Sales per point of distribution (SPPD) is the measure of the speed by which a product is sold from a single distribution point, known as the shelf velocity. Sales per Point of Distribution or SPPD is a method to measure the shelf velocity of a product. Shelf Velocity is the time period (i.e. hours, days or weeks) for which a product stays in the shelf of a store before being sold to the consumer. SPPD signifies how fast the product is moving in a store when distributed in the market.
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SPPD is used to compare products with different distribution levels but within the same market. For example if you own a FMCG company and want to measure the sales of one of your product say soap and compare it with your competitors. You distribute 10000 soaps in a month at a super market while one of your competitors distribute 25000 soaps. Here, SPPD is used to find whose product is sold faster (As no. of soaps sold can be more for the competitor)
At the same time, sales per point of distribution cannot be used to compare products across market. For example if your distribution area is two states say Maharashtra and Andhra Pradesh then you will compare SPPD separately for Maharashtra and Andhra Pradesh with its competitors in the respective markets. Comparing SPPD of these two market will not give any logical interpretation.
Shelf velocity is nothing but the time taken by a product to be sold from its shelf or the distribution point. Sales per point of distribution is usually measured in days or months depending upon the type of product and its shelf life. Generally sales per point of distribution helps in gauging how demanding is the product in the market with respect to other competitors of the same industry. Shelf velocity also signifies how attracted and willing a customer is for a product when it is available on the shelf of the distribution points.
Distribution is the spread of a product. In simple terms distribution of a product signifies the placement of a product in the farthest sales point and the frequency of these sales points. Products with high distribution and high shelf velocity are the ideal choice of any company for example Johnson’s and Johnson’s baby care products availability in Odisha and the number of stores it is available in.
Sales of a product can be controlled by two ways, either by increasing the distribution point or by making the product attractive to increase it velocity.
Sales= (distribution* shelf velocity)
For example, if distribution is 500 stores and velocity is 10 per store then sales will be (500810) 5000 units for a market which has 500 stores.
Mathematically, it is calculated by dividing sales in terms of unit, volume or currency from some measures of distribution like ACV Distribution (to take into account different store size).
SPPD = Sales/ % ACV Distribution
Shelf velocity can be controlled by altering the price of the products, adding value, attractive discounts or aggressive advertising. ACV distribution stands for ‘All commodity volume’ which represents the total yearly sales volume of a single retailer or a sales point. Similarly if sales of a market is $ 5000 and the %ACV distribution is 50% then the SPPD will be (5000/.50) $10000.
Sales per point of distribution comes with a limitation of gauging only a single market for any product. For example if product A is being sold in Odisha and product B is being sold in Assam then the comparison between the SPPD of the two products cannot be made since the markets are different.
‘Sales per million’ is used to measure products across markets. Simply, it measure the sales of a product for every millions of total market sales:
Sales per million = Sales / %ACV distribution *(Market ACV/1000)
Hence, when comparing or using the velocity across markets it is advisable to use sales per million while if comparing or suing velocity in a similar market, use SPPD.
Hence, this concludes the definition of Sales Per Point of Distribution (SPPD) along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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