Replacing Same Store Sales as Stores\’ Key Metric

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Coming out of the 2015 holiday season, one issue emerged that became painfully apparent to the entire industry. If retailers continue to use same store sales as a metric, they will continually and forever disappoint themselves, their management, and their investors as well as the markets. It is simply no longer the most relevant metric to understand how well or poorly a retailer is performing on a store-by-store basis.

Metrics of the Past

As long as can be remembered, retailers have used same store sales increases or decreases as the absolute barometer of success. Once it was known if sales were up or down, the conversation would then turn to margin and other metrics that spoke to the health of those increases or decreases. Oh how the times have changed…but the industry’s metrics really haven’t.
Venturing through January’s NRF BIG Show and anticipating the new retail year, store-related conversations all came back to one simple thought: same store sales do not adequately reflect effective performance in today’s complicated multi-channel retail environment.

Shoppers just don’t shop the way they did even as recently as one year ago. Rather, shoppers now shop everywhere and nowhere all at the same time, from their mobile devices, from inside a store, from the parking lot of their office building, from literally everywhere. Shoptalk is a new conference being launched this year and the cover of their event brochure has a picture of a monkey on a toilet with a mobile phone. Why? Guess what, 10 percent of us have made online purchases from—you’ve guessed it—the potty.

\"RR

Physical stores are here to stay, and that’s not exactly “news.” But, what is news is the way the retailers and the financial community must change how they think about and MEASURE the store experience.

From where I sit, the in-store shopping experience needs to be measured through metrics and data, but at the end of the day, does it really matter where (either online, in-store, in-app, etc.) shoppers actually make their purchases?

The customer is already so far ahead of retailers and she is determining herself what her experience looks like. She is in the dressing room checking other sizes and colors of her item of choice on websites—either of the store she is in or another brand’s—and she is deciding where she will ultimately part with her hard-earned money.

New Metrics For the Future

So what’s a retailer to do? Well, defining new metrics is paramount. A few things that need to happen:

  1. New retailer metrics need to cover the full shopper journey. What are your customer’s year-over-year spend increases
    or decreases, and what’s the cost of acquisition (across all channels)?
  2. At the store level, measurement will continue to be critically important, but metrics like capture rate, conversion, frequency, and duration of visit must be integrated with sales per shopper and average transaction value to develop a quality of traffic and interaction/transaction metrics to balance the traffic decreases that by now are de rigueur for most every store.
  3. As you can, tie the shopper journey in-store back to her purchases online. This is, of course, 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.

At the end of the day, I don’t think there is a magic formula for success, but I do think those retailers who aren’t thinking along these lines and evolving how they manage and measure physical stores will continue to feel the holiday blues long after the season ended.

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