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Thread: Sales tax projections

  1. #1
    Cyburbian
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    Sales tax projections

    I'm dealing with a development proposal from a large privately held retailer ("super store") who will not provide annual sales figures.

    My mayor wants me to project/guesstimate annual sales tax revenue for the town.

    Can anyone point me to a source for CURRENT sales per sq. ft. tables for retailers? I've found some for 2008/2010 but not anything more current.

    Thanks

  2. #2
    Cyburbian Brocktoon's avatar
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    Quote Originally posted by short timer View post
    I'm dealing with a development proposal from a large privately held retailer ("super store") who will not provide annual sales figures.

    My mayor wants me to project/guesstimate annual sales tax revenue for the town.

    Can anyone point me to a source for CURRENT sales per sq. ft. tables for retailers? I've found some for 2008/2010 but not anything more current.

    Thanks
    International Council of Shopping Centers has a book ( i cannot recall the title but it is for sale on their website) that has that data. Check with your local libary or university the might have a copy in their reference area.

    Given the economy in 2008/10 those numbers will probably be conservative.

    Cardinal might have those as well. MY office stopped chasing retail 5 years ago or I would have been happy to share it.
    "If you don't like change, you're going to like irrelevance even less" General Eric Shinseki

  3. #3
    Cyburbian Cardinal's avatar
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    It is not too hard to determine a company's average store sales from any number of sources. Some even publish it in their annual reports.What is harder is determining where this particular store falls on the continuum from low to average and on through high volume. You should also expect some time for the store to reach its full market penetration. Three years is a general rule, but I have seen stores hit the mark within months. Further complicating the issue, to project sales tax collections, you will need to understand the likely composition of sales by product line to determine taxable sales. If you want to get even more technical, there is the issue of cannibalization. When the superstore opens it will generate some new sales, and will transfer existing sales from other businesses in its market area. This depends on competitor mix and strength, population growth rates, expenditure patterns, and trade area reconfiguration as a result of the new store opening. Send me an email with the company name and I can probably suggest a few sources for the basic numbers, but you are on your own with regard to the rest.
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  4. #4
    Cyburbian
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    Thanks. I was looking for free/readily available. ICSC already gets too much of my community's money with little concrete return. I found some info via BizMiner but full access costs.

    I had given up on retail too until this party literally walked in with a proposal for a 200,000 sq. ft. store.

    The Mayor's not looking to do a five year budget based on ST projections, just trying to get a handle on the magnitude of revenue benefit for his small town.

  5. #5
    Cyburbian
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    Quote Originally posted by Cardinal View post
    If you want to get even more technical, there is the issue of cannibalization. When the superstore opens it will generate some new sales, and will transfer existing sales from other businesses in its market area. This depends on competitor mix and strength, population growth rates, expenditure patterns, and trade area reconfiguration as a result of the new store opening.
    I would go further..this store will generate no (or negligable) NEW sales tax revenue. Any taxable items that it will sell, would have been sold by some other establishment within its market region. At best, it will shift some sales tax revenue collected by other government entities to yours.

    If you can identify all the competitors within the new store's market area, any of those that are already within your sales tax district represent no gain to the municipality (no matter how much of their sales are cannibalized); any of those that are outside your tax district will represent some shifting of tax sales revenues (somewhere between none and all—I'd start with 50% as an order-of-magnitude estimate).

  6. #6
    Cyburbian Rygor's avatar
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    Quote Originally posted by darnoldy View post
    I would go further..this store will generate no (or negligable) NEW sales tax revenue. Any taxable items that it will sell, would have been sold by some other establishment within its market region. At best, it will shift some sales tax revenue collected by other government entities to yours.

    If you can identify all the competitors within the new store's market area, any of those that are already within your sales tax district represent no gain to the municipality (no matter how much of their sales are cannibalized); any of those that are outside your tax district will represent some shifting of tax sales revenues (somewhere between none and all—I'd start with 50% as an order-of-magnitude estimate).
    Not necessarily true. It depends on what retail sector the store is in, what is it's competitive set, the primary and secondary markets being served, and the discretionary spending on those types of goods or services by the people within those market areas.

    To the OP, can you check with the local municipality's finance or tax and licensing departments? They might be able to at least give you tax revenues generated in specific retail sectors within a particular area (aggregately - they won't give you numbers for individual businesses), and as long as you know the sales tax rate you can extrapolate the average sales and then figure an average sales per square foot. Another potential source is BOMA (Building Owners and Managers Association) or ICSC. They likely have guides or manuals with tables for that sort of thing, as well.
    "When life gives you lemons, just say 'No thanks'." - Henry Rollins

  7. #7
    Cyburbian
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    The RetailSails Chain Store productivity guide is used as a benchmark by a lot of people in the property industry, for chain stores. It holds for most markets since the national chains themselves use benchmark targeting to do their own feasibility planning. Non-chain and local chain retail is all over the map and more difficult to predict, subject to more ,local market force (see Rygor's post below, which I agree with).

    http://www.retailsails.com/index.php/site/reports

    Find the closest comparable to the chains listed in the chart on the chart on the right (note, do NOT try to use this in Canada or anywhere else outside the lower 48.. it does not work).

    Remember that these figures are done on a net GLA basis, not a GFA basis,so if you only have measurements by GFA then you would be overstating sales by around 20-25%. Try go get your applicant to give you the correct GLA instead.

    For non-chain and local chain stores (including non-chain stores in malls), sales per GLA can be much much much lower. $350-600 psf in a lot of places. For example, a Whole Foods generates about $1,150 in sales per sq ft (what they target.. they actually hit around $1,200 or even slightly higher) but a local indie grocery/supermarket chain probably does no more than $550 where I am.. Pick'n'Save around Milwaukee or Chicago does about $395 psf for example. In smaller/rural and lower income inner city markets, $350 psf is considered respectable for supermarket food unless you're a national chain like Trader Joe's or Whole Foods. In most inner city markets, sales of below $300 psf for food tends to be when groceries leave or don't show up in the first place (hence the phenomenon of many inner city areas not having access to fresh produce). The one exception to this in the supermarket world are indie organic/designer-grocery stores in upper income neighborhoods. There are documented cases of such establishments hitting $2,000 psf. I guess if you sell enough caviar...

    Note that some categories of stores can go below $300, but they're the ones basically getting subsidized 'cause the center landlord thinks having some colorfully artistic t-shirt and curio shops make for a well-rounded retail experience...

    if you do a lot of work with retail, you very quickly realize that the world is not a fair place and that the decks are stacked radically against the little guy.
    Last edited by Cismontane; 03 Jan 2013 at 6:22 PM.

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