Women’s clothing brand Roman Originals has been inundated by calls since the photo became the center of an online debate.
Big chains shouldn’t lump e-commerce in with their same-store sales reports.
As a student of online retailing and an avid collector of business-to-consumer e-commerce statistics, I am used to merchants disclosing their web-related sales in all sorts of ways.
When asked, some merchants will tell you what their web sales are during the course of an interview. It’s not top secret, world peace doesn’t hang in the balance and they tell the press what their web sales are because they’re proud of their track record. But other publicly traded retailers, especially the biggest chains, tend to bury e-commerce sales figures in their earnings press releases and quarterly filings with the U.S. Securities and Exchange Commission. They also like to reveal how much sales grew online during their quarterly earnings calls with Wall Street analysts.
Either way pulling e-commerce sales information from chain retailers is like pulling teeth, although a trip to the dentist can be a lot more fun. My point here is that investors and the industry want to hear more about how e-commerce is driving the top and bottom line performance at many of the nation’s biggest and most prestigious chains—and not less.
But for every step forward some chains take in breaking out more public e-commerce numbers, others take a big step back. Hats are off to J.C. Penney Co. No. 16 in the Internet Retailer Top 500 Guide, and Ann Inc. (formerly Ann Taylor Stores Corp. and No. 122) for being among the latest group of chains to disclose quarterly web sales.
For the chains taking a step back we can add Nordstrom Inc. (No. 29), Express Inc. (No. 144), dEliA*s Inc. (No. 152) and Coldwater Creek Inc. (No. 78) to the list. Coldwater Creek and dEliA*s have stopped reporting the Internet as a percentage of sales of their direct revenue. Their reasoning: The direct channel is all one bucket so why bother breaking it down any further.
I can see that. But the bigger mystery to me is why other chains such as Nordstrom are no longer breaking out any direct sales at all or, in the case of Express, folding e-commerce sales into comparable-store sales.
Nordstrom says it will combine direct and store sales into just one figure because “it best reflects how our customer is shopping with us.” Express going forward will begin to report e-commerce sales in its comparable-store sales because it “believes that reporting comparable sales inclusive of stores and e-commerce is a more appropriate gauge of performance, as this is how it is viewed and evaluated internally, and is consistent with its customers' preference to shop across channels.”
What this says to me is that some chain retailers are taking a very myopic view of their financial reporting. Chain retailers run lots and lots of stores so it’s important that every 30 days and every quarter the CEOs and chief financial officers of those chains tell Wall Street and their investors how that part of the business is performing.
It’s also equally important for those same CEOs and CFOs to begin breaking down key e-commerce operating statistics such as web sales, conversion rate and ticket. E-commerce is not a store operation and it smacks of inflating numbers if a chain chooses to include e-commerce revenue in its same-store sales reporting. By including the web in same-store sales, this method does inflate the metrics because web sales are growing faster than store sales.
Consumers shop by brand, and it’s not just one big multichannel bucket of sales as some chains like to think. Understanding how e-commerce impacts top and bottom line performance is crucial in helping company managers, investors and employees understand how customers are shopping the brand. These days many transactions begin on the web and end in the store or online.
The chains understand foot traffic, and that’s reflected in the myriad comparable-store sales metrics they regularly report out. The same approach also needs to be taken by the chains to include more e-commerce stats.
It’s important to understand what’s driving the business across all channels. And where more of the business is coming from these days is online.