Using Distribution to Enter New Markets
By: Kimberly Grant
When it comes to deciding on a new location or new distribution for your brand or product metrics is key. In the retail industry, decisions cost money and must be calculated correctly using two general metrics: ACV and PCV.
Not the Best Substitute
In the world of buying and selling, a good way to measure the next move for your company or brand is to look at how well (or not so well) a potential store is doing in the revenue column. It seems basic, but the wrong calculations and interpretations could lead to a big misstep. One of the measures used is all commodity volume (ACV). The formula for ACV is:
ACV (%) = total $ sales of a stores stocking your brand divided by total sales of all stores.
Now, ACV can be used in a perfect world when stores are willing to give up their very personal bookkeeping information to a company just because they asked. Would you give your electrician a list of all of your paystubs for the previous year? I wouldn’t and he’s family. So, ACV isn’t always the go to measurement. In fact, it’s considered a substitute only when PCV information is not available.
The Best of the Best
Although, ACV is a good start, the best way to gauge store worthiness is to calculate product category volume (PCV) across all of the stores that sell products in your category. In other words, this metric will give you a great idea of where consumers in the market for your brand (example: bagged popcorn) are likely to make the purchase. The formula for calculating PCV is:
PCV (%) = category sales of your stores divided by total category sales of all stores.
The scenarios above are based on a perfect world, which we do not live in.
A World of Possibilities
Although, there are some “worlds” where stores (or retailers) willingly give up all of their sales information and display it for all to see. It’s like magic for a company. One could even say “movie magic”.
Yes, the film industry is one of the “worlds” where their sales are posted (read: shouted from the roof tops). There are sites like Box Office Mojo that give all of the ticket sale information of every movie ever released in a theater. They can do this because the movie theaters report their ticket sales to the website.
In a Perfect Metric
Let’s say AMC Theatres is looking to open a movie theater in Hawaii. This would be a big undertaking. The predominant movie theaters in the State of Hawaii are Consolidated Theatres and Regal Cinemas. Regal Cinemas is one of AMC’s main competitors. In order to calculate the ACV of Regal Cinemas, AMC Theatres could use Box Office Mojo to run a rough calculation of Regal Cinemas’ movie ticket sales divided by movie ticket sales of all of the theaters in Hawaii.
The ACV would also give a rough estimate of cities and towns in Hawaii where AMC Theatres could capitalize on box office dollars, which would be to carve out a share of the movie market. In this scenario, a PCV calculation would be somewhat intricate. AMC would have to look at all of the movies it is licensed to show in its movie houses, then calculate the PCV of those specific movie sales in the theater chains in Hawaii.
Building to the New World
Would this process take a while? Of course. Then again, Hollywood wasn’t built in a day. With time and patience, AMC Theatres could use its knowledge to penetrate the Hawaii movie theater market and increase revenue. So, it may not be telling your electrician how much money you make. But using ACV and PCV calculations would a great start to movie magic.
World building may be hard, but reading my last post is easy. You can read it here.
