Never allow more than 30% for a category

Does your business rely on too much traffic, gross profit or revenue for a single product category? By too much I mean more than 30%.

30% is a figure I have come up with, based on years of working with newsagents in Australia affected by categories which dominate their business falling into decline.

Tobacco, newspapers & magazines and lotteries are three categories which can account for more than 30% of revenue, gross profit or traffic.

Any category accounting for more than 30% of revenue, gross profit or traffic presents you with a risk as it is a big hole to fill if something happens to the category – such as a store nearby getting lotteries or tobacco sales crashing following tighter regulation. While it is easy to blame these external factors, I blame any retailer for allowing too much of their revenue to be dominated by a single product category.

Take a look at your data – any computer system should provide you with the percentage breakdowns for basket penetration, revenue and traffic. Look at your data and act on any category accounting for 30% or more. No, don’t cut the category – work on other areas of your business to dilute the impact of the above 30% categories.

Act now. Own the situation and your actions.