Should the same-store sales metric be retired?

Discussion
Photo: Walmart
Apr 10, 2017
Tom Ryan

Dragged down by steady traffic declines, same-store sales numbers may be failing to show how physical stores boost online revenues.

In a column for Forbes, Steven Dennis, president of SageBerry Consulting, writes that the metric doesn’t take into account stores’ role in recruiting new customers as well as converting shoppers that start their shopping online but need to touch, feel or try on a product before buying. Same-store numbers also fail to consider the contribution of omnichannel practices such as BOPIS and online returns.

Instead, “same trade area,” which accounts for all sales regardless of purchase channel within the influence area of a store, may be more useful. Wrote Mr. Dennis, “Critically, it also provides the basis for understanding the drivers of customer segment level performance at a more granular and actionable level.”

In its 2015 report, “Bringing Store Performance Into Focus,” Kurt Salmon said traffic and transaction-based metrics such as same-store sales growth, sales per square foot, conversion, basket size, average retail price and labor as a percentage of sales fail to capture the “full value” of physical stores.

“Stores are the hub of the new omnichannel ecosystem,” the report stated.

Kurt Salmon said retailers need to measure “overall cross-channel brand performance” by consolidating store and digital P&Ls, expanding key metrics to measure all of the levers that drive customer behavior across the customer journey and recalibrating labor metrics to account for the full set of activities store associates perform.

In a blog entry last year, Bridget Johns, head of marketing & customer experience, RetailNext, wrote that new metrics are needed to measure the “full shopper journey.” At the store level, capture rate, conversion, frequency and duration of visit integrated with sales per shopper and average transaction value could “develop a quality of traffic and interactions/transactions metric” that balances the traffic declines, she said.

Ms. Johns said the ability to “tie the shopper journey in-store back to her purchases online” remains “the Holy Grail for retailers, and an extremely difficult problem to solve. But even understanding this for a small subset of your shoppers (perhaps starting with those most loyal) can answer a lot of questions about how the channel interplay is — or isn’t — working for you.”

Discussion questions: Do you agree that the same-store metric has become obsolete in the omnichannel age of retailing? How should store performance metrics be reimagined?

Braintrust
"Same-store metrics won't go away anytime soon -- however, they may be used differently than they have in the past."
"As long as physical stores are necessary, the same-store sales metric is an important KPI."
"...it is short-sighted not to consider the indirect influence and impact each channel has on the other channel sales."

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32 Comments on "Should the same-store sales metric be retired?"

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Mark Ryski
BrainTrust

I do not believe that same-store sales or the other traditional metrics are obsolete, however there’s no question that they have become nuanced and require more interpretation. My concern about using a vague notion like “same trade area” is that it’s open to interpretation. Who decides what area is to be considered same-trade? While it’s true that the nature of retailing today is making traditional performance metrics more challenging to interpret, they still provide valuable insight that can be compared across retailer types and categories.

Lyle Bunn (Ph.D. Hon)
BrainTrust

No, there are no obsolete metrics, but what is measured has to evolve in the face of omnichannel and new customer experiences. The shopper journey is changing and with it the influence on transactions and ongoing brand/retail engagement. The traditional measures matter, but so do the factors that contribute to those bottom-line numbers. Data and trends point to strengths that should be emphasized and weaknesses that should be minimized, opportunities that should be exploited and threats that should be eliminated. SWOT is a foundation of how business developers think so this periodic core analysis, supported by traditional and new metrics, offers insights for continuous improvement and suitable areas of investment.

Susan O'Neal
BrainTrust
3 months 12 days ago

The degree to which physical stores are necessary to capture significant share of retail spending is still unknown (otherwise Amazon would not be investing in stores). As long as physical stores are necessary, the same-store sales metric is an important KPI. That said, customer and transaction-based sales metrics (across sales channels) are equally important.

Sterling Hawkins
BrainTrust

Different metrics apply to different executives and even different retailers. A department store might need to lean more on omnichannel metrics vs. a custom bridal retail location for example. On the whole, omnichannel metrics are becoming more important as we see a critical mass of consumers changing how they shop.

Phil Masiello
BrainTrust

At the end of the day, there are only a few measurements that matter to determine the overall health of a brand. Do you have more new customers this year vs. last year in total? Is your customer retention rate higher or lower than last year and are your overall sales up?

Same-store sales is still a worthwhile metric. However, if you are truly an omnichannel brand, then you can measure your total customers, total sales and retention rate very easily. If they are all falling, then changing the metric you measure won’t help you fix the problem.

Shep Hyken
BrainTrust

My short answer is, no. The quote that is often attributed to Peter Drucker is: “You can’t manage what you don’t measure.” It is important to have metrics for all channels. It is the only way to balance budgets, inventory and much more.

Steve Montgomery
BrainTrust

The reporting metrics based on brick-and-mortar locations have been used for many years by companies and Wall Street to judge a retailer’s performance and benchmark it against others.

Are there new measures that might be more applicable? Yes, but I would urge caution when considering or making the transition. Doing it too quickly before the new metrics are clearly defined and understood could lead to confusion and likely a lower evaluation of the company. The one metric that will remain will be corporate profitability.

Dave Wendland
BrainTrust

If you haven’t yet noticed, we have been embroiled in a seismic paradigm shift at retail. Thus clinging to “establishment” metrics and patting ourselves on our backs if same-store sales are declining at a lower rate than the market average is simply fuzzy math.

Shoppers have changed the way they shop. Competitors do not look like what they once did. And brand loyalty isn’t what it used to be. These are among the factors that strongly point to the need for a re-imagined (timely and relevant) measurement.

Kurt Salmon has it right, “Retailers need to measure overall cross-channel brand performance.” The new measurement must take into consideration brand interactions, conversion rates, content stickiness, referrals, reviews and much more.

Liz Crawford
BrainTrust

Same-store metrics won’t go away anytime soon — however, they may be used differently than they have in the past. Before the age of the internet, same-store metrics were a gauge of overall retailer health. But in the era of omnichannel selling, location-based metrics will be used to help diagnose profitability of the retailer holistically. These metrics may go beyond sales, basket and frequency, and extend into uses of the real estate for supporting warehousing of fulfillment goods for online orders. The profitability of the entire “box” will be the evolution of the metrics.

Doug Garnett
BrainTrust

All metrics are merely proxies — estimates we hope relate to the health of a business. That means we must always remain cautious about these proxies failing when the market changes. Too often businesses forget that metrics are merely proxies and not full indicators of business success.

Store comps should get far less emphasis in the future because they are a less and less accurate proxy for business health.

Unfortunately, that means weaning Wall Street from their reliance on same-store sales.

We should also remember W. Edwards Deming’s caution — that over-reliance on metrics leads to perfectly-managed businesses that fail.

Cathy Hotka
BrainTrust

Traditional same-store analysis has been out of sync for years, providing no way to measure sales influenced by mobile phones, cross-channel promotions, BOPIS and endless aisles. Kudos to Mr. Dennis for suggesting ways that the industry can better adapt.

Dr. Stephen Needel
BrainTrust

While it’s not obsolete, it could stand some improvement. I’d add in BOPIS and I’d ask online buyers if they visited a store first (if so, which store) and give that store credit for the online sale. That said, it’s still a total sales number and total customer number that’s most important.

Dick Seesel
BrainTrust

The article brings up a key point about the impact of omnichannel on same-store sales metrics. If a customer uses BOPIS (buy online, pick up in store), does the sales credit belong to the company’s e-commerce site or to the store that fulfilled the order? Is it a fair metric when store A might have the merchandise in stock and location B might not? And, bottom line, does it or should it matter to a true omnichannel retailer?

There is another issue casting a shadow on the validity of same-store sales: The increasing speed of store closures. At one point “comp sales” was a valuable tool as a lot of retailers were in a go-go expansion mode, but just the opposite is the case now. As companies close overlapping locations, the remaining stores may benefit from a spike in same-store sales without actually reflecting on the health of the business.

Paula Rosenblum
BrainTrust

We try to just use comparable sales now — in other words, online plus YOY store sales. If both channels are more than a year old, why not merge them? The store has bigger problems and more than performance metrics need to be re-imagined. I think traffic and dwell time might be the best. Maybe.

Ross Ely
BrainTrust

Same-store sales is an important metric that indicates a retailer’s growth trends and enables comparisons with other retailers. In most industries, online sales and omnichannel factors are not yet material enough to impact the power of this metric.

Retailers should be closely measuring the progress of their online and omnichannel initiatives, but these programs will not affect the importance of the same-store sales metric for the foreseeable future.

Ricardo Belmar
BrainTrust

The same-store sales metric isn’t quite obsolete — retailers still need a measurement of how their stores are selling, but how this metric is used is what’s changing. Steve Dennis is right — this metric alone does not help a retailer understand what other channels are influencing store sales and vice versa. New metrics are absolutely needed in the new omnichannel era to help retailers fully understand where their customers are coming from, how they like to buy and which communication channels are most effective at influencing a purchase.

Tom Redd
Guest

Same-store sales was a metric when our great industry only had the store channel to use as one of the business measures on Wall Street. Well heck, retail changed — NO WAY, REALLY? — and now so must the measures. Channel activity measures will evolve — especially as retailers learn to leverage the much larger key indicators relating to sales and customer buying processes. Same-store comps is DOA. Wall Street people are not as fast as our retail industry. They will learn.

Nikki Baird
BrainTrust

I like the idea of “same trading area.” I’ve also talked to investment analysts who prefer to look at comparable store traffic rather than comp store sales. It makes sense — if the store is serving a greater purpose than just transactions, then you should have the traffic to go along with it. Reporting on sales or even conversion rate hides underlying issues. If conversion rates are steady but traffic is falling, not only are sales likely going down as a result, but you have fewer “at bat” opportunities with customers because they’re just not coming in the door.

At the end of the day, what’s important is: are you measuring something that indicates the health of the business? That whole SMART thing: simple, measurable, etc. I’m not sure that comp store sales is a SMART measure any longer, not if you really want to know what’s going on in stores.

Stefan Weitz
BrainTrust

Same-store sales are absolutely important in retail today if for nothing else than for a retailer to optimize their real estate, staffing and marketing budgets. But of course as channel-less retail comes into its own, focusing on things like “ship-from and ship-to addresses” for fulfilling SFS orders, in-store returns for online orders and overall inventory turns will feature more prominently. The future is all about having the inventory in the right place to fulfill demand no matter the channel — this is what will make or break retailers.

Lee Peterson
BrainTrust

Same-store sales comps will never go away. They just don’t carry the same gravity they used to, mainly because of the huge jumps in online sales. Company comps are the real measure as that is the balance of both.

Some companies will want same-store metrics to go away as they’ll be a constant source of embarrassment and stock hits. Whereas other companies, like Warby and Bonobos, will use same-store comps to their advantage. But all-in-all, it’s still a useful and necessary measurement.

Larry Negrich
BrainTrust

I agree with Tom Redd, this is a metric that simplifies a dynamic, complex business into a single calculation allowing quick analysis by Wall Street and the media who don’t have the time or the inclination to delve more deeply into what is actually happening. The metric will stick around but, hopefully, will get some contextual explanation in the future.

Mohamed Amer
BrainTrust
Metrics are ways to abstract the business to allow comparison over time. As retailing has become more complex in terms of the myriad of paths and choices along the shopper journey the most traditional of all metrics, same-store sales, is losing value and relevance. To revive the metric requires agreement on a new definition, how it’s measured, and consistency in use. We also need to ask, who is using this metric? Is it primarily for internal decision-making by the retailer or financial analysts seeking an “objective” measure of the health of the business? Retailers have many other ways to understand and measure the health and direction of their business. Any shortcomings come in what to do about those measures. As long as retailers have stores, they will always need to know how each store is performing on sales, assortment and profitability. Financial analysts, on the other hand, seek ways to upgrade or downgrade a sector or a company and like to slice the business in clean analytical categories that can be projected forward. Due to the choices, mobile technology and irreverence to traditional channels, consumers have made retailing analytically complex and no single measure can break through the fog for… Read more »
Tom Dougherty
BrainTrust

Do we ignore bad news? Napoleon once cautioned his generals never to wake him over good news.

Same-store sales are bad news. But same-as comparisons are a realistic metric. One that retailers should use to measure growth and predict opportunity. One thing is certain — same-store sales is a downward trend. It points to new horizons or shuttered windows. It’s a choice.

Dave Bruno
BrainTrust

I agree, Tom. Same-store metrics greatly underestimate the role of the store in the modern shopping journey and we must find new ways to measure the value of the store. Kurt Salmon’s “overall cross-channel brand performance” metric (or something akin to this concept) is, in my opinion, critical to the future of retail. If we continue to measure the value of our investments in the store by black-and-white sales performance metrics, we will cede far too much territory in the battle against Amazon. Read further here.

Peter Charness
BrainTrust

While it’s a good metric, it really doesn’t give the store credit for the entire role it plays in the path to purchase for a shopper. Omnichannel has the store playing a variety of roles. Whether it’s the research vehicle for a subsequent online purchase or a pickup point or ship-from location for an earlier online purchase, the role of the store tends to be under represented in the metrics. If a store was to be closed, what would its impact be on the retailer’s total business? Capture that and you have a more valid metric.

Jeff Sward
Guest

I would never suggest to a retail store manager or group of managers that their individual comps were not important. “Same trade area” might be useful in an omni-channel environment, but each store still has to evaluate their own ongoing health. So it’s not strictly versus LY. Now it’s about versus a trailing 1 month or 6 month or 12 month trend. We were dropping versus LY but now we are dropping less. Our course corrections are helping. Or, we were dropping versus LY and now we are dropping more. Gulp. Traffic? Conversion? Product? Presentation? Staff? Just measuring a group of stores in one bucket doesn’t provide the surgical information necessary to look at all the moving parts.

Adrian Weidmann
BrainTrust

Wall Street has been measuring the success of retail by same-store-sales and trying to change their understanding and definition will be next to impossible in the near term. At the end of the day, the only metric(s) that should matter is those that truly measure the success (or failure) of the business. The shopping, buying landscape today is no longer one dimensional and as such the same-store-sales metric no longer reflects an accurate view of the business. How do you compare a pure-play online retailer with one that has both online and physical stores? Common sense dictates that all shopper touchpoints where you can map the shopper journey including purchase (and returns!) need to be included in the success metric.

Ralph Jacobson
BrainTrust

Physical store performance metrics, like same store sales provide insights to specific operations of the retail business. Sure, you can bubble up cross-channel operations to look at how aspects of stores affect other parts of the business. However, same store sales shows a tangible, concise view of revenue growth of the store, while taking into account other channel factors that may or may not affect that part of the business. I say keep it.

Ken Morris
BrainTrust
Omnichannel retailing is, or should be, changing the way retailers evaluate their business performance. Attracting and retaining customers wherever they choose to shop is more important than where the shop or where they ultimately buy, as long as it is with your brand. Total revenue is far more important than individual channel revenues. Since the shopping journey is often cross-channel, it is short-sighted not to consider the indirect influence and impact each channel has on the other channel sales. The consumer purchase decision rarely is isolated to one touch point. According to Nielsen reports, 60% of consumers shop online before buying in the store (webrooming) and more than 50% of consumers browse in a store before making a purchase online (showrooming). Another impact on total sales is catalog shopping or catalogrooming — consumers shopping in a catalog and then purchasing online or in the store. Maybe we shouldn’t be even trying to attribute sales to a specific touch point like the “last-touch” model, as the consumer’s decision process is often impacted by many brand interactions — not just the last one. A better approach is to look at it from a holistic perspective — measuring sales by “markets” instead of… Read more »
Herb Sorensen
BrainTrust
Absolutely do NOT abandon “same-store” metrics, although it must realistically be restated as “same trade area,” including BOTH online and in-store sales. Managing online and in-store separately will lead to further “murder” of the in-store business. Of course if top management really does see the two manifestations of their business as two different businesses, they have already sounded the death knell for their in-store business, which can’t possibly survive without drastically reducing the vast wastage of their “parked capital.” See: “The Problem: “Parked” Capital.” It’s not just about giving full credit to the bricks store for online purchases made by their usual shoppers, but unless the store is credited with both modes of purchase, then they must be competitors — online vs. bricks. This is insane from a management point of view. It is helpful that this is being discussed in this forum, but sad that the industry has not long since resolved these issues. (And I don’t care how difficult the metrics are. If your IT people are stuck in the past century, get some new ones!) The bricks store MUST be promoting online sales, EVEN FROM WITHIN THE BRICKS STORE!!! Just as the online store MUST be promoting… Read more »
James Tenser
BrainTrust
The same-store-sales metric was manipulated for many years by certain fast-growing retail chains, who understood the ramp-up pattern of newly opened stores in years two and three. By figuring the residual growth effects of year-two and year-three stores into the results of “existing” stores, sharp retailers knew they could make their averages look better, even when their portfolio included a high percentage of “dogs” in older locations. Wall Street analysts seemed pretty easily deceived by this tactic throughout the ’80s and ’90s. Of course, this only worked if you opened new stores at a consistently rapid rate, year after year. Once you slow the pace, the “second-year effect” evaporates and same-store numbers are negatively affected. The good news was that a clever retail chain CEO could use a strong SSS report to buck up share prices, affording access to capital that permitted headlong expansion — for a while. But saturation is an inevitable consequence. In an over-stored marketplace, true same-store sales increases that result from actual performance increases are devilishly hard to achieve. Using growth to mask poor performance is not sustainable. Real retail sales growth, on an average-sales-per-square-foot basis chainwide, is a nearly miraculous achievement. As if that wasn’t… Read more »
Tom Erskine
BrainTrust
3 months 11 days ago

Shared attribution in omnichannel sales is messy, but the same-store sales metric is not obsolete. It is more important than ever as a way for retailers to measure the success/failure of high cost, risky programs like changing formats to improve store performance. It continues to be the purest way to measure the impact of these initiatives on channel performance.

wpDiscuz
Braintrust
"Same-store metrics won't go away anytime soon -- however, they may be used differently than they have in the past."
"As long as physical stores are necessary, the same-store sales metric is an important KPI."
"...it is short-sighted not to consider the indirect influence and impact each channel has on the other channel sales."

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