Estimating Total Revenue
Srika Raja
Est-Total-Revenue.RmdThe functions in this section of the package estimate the total revenue of a store using the estimated market size, three different shopper type categories, and the average per capita spending on groceries.
Average Per Capita Grocery Spend
The Avg_Capita_Grocery_Spending() function calculates
the average per capita spending. This value serves as a baseline for how
much each shopper will spend on average in a grocery store per year. The
function takes 2022 total US grocery sales data from IBIS and divides it
by the 2022 total US population from the US Census Bureau.
Since the population and grocery sales have taken 2022 data, the
change due to inflation for the current year must be accounted. This is
done by adjusting the average per capita grocery spend according to the
state index and inflation. The functions
Adj_Capita_Grocery_Spend() and
State_Adj_Capita_Grocery_Spend() does this by using CPI
(Consumer Price Index) and RPP (Rural Price Parities), respectively.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. So, adjusting according to the CPI accounts for the inflation in the US.
Regional price parities (RPP) measure the differences in price levels across states and metropolitan areas for a given year and are expressed as a percentage of the overall national price level. Adjusting according to this measure gives that state’s average per capita spending on groceries for that year.
Total Spend by Category
Not all shoppers have the same priority for all stores, and it is important that we classify them according to their preference for the store. So the next component needed for estimating the revenue is the number of shoppers in each category for each type of market.
Shoppers are classified into 3 categories:
Primary Shoppers: The people doing most of the household grocery shopping in that store.
Secondary Shoppers: Regular visitors for smaller purchases but will often do their weekly shopping elsewhere.
Rare Shoppers: People who are very occasional shoppers(only when necessary).
Location and accessibility are key factors affecting the preference for a shop. Shoppers are classified into 3 different populations based on their location:
Metro: The population of the city in which the store is planned to open
Town: Population of all the cities in the market
Rural: Total rural population of the market
The functions: Primary_Shopper_Count(),
Secondary_Shopper_Count(), and
Rare_Shopper_Count() calculates the number of shoppers in
each category for each type of market. These functions use some default
values for the percentage of each type of shopper in the different
populations. For example, if we take the primary shoppers count, it
calculates this number by multiplying the different percentages of
primary shoppers in the different markets. The percentage of primary
shoppers is highest in the metro populations because there is a higher
probability of people living in the same city as the store having that
store as their primary shopping place compared to others who have to
travel to get to that store. The outputs of these functions are
multiplied with the average grocery spend calculated from the
State_Adj_Capita_Grocery_Spend()to get the total spend by
each of these groups in the functions
Total_Spend_Primary_Shoppers(),
Total_Spend_Secondary_Shoppers(), and
Total_Spend_Rare_Shoppers().
For information on data update frequency and sources, check out this table:
| Variable name | Frequency | Source | Link | Notes |
| Total US Grocery Sales | Optional | IBIS | Default base year is taken as 2022 | |
| Total US population | Optional | US Census Bureau | Default base year is taken as 2022 | |
| Estimated cumulative price increase(CPI) | yearly update/ Half yearly update | US Bureau of Labor Statistics | https://data.bls.gov/timeseries/CUUR0000SA0 |
CPI in the current year - CPI in the base year For now, defaulting as 7 for 2023 |
| State Index | yearly update | BEA | https://tinyurl.com/2wvca7vy | Should be inputted by the user according to the store location. |
Total Revenue Estimate
Total revenue is estimated by summing the total spend by primary,
secondary, and rare shoppers by the
Total_Estimate_Revenue().