ROI Demystified: Evaluating Your Endcap Investment

Ever wondered if that prime endcap display is truly paying off? In today’s retail environment, every square inch counts. Let’s break down how to calculate the Return on Investment (ROI) for your endcap display—no fluff, just clear numbers and actionable insights.

The Investment Breakdown

When you secure an endcap, you’re typically investing in two main areas:

Display Setup Cost: This can be a flat fee or sometimes a percentage of your sales.
Product Discount: To attract buyers, products on endcaps are often sold at a lower price.

Variables to Know:

setup_cost: The fee charged by the retailer for positioning your endcap.
discount_rate: The markdown applied to your product (expressed as a decimal).
base_price: Your product's standard selling price.

Gauging the Sales Lift

Your endcap should boost sales, but by how much? Compare the numbers:

Baseline Sales: Regular units sold before the promotion.
Promo Sales: Units sold during the endcap campaign.

Additional insights from tools like BrickBI can reveal:

Impressions Data: How many customers notice your display
Interaction Rates: How many customers pick up your product
Conversion Rates: What percentage of these become buyers.

Let’s denote:

baseline_units: Average units sold normally.
promo_units: Units sold during the endcap promotion.

The ROI Formula in Action

ROI is essentially the net profit generated from your promotional efforts relative to your investment. The formula looks like this:

ROI = (\frac{Promo Revenue - Baseline Revenue - Total Investment}{Total Investment}) \times 100%

Breaking Down the Components

Promo Revenue:

$Promo Revenue = promo_units \times base_price \times (1 - discount_rate)$
Baseline Revenue:

$Baseline Revenue = baseline_units \times base_price$
Total Investment:

$Total Investment = setup_cost + (promo_units \times base_price \times discount_rate)$

A Real-World Example

Imagine these are your figures:

base_price discount_rate setup_cost baseline_units promo_units = $15, = 0.10, = $1, 000, = 150 units, = 300 units .

Step-by-Step Calculation

1. Calculate Promo Revenue:

Promo Revenue = 300 \times $15 \times (1 - 0.10) = $4, 050

2. Determine Baseline Revenue:

Baseline Revenue = 150 \times $15 = $2, 250

3. Compute Total Investment:

Total Investment = $1, 000 + (300 \times $15 \times 0.10) = $1, 000 + $450 = $1, 450

4. Final ROI Calculation:

Incremental Revenue Net Profit ROI = $4, 050 - $2, 250 = $1, 800 = $1, 800 - $1, 450 = $350 = (\frac{$350}{$1 , 450}) \times 100% \approx 24.1%

The result? Your endcap display is delivering a solid 24.1% ROI, meaning it’s generating profit beyond its associated costs.

Turning Analysis into Action

Numbers drive decisions. With BrickBI’s advanced analytics, you can:

Refine In-Store Strategy: Tailor your endcap displays based on real-time conversion data.
Optimize Promotions: Adjust discount rates and placements to maximize revenue.
Enhance Customer Experience: Use foot traffic analytics to better understand shopper behavior.

Armed with this ROI framework, you're ready to assess and optimize your endcap investments. Use these insights to drive smarter decisions and create displays that not only attract attention but also boost your bottom line.