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?

Please practice The RetailWire Golden Rule when submitting your comments.
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."

Join the Discussion!

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


Sort by:   newest | oldest | most voted
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)
Guest

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
4 years 28 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
Doug Garnett
President, Protonik
4 years 28 days ago

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
Guest

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
Ricardo Belmar
Retail Transformation Thought Leader, Advisor, & Strategist
4 years 28 days ago

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
Nikki Baird
VP of Retail Innovation, Aptos
4 years 28 days ago

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
Guest

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
Mohamed Amer
Independent Board Member, Investor and Startup Advisor
4 years 28 days ago
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… Read more »
Tom Dougherty
Guest

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