187,244
Home Depot              $345                               1,950                         $176,923
Lowe’s                       $328                               1,528                         $214,659
Target                         $179                               1,591                         $112,507
Kmart                         $158                               1,382                         $114,327

Casual Living only showed the first three columns in this table. I wish they had gone further and printed the last column “Sales by Store.”  Since they didn’t, I sat down with my trusty calculator and did it for us. That is what the last column represents.  Those figures make two interesting things happen. First, the leader becomes Lowe’s. Second, you see that any individual big box store sells much less than one specialty store. In fact, most of us do more in one month than any single big box store does in one year.

This should be a comforting fact for us specialty retailers. However, I would like to take it one step further. I counted the number of stores each company had in my sales area. Then I extrapolated the total sales each company did in my area and totaled those figures. Here is what I found:

Company                   Store in my Area                   Sales per Store                 Total Sales
                                                                                   In my Area
Wal-Mart                           10                                      $187,244                       $1,872,440
Home Depot                      13                                      $176,923                       $2,299,999
Lowe’s                                 7                                      $214,659                       $1,502,613
Target                                  4                                       $112,507                          $450,028
Kmart                                  5                                       $114,327                          $571,635
TOTAL BIG BOX STORES: 39    TOTAL SALES: $4,197,681           

Again, two interesting things happen. First, Home Depot takes the lead by a wide margin with Target and Kmart way behind everyone. Second, the total sales of all 39 big box stores in my area only equal the sales of one very big specialty retailer. It took 39 stores to sell as much as one or two specialty retailers could do in the same area.

By the way, you can figure this out for your area without counting the total number of big box stores where you live and work. The population of my trade area that includes three parishes (counties to everyone else) is just over one million people. If your sales area has about five million people in it, you can multiply the above total by five to see what the big boxes are selling around you.

But let me go back to the fact that it takes 39 stores to sell as much as one or two specialty retailers in the same area. That can’t be efficient! I would guess there is at least one sales associate at every store working the outdoor area even though you can never find them when you need them! That comes to 78 people in a 16 hour sales day. Add in administrative overhead, cost of property, figure most big boxes work on shorter margins than we do, and you have to conclude that a specialty store is going to make a lot more profit on $4,200,000 than the five big box guys will.

It’s all a matter of perspective. If you are a manufacturer and Wal-Mart waves their $640 million in annual sales in front of you, you are going to salivate like a Pavlovian dog. If a specialty retailer didn’t delve a little further into the data, the same figure would make you feel smaller than a flea on an elephant. But just a little bit of math and retailers can count their blessings. Instead, manufacturers might see these blessings as a curse.

Yours in confused retailing, Bruce