Retail Sharks: Know Your Local Market Share
That’s right, you can get an estimate of your market share in your local area! Sounds crazy I know, but in some cases, this can be really helpful to your growth. Since you own a retail business it’s tough to go to the customers, but there’s always a way to get them to you! This post is right for you if you believe knowing your local market share can possibly benefit your bottom line, or if you’re even just a tiny bit curious about how it could help. You know by now if I’ve piqued your interest. So sit tight, and hold on to your excitement.
Knowing your market share can help you understand, even in a retail shop, can help you gauge your growth opportunity as well as learn from the efforts of others.
Determining your percentage of market share and detailing your customers you’ll learn more about the competitive landscape of your local area. You’ll also learn more about strategies your competitors are undertaking, what’s working, what’s not working, and you’ll be able to detail out key differences among you and your competitors through this process.
Usually, around retail stores, there are swarms of competitors and other shops that aren’t necessarily competing with you. So within your zip code, how do you fair when it comes to market share of your community in terms of similar shops if any. It’s difficult to determine your percentage of market share with small businesses because this information isn’t public. If you wanted, you could take an area, a few avenues, and blocks, determine your direct competitors, and estimate their sales.
For example, let’s say I own a sandwich shop here in Brooklyn. I’ve chosen a 1-mile area around me in all areas and counted out that there are 3 other competitors in my 1-mile area. I can then take my Average order Value and multiply that across the number of customers, or walk-ins. Your competitors may have similar Avg. order values. To get a better idea about what customers are paying for their items you can get an idea of what price they sell their merchandise at.
Next, I’d take a look at my the number of walk-ins I have throughout the day. This, you can actually take a measure of! Now that you have an idea of how many customers you get in the last 30 days you can compare it to your listing on Google. Which would usually look something like what you see below.
The purpose of you doing this is so you can put a number for each blue mark for your competitors, as well as yourself. This would be the tricky part. Which means this number will vary a little more than usual models. Still, if you can match your foot traffic with the foot traffic of your competitors in your selected area you could get some insightful information about your business. This will give you an idea if they’re gaining more foot-traffic than you and potentially more sales or not. Once you’ve given them the estimated number of foot traffic and multiplied that by their believed average order value, you’ll be able to determine market share of the selected area.
Check this example out here:
I own Pretend Sandwich shop and my Avg. Ord Value is 14.69
I’ve calculated that I received around 200 walk-ins in the last 30 days.
Even though we can calculate the exact amount of sales and customers within a time frame, I’m going to use my Avg. and multiply that by my walk-ins. This way it’ll be under or over exaggerated about the same amount as my competitors.
So my sales look like this: 14.69 x 200 = $2938
Basic Sandwiches has a lower price than I do. He only charges $5 per sandwich. I assume that at most, 50% of walk-ins order 2 sandwiches. I also see that he has the same amount (200) of walk-in as me over the last 30 days. So I can say 100 of them spend $5 and 100 of them spend $10.
This calculation will look like this: 5 x 10 = $500, and 10 x 100 = $1000
$1000 + $500 = $1500
$1500/200 = 7.5 Avg. Order Value
After running the calculation we now have an idea of their Avg Order Value, which we will now calculate as we did with ours.
Avg. Order Value x Walk-ins = Estimated Sales
7.5 x 200 = $1500
For simplicity Let’s say that our other two competitors have estimated sales, over the last 30 days, of $1800 and $2500.
We can then add up all the estimated sales numbers.
2938 + 1500 + 1800 + 2500 = 8738
That 8738 is the estimated revenue of the market. Now to find out the percentage share that each competitor has we’ll follow this formula.
(Estimated Revenue of shop / Sum of all Estimated Revenue) x 100
So I wanted to measure the market share of my shop, which made estimated revenues of 2938. I would do this:
(2938/8738) = 0.3362 x 100 = 33.62%
Using this method I’ve found that I have almost 34% of the market share in the area I’ve selected. The closest competitor, who made 2500 in estimated revenue, has 28% of the market share in the selected area.
Now that I know my market share I have a better understanding of how much I can grow. For example, I see that one of my competitors has 28% of the market share. Is she running promotions on sandwiches? Buy one get one? Free soda or Fries? I can investigate to point out key differences between my shop and hers. You don’t want to copy her decisions exactly because there might be costs involved. If she generally has a lower cost of goods than you, that means she’s not cutting profit to lower her prices.
There’s also the matter of your brand! It’s possible that the only thing she has going for her is her prices. However, she doesn’t have a strong brand. Which, Pretend Sandwich Shop does. So, I’ll focus a little more energy on strengthening my brand image and presence. This will keep loyal customers loyal and attract the attention of new customers who are willing to spend a little more for a different experience.
You can test my Retail Shop Market share strategy yourself if you’d like. But If you do, I hope you take note that the most helpful part of determining your market share is the journey to the answer. You’ll learn things about your competitors you haven't noticed before, so take lots of notes throughout your investigation. And don’t be afraid to play customer at any one of the other shops on your radar!
I know this article Is showing you the Shark side of the business, but we have another article coming soon that will introduce you to a more brighter side. One where partnerships are key! If you have any questions or ideas on how to get your local market share your ideas in the comment section below or on our Facebook page.