PERSPECTIVES

From The Co-Founders

Tips, Tactics & Strategic Insights and Commentary
from The ROI Co-Founders, Pat Johnson and Dick Outcalt
Outcalt & Johnson: Retail Strategists LLC; Retail Turnaround Experts

Important: Look Behind Top Line Numbers

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2 MIN READ |
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by ROI Co-Founders |
November 7, 2022 |
Perspective, Strategic Opportunities |

Consider this retailer, whose sales over the last 4 weeks are down 12% compared to last year.

Some retailers in this situation essentially freak out.

But others know to keep asking questions. Before they decide what to do next to fix lagging sales, they want to know "Why?"

So, here is one way to get to the numbers behind the numbers; to begin to know the "why" of your sales trends.

All it takes is tapping into the data that's already in your POS system, and putting together a little summary tally sheet. Here's one example.

All you need is some rows and columns: a spreadsheet, a table, a pencil and paper. Choose a period of time to compare to last year, say, the last four weeks. Label four columns from week one to week four.

Start with the numbers that you have just been reviewing, sales this year versus last year. Enter the results into their places on table, 2022 results on one row, 2021 on a separate row.

You already know how those compare. Now is when you start to dig a bit deeper.

For instance, how many transactions did you have each week this year? How about last year?
Make a row for that for each year, and enter those results.
How do those compare?
Well, what is the AVERAGE transaction each week, for each year?
Just need another couple rows here, and a little arithmetic (each week's total sales divided by total number of transactions.)
Hmm. That can reveal some interesting differences this year versus last year.
What about gross margin dollars?
Two more rows, one for each year. How do the margin dollars compare each year?
Oh really?! Wonder why that is?

See? Already these few inquiries are prompting a host of other questions.

Are transactions down this year because traffic is down? Or, are people still coming into the store, but without buying from us?
Makes a difference in what you might choose to do to grow sales, doesn't it?
Are customers buying more items, that cost less? Or maybe they're buying fewer items. That's something else to look into – IPT's (items per transaction.)
And what's happening to your margins? Are those holding up, or declining? Is that because of your costs? Or markdowns? Or...
Here's a sobering thought: inflation should be giving everyone a 5%-8% increase in sales. Did it?
Were there some quirks affecting last year's sales? Remember, we were just emerging from the pandemic. Perhaps you had some unusually large sales, due to that pent-up demand.
Or, maybe there were weather issues, either this year or last year.

Why raise all these questions? Because only when we have a better understanding of WHY sales are different can we make good decisions about what , if anything, we need to do about it.

After you have actually looked behind your top line numbers, you will be able to make an informed decision of what makes the most sense for your operation. You will be able to answer "Why?"

Making shrewd decisions – useful anytime you are wondering – starts by asking more questions. By getting to WHY?

Good News on the Economy?

Maybe you saw some of the commentary around the World Series, pitting the Philadelphia Phillies against the Houston Astros, and the connection to the economy.

Turns out that all the prior years when a Philadelphia team became baseball's World Champions – 1929, 1930, 1980, 2008 – a recession followed. (For some reason, this has been reported mostly by Phillies' fans.)

That's one reason we all should be grateful that the Astros won this year. 🥳