Same-store sales is a term that refers to a comparison of the revenue generated by the stores owned by a given chain that have been in operation for a minimum of one calendar year. By identifying the increase in revenue generated by older stores rather than by any new locations that have opened in the last twelve months, a retailer can obtain a better understanding of where gains and losses in revenue are taking place. Sometimes referred to as comparable store sales or identical store sales, these figures can be used to help a retail chain understand when the saturation of a particular market has been reached, and avoid the mistake of opening additional stores within that market.
The process of same-store sales requires that the sales figures for any recently opened locations to be excluded from the comparison. This is because the newer stores are building a steady clientele that may be partially composed of former patrons of older stores. One of the goals of comparable store sales is to determine what effect, if any, opening a new store in relatively close proximity to older stores had on the revenues generated by those established locations. If the same-store sales figures indicate that the older stores did not experience a significant decrease in revenue, in comparison to what they generated during the previous accounting period, then the business owners know that the market has not reached a saturation point. This means that the retail chain can consider opening another location within the area, if research indicates that yet another new location will not have an adverse impact on the older stores.
Businesses may compare same-store sales on a monthly or a seasonal basis. In each scenario, the sales figures for the most recent period is compared to the sales figures for that same period during the previous year. For example, the retailer may focus on determining if there was a loss or gain in sales at the older stores during the recently completed Christmas season over the sales generated during the previous Christmas season. If the revenue was at least as high as the previous season, then the retailer knows that the new stores opened in the interim have not had a negative effect on the performance of the older stores, and the company will benefit from the presence of more outlets in the area.
Same-store sales can also indicate shifts in the demographics within a given sales region. When older stores do lose revenue when newer stores are opened across town, it can indicate a gradual trend of consumers leaving an older section of the city to relocate to a newer section. Should this type of trend become evident, there is a good chance that the retail chain will build a new location across town, and shut down the older store once the newer facility is open for business.
