October 06, 2015

Hiding The Numbers

Then Bed Bath & Beyond honestly tells what is happening (most retailers don't).
  • E-Commerce = +25%.
  • Store Comps = -1%.
If you remember your high school algebra, then you know that the ratio above suggests that e-commerce sales are +/- 6% of total (remember, new stores are not counted in store comps, so the actual answer of 6.5% is overstated).

Why do retailers hide poor store comps in a blended average of store comps and e-commerce growth?

Well, as your e-commerce channel grows, your blended comp grows, as long as e-commerce keeps growing.

When e-commerce is 6.5% of the total, the blended average of +25% and -1% is +0.7%.

When e-commerce is 12% of the total, the blended average is +2.1%.

When e-commerce is 20% of the total, the blended average is +4.2%.

As retailers figure out how to grow e-commerce, store sales decrease ... and as store sales decrease, the reporting changes, skewing to e-commerce, enabling the perception that growth is fantastic.

Regardless, in every situation, store sales are in decline - and eventually, stores are closed - they have to be closed. When a store is closed, it is not included in the comp measurement.

In other words, as e-commerce gobbles up commodity-based items that used to sell in stores, e-commerce drives retail comps further negative while growing e-commerce, causing the business to report positive comps as it closes stores, accelerating the mix to e-commerce further, causing the business to continue to report positive comps as the business contracts.

That's the future. That's what is coming ... e-commerce growth and store closures and business contraction, all hidden with an overall and ever-growing positive comp store sales measure. #Omnichannel!!