You hear and read about it everywhere you go, there’s a retail revolution taking place. There’s now a constant flow of data 24/7 and across time zones, accessibility, experience, extreme niches, social, and emotional connections are invading the traditional halls of retail merchandising and marketing.
Convergence of offline and online will enhance the experience and boost the convenience
Although still a small percentage of overall retail sales – low to middle single digits in most countries – Online retailing is making traditional brick and mortar retailers uneasy – just see the big push to start collecting sales tax by online retailers regardless of their physical presence in the selling area (so called nexus). But those with foresight are working on meeting the consumer wherever, whenever, and however she wishes to shop in this mobile age of business. Taking this cue, the largest advocacy group for retailers, NRF, has just launched Integrated Mobile Initiative and in this blog, Shop.org Executive Director Vicki Cantrell speaks to the need to take a macro view of mobile in a retail organization. Retailers’ focus is increasingly on the consumer as she moves from website to app to social networks and to the store or the catalog. She may see an item of interest in a magazine ad or on a billboard; a scan of a QR code can launch the acquisition journey. Or she may have seen it in a store while on a business trip in Orlando and that store will arrange for her to pick it up at her favorite store when she returns from her trip or have it delivered to her home (think of Burberry’s Clientelling App).
Retail is changing, but are the metrics keeping up?
This gets me to one of the challenges ahead for a retailer. Over the decades, the one metric that most retailers, financial analysts and press tend to rely on as indicator of business health is year over year ‘Same Store Sales’ growth (aka like store sales and comp store sales). This metric is defined as sales at stores that have been open at least 13 months (so for example you can compare January 2011 to January 2012). Retailer share prices soar or fall based on these monthly announcements.
Stores that undergo remodels, expansions, and so on make the Same Store Sales metric a little tricky but that hasn’t diluted Wall Street’s love with the number. As you probably have experienced at your current or prior employers, once a metric is in place and is part of the regular Key Performance Indicator (KPI) club, removing or changing it may require divine intervention (or so it seems). So, what’s a retailer to do now that more and more of their sales are e- or m-Commerce (non-store), or if a sales starts in the store but is ordered online, or vice versa with an online order picked up at the store, or if online research and input from your friends on Facebook or Pinterest were the reason you went to the physical store to make the purchase. According to recent survey by Nielsen, more than 70% of consumers want to shop with digital engagement in the future.
Does Same Store Sales still carry the same weight as before? Is this stellar metric getting long in the tooth or does it remain relevant as true multi-channel and mobile shopping increase in this ongoing retail revolution? There is a shift going on as people’s buying behavior change as they add up the cost of gasoline with the convenience and time-savings that come from online shopping – that same customer will spread her spending across all channels. Will a food retailer and a fashion chain perceive the same need to revisit metrics or will it be based on amount of e-Commerce content in their specific business or sub-segment as a whole? Will Wall Street demand a new metric yet to be identified?
Peek into the Future?
What might replace it or sit besides Same Store Sales for years to come? Would a “same shopper sales” better reflect how well you’re keeping and serving your customers? Although that will capture the perceived value your customers’ experience, it wouldn’t necessarily capture your ability to attract new customers. So, maybe there’s another metric to supplement the picture around “number of first time customers”. You might want to also know the number of customers that have stopped shopping your stores over the past 12 months. Or even keeping track of the number (percent) of your customers that represent 80% of your sales (the old 80./20 rule), is that percentage becoming more concentrated or getting diffused? Is the makeup of that 20% changing? Is it in line with your strategy and marketing?
The point is a metric like Same Store Sales is completely based on a unit called ‘the store’ it doesn’t consider online sales, and while it may be a crude measure of past performance, it doesn’t consider the consumer in any direct way. If retailers are serious about putting the consumer in the center of their assortment planning, marketing, and promotions and respecting the many ways she can and will make a purchase, shouldn’t a new metric that better reflects this new reality start to bubble up?
What do you think?