Retailers have long used a comparison of sales, in the same store, for the same quarter, but in different years, to assess their performance. If sales in that same store rose in the third quarter of 2017, compared with 2016, then it must be doing something right. If they fell, it would need to figure out why and resolve the problem.
Yet after years of use, this metric might have outlived its usefulness in an omnichannel world. Because it only includes sales within the store, it cannot account for some of the beneficial effects that store operations can have, such as recruiting hesitant new shoppers or giving online shoppers a source for in-person information. It also ignores sales journeys that start in stores but conclude on other channels. By failing to acknowledge those influences, retail managers might mistakenly think they need to change the store radically, when in truth, it might be driving overall profits, through the combination of channels available to consumers.
Some analysts thus are calling for an end to the same store sales metric, to be replaced with other measures that more accurately reflect the current retail environment. One option is to consider sales within the same trade area. Thus, the retailer would measure sales of a particular trade area, regardless of the channel through which they occur, which can clarify segment-level performance data.
Another alternative would measure brand performance across channels by integrating multiple measures. For example, retailers might combine their profit figures across store and online channels, while also integrating information about labor costs and benefits, to reflect the contributions that store employees can make for consumers.
Such suggestions make the alternatives sound appealing, but finding a true, accurate measure of what is driving performance and shoppers remains elusive. Linking all the retail touchpoints and determining how they are influencing shoppers in combination is “the Holy Grail for retailers.” It is also a pursuit that they cannot afford to give up.
Discussion Question:
- What is the same store sales measure?
- For what is the same store sales measure used?
- What is the inherent weakness of the same store sales measure?
- What financial measure could be used in place of same store sales, and why is it better?
Source: Tom Ryan, Retail Wire, April 10, 2016