🎓 Definition
The market share – or sales contribution – defines the ratio of sales (in value or volume) of a defined group (category, sub-category, format, supplier) compared to the sales of the total group. It is expressed in %
When a Supplier's sales grow more than the category sales, its market share inside the retailer – or its sales contribution – is growing. In this case, the supplier is a Category Growth Driver.
🧪 Example of Market Share
Let's say there are three Brands in the Liquid Soap Category - Brand A, Brand B, and Brand C. The total revenue for the Liquid Soap Category is $1 million, and Company A has revenue of $500,000, Company B has revenue of $400,000, and Company C has revenue of $100,000.
To calculate the Market Share for each brand, is by dividing the revenue of each brand by the total market revenue and multiply by 100% to get the market share:
Market Share for Brand A = ($500,000 / $1,000,000) x 100% = 50%
Market Share for Brand B = ($400,000 / $1,000,000) x 100% = 40%
Market Share for Brand C = ($100,000 / $1,000,000) x 100% = 10%
In this example, Brand A has the highest market share at 50%, followed by Brand B at 40% and C at 10%.
❓What is Market Share used for
By looking at the market share of their Suppliers, Retailers can gain insights into the Supplier's competitive position in the market and their ability to deliver products that meet consumer demand.
Here are a few ways Retailers can use market share to evaluate their Suppliers:
- Assess Supplier performance: Retailers can analyze the market share of their Suppliers to determine how well they are performing compared to other Suppliers in the same product category.
- Negotiate better prices: Retailers can use market share data to negotiate better prices from their Suppliers. Suppliers with a larger market share may be more willing to offer discounts or better terms to Retailers.
- Identify alternative suppliers: By analyzing the market share of their Suppliers, Retailers can identify alternative Suppliers that may offer similar products at a lower price or with better quality.
- Mitigate supply chain risks: Retailers can use market share data to identify Suppliers that are dominant in their product category. This information can help Retailers mitigate supply chain risks by diversifying their supplier base.
How frequently should retailers update their analysis of market share for suppliers to ensure accurate and timely decision-making?
Retailers should ideally update their analysis of market share for suppliers on a regular basis to ensure accurate and timely decision-making. The frequency of updates can vary depending on the industry, market dynamics, and business objectives. Some retailers may choose to review market share data monthly, quarterly, or annually to stay informed about changes in supplier performance and market trends.
Are there any limitations or drawbacks to relying solely on market share data when evaluating supplier performance or making strategic decisions?
While market share data provides valuable insights into a supplier's competitive position and performance relative to others in the same product category, it does have limitations. Relying solely on market share can overlook other important factors such as product quality, innovation, customer satisfaction, and brand reputation. Therefore, it's essential for retailers to use market share data in conjunction with other metrics and analyses to make well-rounded and informed decisions.
How can retailers effectively combine market share data with other metrics or analyses to gain a more comprehensive understanding of the competitive landscape and supplier relationships?
To gain a more comprehensive understanding of the competitive landscape and supplier relationships, retailers can effectively combine market share data with other metrics and analyses. For example, retailers can integrate market share data with customer satisfaction surveys, product reviews, sales trends, and supply chain performance metrics. By combining multiple sources of information, retailers can develop a more holistic view of supplier performance, identify potential areas for improvement, and make strategic decisions that align with their business objectives.
🖥️ Make it happen in Ariane
How to access Market Share in Ariane: 3 Simple Steps
Step 1: Select the Market Share Menu in the Performance Menu Bar.
Step 2: Select Option in the Filter Menu and choose the KPI you want.
Step 3: Select the display by which hierarchy level you want to measure and the period scope.
And here it is.
