D-POPS GROUP is a collective of companies that integrates actual businesses and technology together, a concept that we denote as “Real Business x Technology x Group Synergy”, aiming to realize a Venture Ecosystem that will continue to be indispensable to society even 100 years from now.
Measuring the efficiency and profitability of a store location is indispensable for managing physical stores, which is at the heart of “Real Business”. In this article, we will explore sales per tsubo※, which is a critical metric used in Japan for this very purpose.
※The Japanese unit of measurement tsubo is defined as an area approximately equal to 3.3 square meters. The principle of ‘sales per tsubo’ can be considered as directly equivalent to sales density (in either sales/m2 or sales/ft2) with a simple conversion factor.
Sales per tsubo refers to the amount of sales generated per tsubo, which will vary by industry. For example, supermarkets with high foot traffic and department stores or electronics retailers dealing in more expensive items will usually generate higher sales per tsubo. In explaining how this metric functions in practice, we will focus on the consumer electronics industry, for the sake of consistency in comparison with our previous articles on Inventory Turnover and Revenue per Employee.
1. One of the Three Key Elements of Store Management
We previously looked at examples of inventory turnover (which affects cash flow and, in turn, a company’s balance sheet) as well as revenue per employee (which mainly relates to personnel expenses, and thus impacts P&L). Sales per tsubo primarily relates to rent and, like personnel expenses, is a vital indicator for P&L.
Together, inventory, personnel expenses, and rent form the three essential elements of physical store management. If you haven’t read the previous installments on inventory turnover or revenue per employee, I encourage you to do so to see the full picture.
2. Calculating Sales per Tsubo
Simply put, sales per tsubo is an indicator of a store’s productivity. The higher the figure, the better. It is generally calculated by dividing annual sales by the total sales floor area (in tsubo).
For example:
・A store with ¥50 billion in annual proceeds and a sales floor of 4,000 tsubo earns ¥12.5 million per tsubo.
・A store with ¥1.5 billion in annual proceeds and a sales floor of 1,000 tsubo earns ¥1.5 million per tsubo.
・A store with ¥400 million in annual proceeds and a sales floor of 80 tsubo earns ¥5.0 million per tsubo.
・A store with ¥400 million in annual proceeds and a sales floor of 80 tsubo earns ¥4.0 million per tsubo.
Averages vary widely according to areas and types of business. In the suburbs, an electronics store might earn around ¥1.5 million and a hardware store only ¥500,000, while a convenience store and a drug store could reach ¥5 million and ¥4 million, respectively. Factors include how frequently a product gets purchased, unit prices, the size of the products sold, and whether the location is urban or suburban.
Notably, while suburban stores may have lower efficiency, their rent is also significantly lower. Therefore, one cannot simply compare sales per tsubo in isolation, but rather view it in the context of local real estate costs.
3. Why is Sales per Tsubo Important?
To explain why sales density is critical, let’s look at the following example.
As explained above, comparing companies in different locations (urban vs. suburban) or with different product categories is not an effective comparison because rent and unit prices differ too greatly. Therefore, just as we did in the previous article regarding sales per employee, we will use two rival electronics retailers as examples. They sell the same products and are both located in urban areas. (These model companies are fictional but based on the numbers from actual businesses.)
| Metric | Company B | Company C |
| Store Count | 24 | 45 |
| Sales Floor Area | 75,000 tsubo | 74,000 tsubo |
| Sales Per Tsubo | ¥10.09 million | ¥6.00 million |
| Total Sales | ¥750 billion | ¥440 billion |
| Ordinary Profit | ¥50 billion (6.7% margin) | ¥4 billion (0.9% margin) |
The Company B featured here is the same one from our previous discussion on sales per employee. Company C is a group-managed company with many franchises; for this example, we have extracted only the data for their urban store brands. The figures have been aligned with the fiscal year of the sales per tsubo data, and the floor area has been reverse-calculated from the sales and efficiency figures. These two are known competitors, both operating in urban centers and often opening stores adjacent to one another in major hubs like Shinjuku.
Here, I want to draw attention to floor area versus the sales per tsubo.
Company B uses 75,000 tsubo to generate approximately ¥750 billion in sales, whereas Company C uses 74,000 tsubo to generate approximately ¥440 billion. When converted to sales per tsubo, Company B stands at ¥10.093 million and Company C at ¥6.002 million. While both companies boast very high efficiency, their total floor areas are nearly identical (around 75,000 tsubo). If you take the difference in their sales per tsubo (¥4.091 million) and multiply it by that 75,000 tsubo of sales floor, you see a difference of over ¥300 billion in total sales.
This gap represents the difference in revenue. If we calculate the gross profit for both companies using the industry average of 30%, the gap in gross profit alone is nearly ¥90 billion. It would be quite complicated to calculate their exact costs of rent, so we won’t do that here. However, both are urban retailers in similar locations, so if we assume their rent is roughly the same, this difference in gross profit translates directly into a difference in bottom-line profit. There is a ¥46 billion gap in ordinary profit and a 5.8% difference in profit margin between Company B and Company C, and it should be clear that sales per tsubo is one major factor driving this disparity.
As mentioned in the previous article, even with minor differences, the gross profit margin in the electronics retail industry—regardless of the company—generally hovers around 30%. Whether in this industry or any other, when companies handle the same products at a similar scale, there will seldom be any large discrepancies in gross profit margin.
In this comparison, as stated, a ¥90 billion gap arises from sales per tsubo. When competing companies sell the same products, in similar locations, using similar floor space, I believe that inventory turnover and sales per employee are the only other metrics that could account for such a massive difference in management efficiency.
This is not unique to our model case. In restaurants, apparel stores, supermarkets, or any brick-and-mortar locations, there is no escaping sales per tsubo. Achieving a sales per tsubo that significantly outperforms competitors in similar locations leads directly to a major advantage in the unavoidable competition of business.
4. Key Strategies to Increase Efficiency
By now, I suppose you recognize the importance of sales per tsubo, but the next question is how to increase it. There are several key strategies, and I would like to highlight the most representative examples below.
① Focus on purchase frequency or unit price
Even if unit prices are low, like groceries or daily necessities, high purchase frequency makes it easier to drive up sales per tsubo. Conversely, for high-unit-price items like luxury brands, the high price per transaction compensates for lower frequency, allowing for high efficiency. From this perspective, it is perfectly logical for community-based drugstores to carry food and daily goods that are bought more frequently than medicine. Similarly, it is a sound strategy for electronics retailers to expand their lineup to include a mix of high-purchase-frequency consumables and high-unit-price hardware.
② Optimize product size and eliminate wasted space
In short, this means displaying small products without leaving any gaps. This is plainly visible if you look at Don Quijote, convenience stores, drugstores, or urban electronics retailers. While some stores carry large items, the focus is on smaller goods packed tightly together all the way to the ceiling.
From the perspective of sales per tsubo, this is a highly rational display strategy. Take electronics retailers as an example: urban stores are often branded as “ Camera”, like Yodobashi Camera, while suburban stores are “ Denki” (i.e., electronics), like Yamada Denki. There is a reason for this. In the past, urban stores were so small that if they stocked refrigerators and washing machines, they would have no room for anything else. Consequently, urban stores focused on cameras, watches, portable devices, beauty appliances, and small office equipment. Suburban stores, benefiting from lower rent, could afford the lower efficiency of large appliances. This specialization was an inevitable result of optimizing for sales per tsubo.
Historically, there used to be a number of urban stores that did focus on large appliances. Just by looking at Akihabara today, one can see that these have mostly been consolidated into the most powerful stores, and only a few of those remain. This, too, was an inescapable outcome driven by sales per tsubo.
③ Master cross-selling and up-selling
Cross-selling and up-selling can lead to significant improvement through store-wide effort. When you go to buy a suit, most stores will suggest a matching shirt or tie (i.e., cross-selling). When you look at PCs, many stores will suggest one with a high-performance i-series core processor rather than a cheaper model (i.e., up-selling).
Up-selling changes the unit price per item, and as the price goes up, so does sales per tsubo. Cross-selling increases the number of items purchased per customer, which raises the total transaction value per person and, by extension, the sales per tsubo.
The examples above are the primary ways to increase efficiency. While there are other factors, the ultimate key—as with inventory turnover and sales per employee—is ensuring employees are educated on the importance of this metric. Success comes from management with a human touch, where the company and staff constantly innovate in procurement, product display, and customer service to boost efficiency, supported by technology that can visualize inventory and sales data.
Ultimately, the leap in management efficiency through improving sales per tsubo is also built upon the intersection of “People × Technology × Management Strategy”.
5. Conclusion
In this article, we discussed sales per tsubo. In the industry of physical stores, there is no business that does not occupy space. Optimization of space is quantified in Japan as sales per tsubo, which leads to the maximization of operating profit and provides a major competitive advantage over rivals in similar locations.
Sales per tsubo is strongly affected by product characteristics (price, size, sale frequency), product assortment and display techniques (filling gaps), and customer service techniques (cross-selling/up-selling). In other words, the catalyst for increasing efficiency lies in the constant ingenuity of both the company that defines the product concept, and the employees who actually perform the procurement, display, and service mentioned above.
With this discussion of sales per tsubo, we have now covered the three essential elements of store management: inventory, personnel expenses, and rent. By reading this series—including the previous articles “Inventory Turnover” and “Sales per Employee”—the key points of store management should become much clearer.
What we at D-POPS GROUP want to convey through this three-part series is that business is built by people. The customers who purchase products are people, and those who devise strategies and utilize technology are also people.
While it is impossible to win in competition without mastering technologies like AI, technological skills alone cannot ensure survival. We believe that business success is not just about good technology or a good strategy; it is about the intersection of “People × Technology × Management Strategy”.
Based on this philosophy, D-POPS GROUP aims to realize a Venture Ecosystem by supporting startup companies in order to solve societal problems.
We hope that you enjoyed this article and look forward to working with you in the future.
D-POPS GROUP Managing Executive Officer
Tetsuya Watanabe
