November 25, 2014

Modern Retail Comp Store Sales Calculations

In the old days, when retail comps were acceptable, companies broke out direct channel sales and retail sales - separately.

In the modern era, with retail comps tepid at best, companies add total direct-channel sales to the comp store sales measure, and for good reason.

Here's an example of how this works.
  • E-Commerce Last Year = $1 Million.
  • E-Commerce This Year = $1.2 Million.
  • E-Commerce Comp = +20%.
  • Retail Last Year = $10 Million.
  • Retail This Year = $10 Million.
  • Retail Comp = 0%.
  • Total Business Last Year = $11 Million.
  • Total Business This Year = $11.2 Million.
  • Reported Comp = +1.8%.
See how that works?

I know, I know, the experts will tell you that, in an omnichannel world, you have to add the two metrics together. Fine.

But the modern metric hides retail weakness. So if you're going to do this, you must find a way to clearly articulate the weakness evident in in-store retail performance.

Think carefully about the future, a future where e-commerce performance increases, but increasingly, there's fewer and fewer people shopping in a physical store. I'm not talking about a store going from $1.5 million in annual sales to $0.5 million, that won't happen. All it takes is the store going from $1.5 million to $1.3 million for all sorts of interesting dynamics to happen - just ask your CFO.