Retail Insights & Pro Tips by Brand Retail Solutions
In this edition of our Guidance Series, we share a simple, practical measure that brings immediate clarity to one of retail’s most persistent challenges: comparing store performance on a like-for-like basis.
If this framework sparks questions or you would like to explore how it applies to your store network, we would be pleased to discuss it with you.
Key Benefits & Insights
Takes 5 minutes to pilot
- Tests store financial viability
- Independent of margin mix and accounting choices
- Enables ranking and benchmarking across networks
- Works across formats, countries, and maturity stages
- Scales easily across large retail portfolios
Assessment Steps
1. Select store and period:
Choose a store and a representative 12-month period.
2. Calculate the OCC:
Divide total store revenue by fixed operating costs (rent, service charges, base staffing, utilities, and mandatory overheads).
3. Interpret the ratio (retailer dependant):
Thresholds should be interpreted in the context of the retailer’s category, margin structure, service intensity, and strategic ambition.
- Below 1.3: Structurally unviable: Revenue does not cover the operating structure. Optimisation will not normally fix this. Redesign, relocation, or exit is required.
- 1.3–1.5: Fragile: The store survives but has no buffer. Small demand shocks trigger defensive actions that often accelerate decline.
- 1.5–2.3: Structurally sound. Revenue comfortably covers the cost base. The store can absorb volatility and justifies optimisation and investment.
- Above 2.3: High optionality. Strong surplus over fixed costs. Management has choice: invest, densify, replicate, or use the store as a growth platform.
4. Evaluate the revenue role:
For showrooms, service hubs, or experience-led formats, in-store sales alone may understate contribution. In these cases, downstream revenue should be used.
5. Apply practical filters:
Assess whether results are distorted by temporary factors. Is the store ramping up. Is demand temporarily depressed. Are costs temporarily fixed. If none apply, the signal is structural and actionable.
6. Benchmark across the network:
Compare results at regional, country, and global levels to enable consistent ranking and informed portfolio decisions.
Why this works
This approach links the two most important elements of a store P&L: revenue and fixed operating cost. By stripping out margin noise, it focuses decision-making on structure.
Summary
- Fast, practical structural test
- Simple revenue-to-cost logic
- Clear thresholds for action
- Applies across all retail formats and markets
- Works across all retail formats, from department store operators to standard stores, pop-ups, and temporary formats.