Do you know your market share? It isn't hard to figure out.
Use this 4-step formula:
- Find the total dollars done in your merchandise category across the country. Your trade organizations should know this.
- Divide that number by 303 million (the population of the U.S.). This gives you the dollars spent per person in your category.
- Multiply that times the population of your trade area to calculate the total spent in your market.
- Divide your sales by that number to find your Market Share*.
Chances are you'll get a number between 3% and 30%.
If it's close to 30%, pat yourself on the back. You own your marketplace. But understand that you probably won't grow much bigger. Even Walmart isn't that big. Either be happy maintaining that share or look for other markets or categories into which you can move.
The typical independent retailer will be in the 3% to 9% range. If this is you, there is plenty of room for growth. And it doesn't take much to achieve that growth. A store with 5% share only needs to convince 1% of the market to do business with them to get 20% growth. This frees up your advertising. You don't have to convince everyone, just a paltry 1%. This frees up your approach. When 19 out of 20 people aren't shopping with you, you're free to experiment with your business model - mix it up, change it up, or blow it up.
Knowing your market share helps you know what to do next with your business. Do the math. I promise it's not that hard. And the truth shall set you free.
*Yes, there will be regional differences and variances per category, but the number will be close enough to work for most businesses.
Phil Wrzesinski owns and operates Toy House and Baby Too, one of the 25 best independent stores in America. He shares his business secrets here and at www.PhilsForum.com.
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