Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Can Investors Trust Retail Sales Numbers Anymore?

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Were November's Black Friday sales numbers the beginning of the end for retailers? Despite a 3.5% increase in foot traffic this year, retail sales fell 1.8% from 2011. Was it more than just retailers like Best Buy (NYSE: BBY  ) losing customers to "showrooming"?

Actually, it just might mean investors can no longer rely upon some traditional metrics they've long used to track the health of retailers. When more sales are coming from a retailer's online sources than from its bricks-and-mortar stores, the traditional meaning and value of foot traffic, sales per square foot, and even same-store sales will be lost.

Bits and bytes rule
Online retailers delivered a cyber gut-punch to their more physical-presence brethren with sales surging 26% the day after Thanksgiving. Online sales crossed over the $1 billion mark for the first time ever, with 57.3 million Americans visiting e-commerce sites -- an 18% increase from a year ago. Best Buy was actually one of the most visited sites, coming in third behind (NASDAQ: AMZN  ) and Wal-Mart (NYSE: WMT  ) .

The research analysts at ShopperTrak say shoppers went to the mall more in 2012 over the entire Black Friday weekend than they did in 2011, but this didn't necessarily translate into spending more. The weekend totals saw traffic increase to 594 million store visits, an 8.2% jump, but retail sales increased just 2.7%.

Retailers just might be cannibalizing their own sales. Wal-Mart garners more online shoppers generally than does Apple, Best Buy, or Kohl's (NYSE: KSS  ) with 23% of smartphone shoppers buying at its online site and 24% of tablet shoppers. According to one survey, 41% of those polled made a purchase on their mobile device after shopping in-store, with 31% saying it was because they got a better price.

Charge it!
That could be because retailers are more promotional this year, trying to attract consumer dollars. The National Retail Federation's reports that online stores offering free shipping was the norm this year, but only the beginning of the bargains shoppers could find. Coupons, limited-time only deals, and discounts on specific purchases were also the main means by which to score a great price.

That seems to be in line with data by GroupM Next, which found that simply for a 2.5% discount, 45% of shoppers will leave a store and buy the product instead online. A 5% discount will cause 60% of shoppers to do so, and if the discount is bumped up to 20%, only 13% of shoppers can withstand the lure of the deal.

Let's just forget about it
So investors will need to look at the whole picture before deciding whether a retailer's prospects are rising or falling. Retailers like Sears Holdings (NASDAQ: SHLD  ) themselves started downplaying some of the metrics years ago when they stopped reporting monthly same-store sales, though in Sears' case that could be because it wanted to marginalize the negative drumbeat of steadily falling sales.

Yet if comps are going to become unreliable as online shopping gains ascendancy, then sales per square foot will be less meaningful itself, though it will force the companies to continue the trend of moving toward a smaller footprint. Best Buy has been opening smaller mobile stores while closing its larger big-box stores, and RadioShack (NASDAQOTH: RSHCQ  ) tried to make the most of a minimalist approach by opening kiosks in Target (NYSE: TGT  ) stores (something that may be coming to an end because of its poor results -- it's had to write off $25 million in charges due to the program).

E-commerce sales volumes are expected to reach $327 billion by 2016, or 9% of total retail sales, says Forrester Research, up 45% from the $226 billion spent in 2012, or 7% of the total. That itself is up almost 12% from the $202 billion spent last year.

Instead of comps, investors might need to come up with new metrics -- sales per kilobyte? bandwidth per dollar? -- to assess the health of a retailer.

Everyone knows Amazon is the big bad wolf in the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of competitors'. We'll tell you what's driving the company's growth, and how to know when to buy and sell Amazon in our new premium report. Our report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2162435, ~/Articles/ArticleHandler.aspx, 5/24/2016 2:33:29 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


Today's Market

updated 5 hours ago Sponsored by:
DOW 17,492.93 -8.01 -0.05%
S&P 500 2,048.04 -4.28 -0.21%
NASD 4,765.78 -3.78 -0.08%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

5/23/2016 4:00 PM
AMZN $696.75 Down -6.05 -0.86% CAPS Rating: ****
BBY $33.00 Up +0.66 +2.04%
Best Buy CAPS Rating: *
RSHCQ $0.02 Down +0.00 +0.00%
RadioShack CAPS Rating: *
SHLD $11.82 Down -0.17 -1.42%
Sears Holdings CAPS Rating: *
WMT $69.50 Down -0.36 -0.52%
Wal-Mart Stores CAPS Rating: ***
TGT $67.93 Down -0.73 -1.06%
Target CAPS Rating: ***