The concept of “same-store sales” (SSS) in the retail industry refers to a metric used to evaluate the performance of existing stores within a retail chain in the most recent accounting period relative to the revenue generated in a similar period in the past. Usually, it is presented as a comparative percent (comp percent), a measure that calculates the percentage change in sales between the current year for a set of comparative stores. “Same-store sales” (SSS) is a used term synonymous with comparable store sales metric, “identical-store-sales” (ISS), or “like-for-like sales” (LFL). In other words, it is a productivity measure in revenue used to evaluate a retail store’s sales performance.
When assessing a store’s sales growth or decline, retailers often compare it to other established stores within the chain with a similar product mix and footprint to the store being analysed or its performance over a specified period. However, this time frame may differ depending on the retailer’s business type. Retailers can use historical data to track the change in sales from year to year for stores that have been operating for a specific period.
How is the performance assessed?
Several factors are considered when evaluating retail stores’ “same-store sales” metric. It is essential to consider these factors as they provide context and insight into the elements that influence sales performance. Key factors often include store age, remodels, closures, pricing pressure and strategy, product assortment, and promotional activities.
Calculating the “same-store sales” (SSS) metric typically involves comparing the sales of a group of stores or individual stores for a given period with the sales of those same stores during the corresponding period in the previous year (period). By excluding the impact of new store openings and store closures, SSS provide a more accurate assessment of the underlying sales performance of a retailer’s existing store base. Additionally, the business is responsible for determining the rules that govern the determination of the comparable status of a store.
Some example rules or logic :
- A business may assign a Non-Comp status for the first 60 weeks of a store’s opening and gains the status of a Comp Store from week 61.
- A store can be assigned Non-Comp status when closed permanently because there would be no sales FOR comparison.
- If a store is temporarily closed more than three days a week, it’s Non-Comp.
- If a store has more than three days of sales in a week, it could be classified as having a Comp Status of Yes; otherwise, it’s Non-Comp.
- Online stores are always considered to have a Comp Status of Yes.
|Store||Year||Month||Sales||Comp Status||Store Open Date||Temp Closure Date||Temporary Closure End|
To calculate the comp percent, you typically compare the sales data of the same stores for two consecutive years. Here’s the formula for calculating the comp percent
Comp Percent = ((Current Year Sales – Previous Year Sales) / Previous Year Sales) * 100
Strategic Impact of “Same-Store-Sales” Assessment
The metric is beneficial for retailers with many stores, as it helps :
- Retailers estimate the success of their operational processes and make informed decisions about future investments, expansion plans, and improvements.
- Isolate the effects of changes in customer behaviour, economic conditions, pricing strategies, marketing initiatives, and product assortment on sales performance.
- Retailers proactively analyse their data to stay ahead of competitors.
- The comp percent metric is useful for evaluating the growth or decline of sales performance for a specific group of stores. It helps identify trends and patterns.
- Businesses to navigate disruptions by building on the foundations of their existing digital strategies already well underway when accurate data is in place.
The SSS metric provides insights into how to run promotions to increase margins and sales. Aside from the benefits mentioned earlier, it provides a standardised way to assess the organic growth or contraction of a retailer’s core store operations, making benchmarking performance across different locations, store formats, or regions easier. Furthermore, it facilitates strategic partnerships with other businesses, such as concession partner groups, to attract more visitors.
What factors affect the quality of same-store analysis?
The quality and effectiveness of same-store metric is affected by several factors. Some key factors to consider are having; The availability of accurate and reliable data is crucial for conducting a comprehensive sales analysis. This effort must be supported by a robust centralised reporting data repository (data warehouse) facilitating timely access to detailed transactional data and other relevant metrics. In addition, data normalisation in the context of accounting for external factors influencing sales performance helps ensure a fair comparison. For example, adjusting for economic conditions, local market dynamics can provide a more accurate assessment. When comparing sales metrics, it is important to consider significant factors such as store age, remodelling status, pricing strategies, product offerings, and promotional campaigns to ensure an accurate comparison. Having said that, I think it is prudent for the same-store metric to be reviewed and updated regularly to reflect changing market conditions, business strategies and store dynamics, perhaps on a yearly, monthly, weekly, or daily basis or granularity. We ensure that our analysis remains current and aligned with our current objectives through this approach.
Same-store sales metric with Claire’s
Among other traditional retailers, Claire’s Accessories is a retailer of accessories, jewellery, and toys primarily aimed towards young people. Claire’s Accessories has encountered various challenges in recent years, primarily due to the challenging economic environment and changing consumer preferences, among other factors. These obstacles have had a significant impact on the brand. The company’s operations were further impacted by the COVID-19 pandemic. Although faced with challenges, the brand has taken steps to adapt to the evolving retail environment. This includes expanding its online presence, concession partnership programs and implementing new initiatives to improve customer experience, leveraging social media platforms and influencer collaborations to engage with its target audience. In addition, Claire’s commitment promotes reusable and eco-friendly products, which aligns with the increasing demand for environmentally friendly brands among consumers. The brand is working towards regaining its market position by investing in modernised digital infrastructure, improving supply chain efficiency, and exploring new market opportunities. These efforts are part of the brand’s ongoing transformation. The newly implemented Great Lake data repository supported by Data Vault architecture has revolutionised the brand’s data management and governance approach, empowering the multivariate teams to embrace a data-driven culture and self-service reporting. This has resulted in opening more interesting capabilities for data democratisation, improving the business’ ability to report on same-store metrics using the PowerBI self-service reporting tool. The current investment opportunities and business growth demand have resulted in the implementation of a Product Portfolio Management System necessary to ensure timely and appropriate product availability for the customer.
In conclusion, same-store sales (SSS) is an invaluable metric in the retail industry, enabling retailers to assess the performance of their established stores, identify sales-influencing factors, and make well-informed decisions for future expansion. In today’s dynamic retail landscape, with the rise of e-commerce and shifting consumer preferences, SSS metrics have become increasingly vital for retailers to adapt, stay relevant, and maintain competitiveness.
Amidst these challenges, Claire’s Accessories stands unwavering in its commitment to delivering trendy and affordable fashion accessories to its loyal customer base. Above all, Claire’s Accessories is recognised as a growth-oriented and innovative company, prioritising brand scaling, efficiency, and forward-thinking strategies.