Is four-wall profitability still a relevant metric?
Due to omnichannel’s influence, Sweaty Betty, the U.K. women’s fitness apparel chain, measures performance based on trade area instead of individual stores.
Speaking last week at the National Retail Federation Big Show at a session entitled, “Move Over, Globalization: Community Retail Has Arrived,” Erika Serow, president and U.S. CEO of Sweaty Betty, said the retailer, which is just getting started expanding in the U.S., “stole” the idea of measuring by “markets” instead of individual stores from a U.K. retailer she declined to name.
As an example, she notes that the company will measure sales performance of customers online and offline across Fairfield County in Connecticut rather than just its Westchester location. She said stores in general are taking on many practices including returns, pick-ups and browsing that support online purposes. Said Ms. Serow, “If you think about four-wall profitability, you start killing the value of that physical point of your customer coming in and touching your product, as you’re seeing more and more volume shifting online.”
The broader “market” measurement is part of the way Sweaty Betty aims to “think locally.” Ms. Serow, who joined Sweaty Betty two years ago after a long career at Bain & Co., said she has a strong belief that brands are global in reach, but retail is local. Ms. Serow said, “It doesn’t matter what we do in the U.K. on a retail basis because we have different customers. And frankly it doesn’t matter what we do in London if we’re sitting in Leeds and what we’re doing in New York if we’re sitting in Santa Monica. Retail is very much a local need.”
Some other observers have similarly questioned how accurately same-store sales, sales per square foot and other traditional in-store metrics measure performance amid omnichannel selling.
In its report, “Bringing Store Performance Into Focus,” Kurt Salmon said stores may also find alternative products that might be available online and fulfill online orders. The consultancy said relying on store sales as the only measure of associate workload and productivity can lead to “suboptimal store staffing decisions.”
- Move Over, Globalization: Community Retail Has Arrived – National Retail Federation
- Bringing Store Performance Into Focus – Kurt Salmon
DISCUSSION QUESTIONS: Does the four-wall contribution metric have to be tweaked or abandoned with the arrival of omnichannel or cross-channel selling? Do similar arguments apply for other traditional in-store metrics such as same-store sales and sales per square foot?