CGTA RETAILERS: AMAZING STABILITY

The Spring CGTA trade show is upon us.

And the most common greeting, at least among sales people, will be “How’s the show for you?”

This of course, will spark replies in the narrow range from, “it seems flat”, to “not as good as previous years” and similar lackluster comments.

The reality is that sales in the CGTA are remarkably stable.  

SLOW AND STEADY WINS THE RACE

Stability is great…except if your expectation is for huge growth.   Anyone who makes a living selling, and that’s a lot of us, isn’t happy unless sales are going through the roof.

Expectations, as unrealistic as they may be, often exceed reality.  So when business is stable we’re basically underwhelmed.

Each quarter, the CCTA surveys retailers across the country.  They publish the results in “Sales Pulse”. They ask retailers 3 questions which are:

Compared to last year are your sales:

• ·         Up?
• ·         Down?
• ·         Stable?

Now “Sales Pulse” offers us an interesting  snapshot of a very recent period.  The illuminating part is when we look at the results over a multi-year period so we can see the trend in the industry,

We’ve summarized this here:

AMAZING STABILITY…which you probability will not believe!

The vast majority of retailers do as well or better each year!   

Whenever we have shown these results to sales people, most are incredulous and feel this doesn’t reflect reality or their experience with customers.  

So why do people not believe these results?  Well, the short answer is because any growth these retailers are experiencing is probably very modest; most likely around 2% per year.

And if a sales representative walks into a store asking, “how’s business?”, it’s unlikely any retailer getting 2% growth is going to be too excited about business…we all expect more.

Our guess is that CGTA retailers probably have results similar to all other retailers in the Canadian economy and we’ll take a look at that below.

OVERVIEW OF CANADIAN RETAIL SALES:2% annual growth

The ICSC produces research on shopping mall sales and we’ve reproduced the results here.  

Through this 15 year period, sales have grown an average of approximately 2% per year, from $425/sq.ft. to $550/sq.ft.   It’s slow unspectacular. but steady growth.

To give this a little more context, we’ll show the annual change.  And what we see is that sales go up and down in a very narrow range.  No drastic increases and no drastic decreases.  Overall it adds up to an average 2% annual gain.

Now this encompasses a wide range of stores from chain stores to single-outlet and from hardware to jewellery.  So to give this a little additional context here is a few results by retail type.

The home décor statistic is interesting because a lot of CGTA retailers are home décor specialists.  We can easily imagine a CGTA retailer generating $368,000 out of a $1000 sq.ft.  store ($368/sq.ft).

WHY STORES GROW SLOWLY

Sure every retailer wants to see their sales grow.  The reality is everything has a limit and after a few years of operation a store will hit their sales limit.  At that point the only way to get significant growth is to open more stores.

Let’s take a look at the same-store sales of a few well known retailers.  As we can clearly see from the chart below , these large chains aren’t very successful at generating growth from their existing stores.   

All of these businesses employ teams of marketers, managers, outside advertising agencies and have huge budgets.  Yet for the most part they can’t grow their same-store sales any better than a single-store CGTA retailer.

Take a look at Tim Horton’s.  We’re bombarded with their television ads, they spend millions on advertizing and product development yet they too achieve a small 3% sales gain.

This really illustrates how difficult it is to grow sales out of an individual location. Once a retail business us established, as are most of the CGTA retailers growth is slow.  It's not horrible, it's not great, it's just normal.

WHAT WILL THE SPRING 2013 CGTA TRADE SHOW BE LIKE

Well the fearless prediction is: Business as usual!