Why Same-Store Sales Are Misleading (And How to Improve It)

Discover why same-store sales can mislead retailers. Learn how to improve accuracy and make data-driven decisions to boost business growth.

While same-store sales measure retail performance by comparing year-on-year sales, it fails to provide the full picture. I realised the need to address this misconception during a meeting with a large fashion retail executive.

He said, “I focus on same-store sales because if my comps are up, we are growing, and business is good.”

I agree that same-store sales are important. However, I needed to explain that this metric can be hugely misleading.

For example, it overlooks critical variables like competitive landscape changes, staff variations, pricing strategies, advertising campaigns, and economic conditions that impact performance.

To gain accurate insights, combine same-store sale analysis with traffic and in-store sales conversion metrics.

Let’s delve deeper into the issue with actual data. This article uncovers a real store’s improved conversion rate and explains critical variables that impact performance.

You’ll also gain insight into how to make informed decisions and unlock your store’s true potential.

What Is Same Store Sales in Retail?

Same-store sales is a metric used by retail companies to measure the revenue growth of store locations for the same period year-over-year. It’s a crucial metric for retailers to assess their performance and make informed decisions to drive growth.

For example, a retailer will use same-store sales to evaluate how January sales this year compared with January sales the prior year for the same store. An increase in sales by 10% would be a good result.

When looking at the overall performance of a retail business, same-store sales do two important things:

1. It eliminates seasonality and accounts for any incremental new sales generated by opening new stores.
2. It allows retailers to assess how well their existing locations perform individually compared to new locations opened in the last 12 months. A retail business can easily grow by adding more stores. However, it’s essential to ensure that growth also happens in established stores.

Why Is Same-Store Sales Growth Important?

Sometimes called comparable sales or comp sales, same-store sales growth provides retailers with essential information for assessing performance, identifying growth opportunities, improving operational efficiency, and instilling confidence in investors.

It’s a vital metric in the retail industry’s quest for sustainable and profitable growth. Here’s why same-store sales matter:

1. Accurate Performance Evaluation: Same-store sales growth enables retailers to evaluate individual store performance by comparing sales figures year-over-year. It indicates whether stores are growing or declining in revenue.
2. Identifying Growth Opportunities: Retailers can identify thriving and underperforming stores by analyzing same-store sales growth. The data helps them to optimise successful stores and improve the performance of underperforming ones.
3. Stripping out External Factors: Same-store sales growth focuses on existing stores, removing external factors like new store openings, closures, or relocations. Retailers can assess their core business’s true organic growth or decline.
4. Operational Efficiency: Monitoring same-store sales growth helps retailers assess operational strategy effectiveness. They identify successful initiatives and replicate them for consistent growth across locations. For example, marketing campaigns or changes in product offerings.
5. Investor Confidence: Same-store sales growth is key for investors and stakeholders. It showcases the ability to attract and retain customers, boosting investor confidence and potentially attracting more investments.

What Same-Store Sales Doesn’t Tell You

Many variables impact a retail store’s performance. Simply eliminating seasonality and new stores to garner performance isn’t enough.

Most things are different year-over-year, making same-store sales a deceptive metric. For example:

• Last year, was your competitive landscape the same?
• Was your staff the same as last year?
• Did you offer the same products at the same prices?
• Were your advertising campaigns the same?
• Were the weather and economic conditions the same?

Same-store sales is a good performance metric, but it tells you little about real opportunity or what’s driven performance.

This is where traffic and in-store sales conversion data come in. Combining same-store sales analysis with traffic and conversion metrics dramatically changes how you interpret the data.

Comp Sales up by 15% = A Great Result?

Let’s look at the numbers of an actual store for June:

The store was up 15% on a comp sales basis. Average transaction value and gross margins remained unchanged from a year ago.

Is a 15% increase in comp sales a great result?

How Did the Conversation Go Around the Boardroom Table?

• June was a great month. Comp sales are up by 15%!
• Transactions were up by 15%. Store traffic must have been up 15%.
• That’s what drove the 15% comp sales increase.
• Great job to the marketing team. Your efforts resulted in a 15% increase in-store traffic!

Now, I’ll Add Traffic and Sales Conversion Data

This approach is where things get more interesting.

Store traffic in June was actually up 25% from the same month last year, not 15%.

Look at customer traffic as “opportunity size.” This means the sales opportunity increased by 25%. That’s significant!

Now you have to ask, if sales opportunity was up 25%, why were sales only up by 15%? The answer is conversion rate.

The above table shows conversion rate for the period was down by 12.5%, from 25% to 23%. As is often the case, the conversion rate decreases when traffic increases.

Driving more visitors into your store is great, but only if you convert them into paying customers.

June’s Result Could Be Better Than We Thought

On the surface, a 15% increase in positive same-store sales is a great result. However, adding traffic and conversion data shows the store performed poorly in June. The comp sales should have also increased by 25% had the store performed well.

The focus should be reviewing store operations and exploiting every opportunity, knowing the conversion rate decreased in June.

It’s only possible to know the store’s actual performance with the traffic and conversion data.

July Comp Sales Down by 10% = A Bad Result?

Let’s look at July for the same store:

Comp sales are down 10%, while the average transaction value and gross margins remain unchanged from a year ago.

Is a 10% decrease in comp sales a bad result?

How Did the Conversation Go Around the Boardroom Table?

• July was a poor month, retail sales are up!
• Comp sales are down by 10%! This needs investigating. Store traffic was down by 10%, which drove store comp sales down.
• The marketing team must review their activity as this was an extremely unsatisfactory month.

These are common conversations for most retailers. With the available data above, it’s assumed traffic is driving the transaction volume and sales results.

Consequently, the marketing team is often on the hot seat regarding poor performance. The assumption is their marketing efforts have not yielded enough customer traffic.

Now, Let’s Add Traffic and Conversion Data

Again, this is where the conversation gets more interesting.

The table demonstrates that store traffic was down by 20%. However, the conversion rate increased by 12.3%, from 22% to 24.7%.

A 10% decrease in same-store sales could be better.

However, the situation could have been much worse had the conversion rate not increased for the period. Same-store sales figures would have fallen by a massive 20%.

July Wasn’t as Bad as We Thought

On one hand, July was much worse than initially thought because customer traffic and sales dropped by 20%.

On the other hand, the store performed better against a shrinking opportunity.

Therefore, it’s necessary to investigate the marketing strategy. Store traffic was down by 20% for the month, not 10%.

Traffic and Conversion Data Provides Critical Context

The examples given above are real. This retail customer commenced working with Skyfii in May and quickly discovered the value of having traffic and conversion data to review overall performance.

The business had been using same-store sales data for years and was making incorrect decisions.

Without store traffic counts and sales conversion data, analyzing store performance using comp sales is incomplete and potentially misleading.

Traffic and conversion data enable you to understand the actual performance of your stores.

Ready to Drive Business Growth with Accurate Same-Store Sales Data?

Uncover the truth behind same-store sales and avoid misleading metrics that hinder your decision-making.

Gain a comprehensive understanding of your store’s performance with aurate traffic and conversion data.

Take the guesswork out of optimizing your retail strategy. Contact our team today for a live demo, and witness the transformative impact of a comprehensive approach to retail analytics.

Same-Store Sales FAQ

Answers to common questions about sales metrics in retail.

What Does Comp Mean in Retail?

In retail, “comp” is short for “comparable.” It’s a metric that compares the sales performance of a specific store or group of stores over a defined period, typically year-on-year or quarter-on-quarter.

Comp sales, also known as same-store sales or comparable store sales, help retailers assess the organic growth or decline of their existing locations.

What Factors Can Influence Same-Store Sales Growth?

Factors influencing same-store sales growth in retail include:

• Economic conditions
• Competitive landscape
• Pricing strategies
• Product mix
• Operational efficiency
• Marketing and advertising campaigns
• External events and trends

Retailers must monitor and analyse these factors to make informed decisions.

What Is the Difference Between Same-Store Sales and Total Sales?

Same-store sales focus on the sales performance of existing stores over a specific period, typically year-on-year growth. It excludes the sales generated by newly opened stores.

Conversely, total sales is the overall revenue generated by all stores, including existing and newly opened ones.

Total sales provide a broader perspective on the company’s overall performance, while same-store sales measure the growth or decline of existing store locations.

How Can Retailers Optimise Same-Store Sales Growth?

Retailers can enhance their same-store sales growth by improving customer experience, implementing effective marketing campaigns, optimizing pricing and product offerings, and leveraging data analytics.

How to Calculate Same Store Sales?

To calculate same-store sales, follow these steps:

1. Select a specific period: Determine the period to calculate same-store sales, such as a month, quarter, or year.
2. Identify the stores to include: Typically, include stores that have been open for a certain period, such as 12 months or more.
3. Collect sales data: Gather the total sales generated by each store during that period.
4. Compare sales year-on-year: Compare the sales figures of each store for the current period with the corresponding period in the previous year.
5. Calculate the aggregate same-store sales: Sum up the individual percentage changes in sales for all the stores. Divide the total by the number of stores to get the average same-store sales growth percentage.

The resulting percentage represents the same-store sales growth for the chosen period. It indicates the overall performance of the selected stores by eliminating the impact of new store openings or closures.