Market share represents the percentage of a market a company has for a product or service. Dollar share and unit share are two types of share metrics typically used. Dollar share is basically a retailer’s sales divided by the total dollars spent in the market, while unit share is essentially the number of units sold by a retailer divided by the total number of units sold in the market.
For a grocer, dollar market share measures what proportion of total spending at grocery stores, in a defined market area, is captured by one grocer or location. In other words, what “share” of the total dollars being spent in a market area is spent at that location? Market share helps to measure the performance of the grocer relative to the rest of the market.
The market share is affected by several variables including but not limited to the presence of competition and the size of the market. A retailer can gain market share by taking sales from the competition or capturing a greater percentage of a growing market than you currently have (e.g. if the current share of a market is 5%, and the share of a new market is 10%, then you’re gaining market share). Conversely, losses in market share can signal serious long-term problems that may require strategic real estate adjustments such as relocating to a more visible location in the market.
Regardless of how a retailer measures market share, it is essential that market share is measured consistently on a quarterly or semi-annual basis to ensure that key competitive threats are not overlooked, or the impact of a key initiative such as increases brand recognition and consumer loyalty are not overestimated.