Solarbird (solarbird) wrote,

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On the same-store sales report

This was the second item that got really big in today's economics roundup, so here's Separate Post Two! It's pretty much just excised from the bigger post I'm still writing.
GDP forecasts have been slowly being revised down - just in advance of a bunch of Surprisingly! Better! Corporate! Numbers! Nice pump-and-prime there, guys. Too bad the advance numbers just came out as "ass" (1.8% annualised).

Part of that corporate gain was same-store sales. I've lost the link, but a lot of noise was made about same-store sales being up year-to-year last week. But in the same news reports you were hearing about rashes of commercial vacancies as stores close. These were not linked in news stories, and that's bad, because the relationship is very important.

How does this combine? I'll tell you! Let's say it's March 2010, and you have three stores in an area selling something commonly used - let's say laptops. Each store A, B, and C, sells 10 laptops a month. That's a total of 30.

One of those stores goes out of business in December 2010. No more Store B. What happens?

What does not generally happen is that only only end up with a total of 20 laptops being sold. People buy laptops anyway. Given that stores are closing, you know the economy is bad, so people are buying less - but they're still buying. Some of those sales that would've happened in store B now happen in stores A and C.

Now it's March 2011. The economy is bad, so let's say that fewer of those 30 buyers make the same decision this time. Let's say it's real bad, and only 22 of those buyers - 27% fewer - buy laptops this time. (These numbers are examples, not real reports.)

But they buy them from the nearby stores - stores A and C. That's 11 laptops per store. And that's a 10% same-store sales increase year-to-year, despite being part of a 27% overall decline.

And that's what you're seeing - or, I guess, not seeing - in those same-store-sales numbers. Stores that close do not count in same-store year-to-year sales, because they're just not there the second time. Ghost stores aren't included. It's not "okay, 22/three stores = 7.3 laptops per store, a 37% decline," it's "22/two stores = 11 laptops per store, a 10% increase."

This also works the opposite way in growing economies; if a new store opens, it'll cannibalise sales from nearby stores too, reducing same-store-sales increase numbers.
Tags: economics
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