www.pwc.com/ca/retail
Measuring up
Retail Benchmarking
Survey
Retail Benchmarking
Survey
PwC Consulting partnered with the Retail Council of Canada to
conduct a high level Retail benchmarking survey with Canadian
retailers. This report will allow you to determine where your
performance stands among your peers in sales, general and
administrative costs (SG&A), as well as key performance
indicators (KPIs).
Often we focus our performance measurements internally;
how we have done compared to last year and to budget. By
comparing externally to similar businesses, you can identify
areas of opportunity to reduce costs and improve performance.
“Producing accurate and timely financial
reporting is now just table stakes for the finance
function. In order to be a true business partner
to the executive leadership team, board of
directors and the CEO, CFO’s must constantly
provide both financial and non-financial insight
into operations, lead strategy, effect change and
generate results for the organization.
The retail environment gets more competitive
every year and whereas in the past competition
was domestic, it’s now international. To survive
and thrive, great retailers and great CFOs
are constantly using competitive external
benchmarks to ensure that the organization is
staying ahead and adding value”.
— Bryan Tatoff, CFO, Danier Leather Inc.
2
Measuring up: Retail benchmarking survey
Industry findings—
the data of 72 retailers gives us
the ability to assess individual
results across the industry,
by category and by function.
www.pwc.com/ca/retail
3
High margin and high cost
go hand-in-hand
Retailers often come to us to talk about strategic
options to keep their brand fresh and relevant. A
constant theme among retailers is managing their
brand equity while maintaining profitability.
Figure 2a: Gross margin vs SG&A – Apparel
75%
70%
Gross Margin %
Retailers with higher gross margins tend to spend
more on sales, general and administrative costs
(SG&A). Higher spend on areas such as marketing
and merchandising, permits retailers to build a less
price sensitive brand image. In turn, this drives
higher margins.
Figures 2a and 2b show relationship between gross
margin, SG&A and net margin, as represented by the
size of the bubble.
Our data suggests that keeping SG&A low, in relation
to your gross margin, is crucial for achieving higher
net margin, but you cannot get there solely by
growing your top-line sales.
65%
60%
55%
50%
45%
40%
25%
35%
45%
55%
65%
SG&A %
Figure 2b: Gross margin vs SG&A – Specialty other
Gross Marg in %
70%
60%
50%
40%
30%
20%
15%
25%
35%
SG& A %
Note: extreme outliers have been removed.
Size of bubble represents Net Margin %
4
Measuring up: Retail benchmarking survey
45%
55%
Net margin
High gross margins or low SG&A costs? We looked at
our data to determine the most important contributor to
driving high net margins.
Figure 3a: Net margin vs gross margin – Apparel
Figure 3b: Net margin vs SG&A – Apparel
In all three retail categories (apparel, grocery and
specialty), the correlation between net margin and
SG&A is higher as a percentage of sales than between
net margin and gross margin. This indicates that lower
operating costs are a stronger factor than gross margin in
determining net margin.
25%
25%
20%
20%
Net margin %
Net margin %
Cost control is a stronger
contributor to profitability
than higher margins
15%
10%
5%
0%
40
50%
-5
60%
10%
5%
0%
70%
Gross margin %
10%
Net margin %
12%
10%
8%
6%
4%
2%
-2%
20%
25%
30%
35%
2%
20%
25%
15%
15%
10%
5%
40%
50%
Gross margin %
60%
30%
35%
SG&A %
Figure 3f: Net margin vs SG&A – Other
Net margin %
Net margin %
4%
20%
30%
70%
6%
Gross margin %
20%
60%
8%
20%
-5%
50%
SG&A %
0%
15%
-2%
40%
Figure 3e: Net margin vs gross margin – Other
0%
40%
Figure 3d: Net margin vs SG&A – Grocery
12%
0%
30%
-5%
Figure3c: Net margin vs gross margin – Grocery
Net margin %
15%
70%
10%
5%
0%
-5%
10%
20%
30%
40%
50%
60%
SG&A %
Note: extreme outliers have been removed.
Other includes specialty other and department stores
www.pwc.com/ca/retail
5
Sales productivity
Of the three retail categories (apparel, grocery and
specialty), grocery has the highest sales per square foot –
with a median of $510 compared to $336 for apparel and
$325 for specialty.
Differences between individual retailers within each
category were significant. High performing apparel and
specialty other/department store retailers scored almost
twice as high as their lowest quartile peers and 50%
more in grocery.
So what helps achieve higher revenues in each category?
Retailers who are not high performers within their
category should ask themselves: Am I using my space
effectively? Do I have the right assortment mix? How
can I improve conversion rates? Am I using analytics to
understand my customers’ shopping habits? Our retail
clients who are using more “science” are obtaining better
top line and bottom line results.
“
Figure 4: Sales $/Square foot
$498
$325
Other
$252
$421
Apparel
$336
$223
$595
Grocery
$510
$403
$0
$100
1st Quarter
$200
$300
Median
We ensure that our selling space is as productive as possible by offering highly
effective products of the best quality, and exceptional, genuine customer
service.... We’re innovative, introducing new products and categories on a
regular basis and disciplined in discontinuing products that aren’t selling, no
matter how much we love them. – Andy McNevin, COO, Lush Cosmetics
Measuring up: Retail benchmarking survey
“
6
$400
3rd Quarter
$500
$600
Gross margin
Apparel leads all retail
categories with significantly
higher gross margins.
Apparel has the highest gross margin, with a median of 58%
versus 30% for grocery and 41.4% for other (specialty other
and department stores).
The reliance on unique fashion products in the apparel
category drives the highest gross margin performance.
However, the difference between the highest and lowest
performers in apparel can be as high as 10 percentage points.
Lower margins in the grocery category can be attributed to the
highly competitive and less differentiated environment, where
low priced items and homogenous goods work to drive down
margins and costs.
With such significant differences between categories in the
range of gross margin, it’s important for retailers to compare
performance within their category. Benchmarking against
your peers rather than the general retailer population is more
indicative of your performance.
Figure 5: Median gross margin percent by category
30%
Grocery
58%
41.4%
Figure 5a: Gross margin percent – Apparel
Apparel
61.6%
58.0%
1st Quartile
Median
51.9%
Other
Figure 5b: Gross margin percent – Grocery
33.5%
30.0%
28.7%
1st Quartile
Median
3rd Quartile
3rd Quartile
Figure 5c: Gross margin percent –
Specialty Other
44.4%
41.4%
37.7%
1st Quartile
Median
3rd Quartile
www.pwc.com/ca/retail
7
Store expenses
Labour and occupancy costs make up the bulk of store
expenses.
Apparel has significantly higher median store expenses than
other categories, as a result of considerably higher occupancy
costs.
As seen with gross margin, the large differences between
categories make it more valuable for retailers to compare their
performance on store expenses against peers in each category..
“
High performers carefully manage their
investments in store labour— and modify
quickly based on the fluctuating needs of
their business.
– Paul Beaumont, Director, Retail and Consumer, PwC
“
Labour costs as a percentage of store sales are similar across
all retail categories, with only a two percentage point variation
in medians. Whereas occupancy costs as a percentage of store
sales differ widely.
Figure 6: Store expense drivers
16.3%
6.3%
3.3%
15%
Apparel
13%
14%
Grocery
Other
Occupancy
19.4%
20.5%
22.6%
1st Quartile
Median
3rd Quartile
Measuring up: Retail benchmarking survey
26.1%
1st Quartile
30.5%
Median
33.6%
3rd Quartile
Labour
Figure 6b: Store expense percent –
Grocery
8
Figure 6a: Store expense percent –
Apparel
Figure 6c: Store expense percent –
Specialty Other
18.7%
21.2%
1st Quartile
Median
24.4%
3rd Quartile
G&A by category
Total G&A refers to all head office costs and excludes
costs within the “four walls” of the store. At a median of
5.8%, the grocery category has a significantly lower G&A
percentage of sales than the apparel and specialty (other/
department store) categories.
Pressure of lower margins
drives the grocery
category to lower overall
G&A percent
Grocery also has a smaller gap between first and third
quartile G&A percentage of sales. Back office costs are
more tightly controlled in response to higher volumes and
lower margins.
There are significant differences in specialty other and
apparel between first and third quartile retailers. These
gaps represent the larger variations in business models
and efficiencies caused by the wider range of offerings at
these types of retailers.
Figure 7: Median G&A percent by category
5.8%
15.8%
Grocery
Figure 7a: G&A percent – Apparel
Apparel
11.5%
13.5%
15.8%
18.4%
Median
3rd Quartile
Other
1st Quartile
Figure 7b: G&A percent – Grocery
5.0%
1st Quartile
5.8%
6.2%
Median
3rd Quartile
Figure 7c: G&A percent – Specialty Other
9.6%
1st Quartile
11.5%
13.0%
Median
3rd Quartile
www.pwc.com/ca/retail
9
G&A by function
Marketing and supply chain represent
the highest portion of G&A
Comparing G&A by function within your category can be
a powerful tool in identifying where you may have over
or under invested compared to your peers.
When assessing your performance within your
peer group, ask yourself what’s driving the biggest
differences? Are there inefficiencies in your processes or
systems? Are you over-paying for services? Analysis of
the data will enable you to pinpoint the key drivers.
10%
3.2
2.5
5%
Retailers should expect that marketing, supply chain and
merchandising costs will increase as their ecommerce
business grows. While areas such as store expenses and
store operations will decrease as a percentage of total
sales.
Merchandising is a more significant proportion of head
office costs for apparel and department stores than
grocery and specialty other.
Measuring up: Retail benchmarking survey
20%
15%
Marketing and supply chain are the highest cost
functions in all categories, except department stores,
where merchandising outweighs supply chain.
10
Figure 8: G&A by function*
0%
Apparel
Grocery
9.6
14.7
Dept Store
17.6
Specialty
Other
* Based on median value within each category for each function
0.8%
0.2%
0.3%
0.6%
HR ■
0.4%
0.2%
0.3%
0.3%
Finance ■
0.9%
0.3%
0.4%
0.6%
Other ■
Store Operations ■
1.4%
0.4%
0.4%
0.8%
Corp Services ■
1.6%
0.3%
0.9%
1.1%
IT ■
1.5%
0.5%
1.0%
1.1%
Merchandising ■
2.3%
0.4%
1.5%
1.1%
Marketing ■
3.3%
1.1%
3.0%
3.3%
Supply Chain ■
3.3%
1.8%
1.3%
3.0%
Inventory turns &
gross margin return
on investment
(GMROI)
Higher inventory turns drive
grocery to higher GMROI rates
despite lower margins.
The high perishability of grocery products and higher purchase
frequency drive significantly higher inventory turns in grocery
than apparel and other. Grocery has a median value that is
approximately five times greater. The higher inventory turns of
the grocery category lead it to also have a significantly higher
GMROI than the other categories, despite lower gross margins.
Greater variability in turns and GMROI within grocery presents
an opportunity for grocery retailers to stand out from their
peers.
Figure 9b: Gross margin return on investment (GMROI)
Figure 9a: Inventory turns
Other
2.8
2.3
Apparel
3.7
3.2
2.5
1.7
4.3
5
1st Quarter
4.3
3.5
2.8
10
Median
17.6
14.7
9.6
0
2.0
Apparel
Grocery
2.5
Other
3rd Quarter
7.8
Grocery
5.3
4.3
15
20
0
1
1st Quarter
2
3
Median
4
5
6
7
8
3rd Quarter
www.pwc.com/ca/retail
11
Does size matter?
Increased complexity
and duplication of
functions offset the
advantages gained from
economies of scale.
Less than you would think!
While retailers tell us that their larger competitors have an advantage
due to their size, the data tells a different story.
The benefits of economies of scale on G&A costs at both the total retail
and category level were smaller than expected across the 72 retailers
we studied. In many cases, the increased complexity of larger retailers
and duplication of head office functions, driven through acquisitions,
have offset the advantages gained from economies of scale.
Figure 10b: Net sales vs G&A % – Apparel >$300M
30%
25%
25%
20%
20%
15%
0
$4
,0
0
0,
00
0
00
0
0,
$3
,5
0
0,
00
0
$3
,0
0
0,
00
0
$2
,5
0
0,
00
0
$2
,0
0
0,
00
0
Sales ($000’s)
00
0
$1
0,
0
00
,
00
$8
,0
0
0,
0
00
$6
,0
0
0,
0
00
$4
,0
0
0,
0
00
0
0,
0
,0
0
$1
$0
0
,0
0
$8
00
,0
0
$6
00
,0
0
$4
00
,0
0
00
0%
0
0%
0
5%
0
5%
$2
00
,5
0
10%
00
,
10%
$2
,0
G&A %
15%
Measuring up: Retail benchmarking survey
0,
Figure 10b: Net sales vs G&A % – Specialty other >$1B
20%
Sales ($000’s)
00
0
00
,
$5
00
$3
Sales ($000’s)
20%
$0
G&A %
00
00
,0
,0
$2
00
$1
$2
50
,0
00
,0
50
,0
00
$1
Sales ($000’s)
$1
5%
$0
5%
00
10%
00
10%
Figure 10a: Net sales vs G&A % – Specialty other <$1B
12
15%
$1
15%
,0
0
G&A %
30%
00
G&A %
Figure 10a: Net sales vs G&A % – Apparel <$300M
Canada vs US retailers
There has been a lot of discussion on why retail prices tend
to be higher in Canada compared to the US. While we did not
compare retail prices, we did compare sales, cost and margin
information in Canada and the US.
We found that Canadian retailers enjoy higher sales and gross
margin per square foot, but this advantage is offset by higher
labour and occupancy costs.
Figure 11a: Apparel – Average dollar per square feet Canada vs. US
$359
58%
55%
$236
$204
$130
$52 $60
Sales/SF
15%15% 17%
16% 15%15%
$35 $35
US
Canada
Gross margin/SF
Store labour/SF
Figure 11b: Apparel – Average percent of sales Canada vs. US
Store occupancy/SF
US
Canada
Gross margin %
Store labour %
G&A %
Store occupancy %
www.pwc.com/ca/retail
13
Conclusion
PwC’s Retail benchmarking survey findings show that high
margin and high cost go hand in hand. So, what sets high
performing retailers apart?
foot than the median of their peer group. And high performing
retailers enjoy higher returns on their inventory investments,
with significantly higher GMROI at top quartile grocers.
Our data indicates that cost control is a stronger contributor
to profitability than higher margins. There are significant gaps
between first and third quartile G&A costs as a percentage of sales.
Are there differences between Canadian and US retailers? We
found that Canadian apparel retailers enjoy higher sales and
gross margin per square foot than their US counterparts. But,
this advantage is eroded by higher labour and occupancy costs.
While larger retailers may experience economies of scale, their
increased complexity and duplication of functions largely offset
these advantages.
While cost control is important, higher performing retailers
are also able to focus on sales. They have significantly more
productive selling space – almost 50% higher sales per square
The benchmarks in this study can help you to set goals and
priorities in order to compete and add value in an increasingly
complex retail environment.
“As we craft a support structure for a fast-growing company
it’s valuable to compare our investments in people and
infrastructure to our global business and other retail
leaders. It helps determine that over or under-investment
relative to our peers in a given area is strategic and not just
accidental.”
– Andy McNevin, COO, Lush Cosmetics
14
Measuring up: Retail benchmarking survey
www.pwc.com/ca/retail
15
Appendix
16
Measuring up: Retail benchmarking survey
Appendix 1
Scope
The Retail benchmarking survey was developed in partnership
with the Retail Council of Canada (RCC) and its members.
It captures KPIs important to the retail industry covering
revenues, costs and profitability. The data received from RCC
members was combined with PwC’s Retail Benchmark database
of North American retailers.
In addition, PwC conducts an in-depth, 300 question benchmark
for retail clients to help them focus on areas of over or under
investment and assess whether gaps are strategic or require
action.
Overall survey results are presented in this report for the benefit
of RCC members. Retailers who participated in the survey
were also provided with individual dashboard reports which
benchmark them against their peer group.
SG&A %*
KPI’s
Human resources
Average sales/sq. ft.
Finance
Comp sales vs. previous year
Marketing & advertising
Merchandise gross margin %
Merchandising
Inventory turns
Store operations
GMROI
Supply chain
Store labour % of store sales
Information technology
Store occupancy % of store
Corporate services
Sales
Real estate
Conversion rate – store
Legal
Conversion rate – online
Non-merchandise procurement
Marketing spend percent
of sales
Call centre
Markdown percent
Store expenses
Shrink percent
* Selling, general and administrative costs
Quartiles defined
Retailers ranked
0%
25%
50%
75%
100%
Best
1Q
Median
3Q
Worst
To better understand the factors that contribute to the results of
high performers, we ranked the findings into four quartiles. The
first quartile is defined as the value at the point that separates
the best 25% of the sample retailers along the list of values
from best to worst. The third quartile is the value that sits at the
75% point. A retailer is considered “in the first quartile” if it sits
between the best value and the first quartile value.
www.pwc.com/ca/retail
17
Appendix 2
Profile of participants
Figure 1: Retail category
There are a total of 72 retailers in the benchmarking database,
covering a cross-section of retail categories and business sizes in
both Canada and the US.
The revenue of retailers in our database ranges from less than
$30 million to more than $20 billion, with a median of $653
Million. Canadian participants represent over 7% of total
Canadian retail industry revenues. The number of stores ranges
from 1 store to 4,500 – with a median of 179 stores.
The categories are apparel, grocery, specialty other and
department stores. For the purposes of this report, specialty
other has been combined with department stores and is
categorized as “other”.
Please note that the quartiles are calculated separately for each
metric. For example, the retailer at the first quartile for net
sales may not be the same retailer at the first quartile for gross
margin percent.
1st Quartile
Net sales (millions)
Gross margin percent
Number of stores
Average sf/store
18
Median
3rd Quartile
$2,483
$653
$242
56%
44%
36%
360
179
73
46,151
11,156
3,607
Measuring up: Retail benchmarking survey
Source
Specialty apparel
33%
Specialty other
26%
Grocery
18%
22%
Department store
Appendix 3
G&A Taxonomy
Retail
store
Human
resources
Legal
Finance
Marketing &
advertising*
Merchandising
Store operations
(excluding in-store
ETFs and labour)
•Benefits
administration
•Compensation
administration
• Employee lifecycle/
HRIS
• Employee relations
•Diversity
•Recruiting
•Communications
• Field HR (excluding
store training)
•Corporate
development and
training
•
•
•
•
• Accounts payable
• Internal audit
•Receivables
• Revenue accounting
• General accounting
• Control and reporting
• Financial planning
and analysis
• Treasury and tax
• Capital and fixed
assets accounting
•Payroll
• Marketing strategy
• Promo planning
•Creative
• Media buys/
advertising
• Marketing operations
•Marketing
communications
• Market research
• Print production
•Creative
• Public relations
• Corporate giving/
sponsorships
• Loyalty program
•Category
management
• Sales planning
• Price management
•Merchandising
execution
•Inventory
management
• Merchandise financial
planning
•Merchandise
allocation
• Merchandise buying
• Merchandise design
• Visual merchandising
• Space planning
•Merchandise
sourcing/product
development
• Store operations
support
• Store audits
• Store safety
• Field supervision
• Loss prevention
• Store communication
• Labour management
• Store training and
development
• Metrics and reporting
• Health and safety/
security
• Website and social
media content
management
• Online and email
marketing
• Catalog marketing
•Database
management and
analytics
• Merchandise
planners, buyers,
analysts, etc.
dedicated for the
direct business
Corporate counsel
Legal affairs
Real estate counsel
Corporate contract
administration
Direct
(online
and
catalog)
*Marketing is net of co-op
Information
technology
Supply chain/DC
Non merchandise
procurement
Corporate services
and other G&A
Real estate/
construction
& facilities
management
Call centers
(Not including IT)
Retail
store
• IT operations
• End user support and
training
•Maintenance
•Application
development
• Application support
•EDI
• IT help desk
• Warehouse labour
(including temps)
• Outbound freight
(store to store, DC to
store, store returns)
•Transfers
• Reverse logistics
• Basic replenishment
•DC/warehouse
facilities, occupancy,
maintenance (excl
depreciation)
• DC property
insurance
•RFPs/supplier
selection
•Non-merchandise
vendor management
• Supplier performance
monitoring
• Spend analysis
• Store supplies/svcs
purchasing
•Aviation
• Corporate affairs/
communications
• Risk management
• Corporate facilities
• Executive offices
(CEO/COO/CAO)
• All office rent and
maintenance
•Mailroom
• Insurance (Head
office)
• All other G&A
• Store construction
• Lease negotiation
and administration
• Store design
• Location research
• New store project
management
•Facilities
management
including
environmental and
energy
• Store remodeling
• Store inquiries/help
desk
• Customer service
Direct
(online
and
catalog)
• Website technicians
and support
•Direct-to-consumer
systems
• MIS ecometry
• Dedicated labour for
catalog and/or online
fulfillment and returns
• Online inquiries
• Catalog inquiries
www.pwc.com/ca/retail
19
Who to contact
PwC
Retail Council of Canada
Alain Michaud
Andrew Siegwart
Canadian Retail & Consumer Leader
Senior Vice-President, Membership Services
alain.michaud@ca.pwc.com
Retail Council of Canada
+1 514 205 5327
asiegwart@retailcouncil.org
Ilya Bahar
+1 416 467 3764
National Consulting & Deals Leader, Retail & Consumer
ilya.bahar@ca.pwc.com
+1 416 815 5014
Alison Morin
Benchmark Leader
alison.a.morin@ca.pwc.com
+1 416 814 5742
Paul Beaumont
Director, Retail Consulting Services
paul.n.beaumont@ca.pwc.com
+1 604 806 7790
Robyn Levine
Manager, Consulting Services
robyn.levine@ca.pwc.com
+1 416 687 8664
www.pwc.com/ca/retail
www.retailcouncil.org
© 2013 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights reserved. PwC refers to the Canadian member firm, and may
sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 3552-02 0913