Commerce is changing at a record pace. So shouldn’t the metrics be changing commensurately? Wall Street may love looking at same store sales to determine success, but as customers do their shopping through different channels, the entire model of tracking same store YoY for just one channel is starting to seem a bit inaccurate, if not downright wrong.
Let’s examine the current landscape. Three large trends dominate the retail industry:
- Large, established retailers continue to languish in a ballooning middle, where they face ongoing struggles and possible extinction (Sears, Kmart and JC Penney are several examples).
- Retail store sales at physical locations are faltering
- Ecommerce is expanding and forcing out brick and mortar counterparts by grabbing larger market share.
Yet even as these trends continue, there is still a real need for physical stores, as Amazon demonstrates with its Amazon Go locations; these grocery stores are partially automated and don’t require a cashier or checkout station. But they require your presence.
So what sales metric should we measure?
A new world needs new metrics for success. While same store YoY sales can still be an important KPI, it’s time to take a more holistic view that embraces our holistic shopping patterns. Have you considered tracking comparable sales in an entire sales area?
According to Marketing Week, consumers that used to require just two touch points from a company 15 years ago now need about six before making a purchase. They shop online as well as in the stores. In fact, research by Deloitte tells us that a full 60% of physical store sales can be attributed to an online channel of some sort.
These channels are so interconnected and our online interactions so constant that shopping online or in stores is virtually one and the same. Online channels drive traffic to stores, and store outlets encourage co-browsing as well. So it follows that sales can be attributed to both channels, not just one or the other.
Since this traffic is coming from different directions and may ultimately result in sales offline or online, the same store YoY sales metric doesn’t make as much sense as it used to. Even though foot traffic in a store may have decreased due to online shoppers, the conversion and overall sales may be up since shoppers are serious about being there, especially since they’ve already spent time online researching. Alternately, some shoppers will browse in store and buy online, contributing to a same store slump. The BOPIS option (buy online and pick-up in store), adds a new dimension since it’s difficult to credit the store with the shopping process, even as it becomes the vehicle for returning items and taking that hit. So why are we still relying on same store sales that aren’t entirely right?
Same goes for the digital side. If you’re just tracking conversions and the average sales order, you’re missing the wider point.
Let’s take a different look: Omnichannels
Rather than focusing on one store, it’s smart to consider an entire trading radius and recognize that there are several channels that get a customer to a sale. If you focus on the customer instead of the channel, the metrics make more sense.
Retailwire recently wrote about this. They highlighted Dave Wendland, VP of Strategic Relations at Hamacher Resource Group, who said, “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.”
He continued, “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.” A more holistic approach would track all sales in a trading area that receives sales from an omnichannel model.
To address these challenges, Brent Franson, CEO at mobile location analytics expert Euclid, submits these new metrics to complement same store sales:
- Same (comparable) trade area sales-growth: With both brick and mortar and its e-commerce counterpart funneling sales to a company, a more accurate measurement would be this trade area metric. Even if a store in this area is down, the overall area may be up; this shows a truer picture of sales success.
- Same (comparable) customer segment growth: Here’s where we get really customer-centric. Tracking your personas, or customer segments,’ growth is another smart way to look at your success. Acquisition, retention and growth are all KPIs. You can examine these both by channel and overall.
- Customer journey performance levers: Along the lines of segmenting customers to optimize your messaging and methods for reaching them, it’s important to map out touch points and places where purchase decisions are being made. These KPIs would shed new light on the mind of the customer, which is ultimately where you want to live.
Adding more metrics to your toolbox
Every metric has its value. But with the onslaught of change in the retail community, those who don’t adapt to newer, more accurate measurements will be left behind. These three metrics capture a greater piece of the omnichannel approaches that retails are starting to embrace—and go a long way towards maximizing their use.
Want to learn more about leveraging business intelligence software to put these metrics to work for your company? Dyntell Bi has helped numerous retailers visualize, analyze and predict, using their unique data to make important decisions and drive big successes. Contact us here to see how we can help your business do the same.