Paper Lane: Growth Rates, One-Off Orders and Square Feet
Paper Lane, a single-store bookshop, reports revenue by category for two financial years, in ₹ lakh: Fiction ₹42 in 2023–24 and ₹51 in 2024–25; Non-fiction ₹30 and ₹33; Children’s ₹18 and ₹27; Stationery ₹10 and ₹9. Total revenue moved from ₹100 lakh to ₹120 lakh. The manager’s draft review says: “Children’s is our fastest-growing category at 50%, so we should give it the space currently used by Stationery, which shrank and is clearly dying.” Two facts complicate this. The Children’s figure for 2024–25 includes a one-time bulk order of ₹6 lakh from a school group, unlikely to repeat. Floor space is Fiction 600 sq ft, Non-fiction 400 sq ft, Children’s 300 sq ft and Stationery 150 sq ft, so the store has 1,450 sq ft in total. The owner will approve any reallocation only if the review separates one-off effects from underlying trends and shows revenue per square foot, not just growth rates.
1. Compute absolute growth, percentage growth and revenue per square foot for each category, then assess the manager’s three claims.
Read the worked answer
| Category | 2023–24 | 2024–25 | Change | Growth | Revenue/sq ft |
|---|---|---|---|---|---|
| Fiction | 42 | 51 | +9 | +21.4% | ₹8,500 |
| Non-fiction | 30 | 33 | +3 | +10.0% | ₹8,250 |
| Children’s | 18 | 27 | +9 | +50.0% | ₹9,000 |
| Stationery | 10 | 9 | −1 | −10.0% | ₹6,000 |
Store average: ₹120 lakh ÷ 1,450 sq ft ≈ ₹8,276 per sq ft.
Assessing the claims. “Fastest-growing at 50%” is arithmetically true but rests entirely on the one-off order, as the next task shows. “Stationery is clearly dying” is an overclaim: a ₹1 lakh fall is 0.8% of store revenue, and the same ₹1 lakh would have changed hands if two or three school orders had slipped. What is genuinely true is that Stationery earns ₹6,000 per sq ft, the lowest in the store and 28% below the store average. The real finding is that Children’s and Fiction each added ₹9 lakh - Children’s looks spectacular only because its base is smaller.
2. Remove the one-time school order and reassess. Does the manager’s growth ranking survive?
Read the worked answer
Underlying Children’s revenue is ₹27 lakh − ₹6 lakh = ₹21 lakh, against ₹18 lakh a year earlier.
- Underlying growth: (21 − 18) ÷ 18 = +16.7%, not 50%
- Underlying revenue per sq ft: ₹21,00,000 ÷ 300 = ₹7,000
The ranking does not survive. Fiction at +21.4% is the fastest grower, Children’s is second at +16.7%, Non-fiction third at 10%. On revenue per square foot the order changes again: Fiction ₹8,500, Non-fiction ₹8,250, Children’s ₹7,000, Stationery ₹6,000 - Children’s falls from first to third.
So the one-off order was doing two jobs at once: it manufactured the growth headline and it flattered the space productivity. Both conclusions in the draft review depend on it. The honest statement is that Children’s grew faster than the store average of 20% only on paper; underlying, it grew slower than the store as a whole, and slower than Fiction. Any space decision built on the 50% figure would be built on a number that will not repeat.
3. The owner proposes moving 50 sq ft from Stationery to Children’s. Estimate the revenue effect, state your assumptions, and advise.
Read the worked answer
At current rates: Stationery loses 50 × ₹6,000 = ₹3.0 lakh; Children’s gains 50 × ₹7,000 = ₹3.5 lakh on underlying productivity, or ₹4.5 lakh if the one-off figure of ₹9,000 per sq ft is used. Net effect is between +₹0.5 lakh and +₹1.5 lakh a year, about 0.4% to 1.25% of revenue.
Assumptions to state: revenue scales linearly with space (it rarely does - shelf space has diminishing returns), the freed space suits Children’s fixtures, and Stationery’s decline is structural rather than a couple of lost school orders.
Advice: reallocate, but not as proposed. The gain is small, so precision matters more than speed. Three changes - model Children’s at ₹7,000, not ₹9,000; move 25 sq ft first and measure for a quarter; and compare Fiction, which earns ₹8,500 per sq ft, as the recipient. Fiction is the faster grower and the more productive user of space, so 50 sq ft given to Fiction is worth ₹4.25 lakh against ₹3.5 lakh for Children’s. Also check whether Stationery drives footfall; a category can be poor per square foot and still pay for itself by bringing people in.