Retail Dogma

Retail Sales: Definition, Examples & Importance

Retail sales refer to the value of the sales transactions that happen between a retail business (online or offline) and the end consumer of the products.

Examples of Retail Sales

Examples of retail sales include clothing purchases, furniture buys, and meals purchases from food services businesses.

Based on the NAICS categorization, the different retail categories include:

  • Motor vehicles and parts
  • Furniture and home furnishings
  • Electronics and appliances
  • Building materials and garden equipment
  • Food and beverage
  • Health and personal care
  • Gasoline
  • Clothing and accessories
  • Sporting goods and hobbies
  • Food services and drinking places

Purchases made from such businesses by the general public are included in this metric

Economic Reports

Retail sales as a metric is an important economic indicator that is tracked and reported on a monthly basis by the U.S. Census Bureau .

Every month, the U.S. Census Bureau publishes an Advance Monthly Retail Trade Report, that is based on a survey sent out to 5,500 retail and food services companies to report their numbers. These responses are then weighted and benchmarked to represent the full picture of more than 3 million retail & food services companies in the U.S.

Another detailed report is later on published and called Monthly Retail Trade Report.

In order to keep the monthly report comparable, it is usually divided into sections that exclude some of the categories that fluctuate regularly, such as motor vehicles and gasoline.

For example, this report will have the following lines

  • Retail and food services sales, total
  • Retail sales and food services excl. motor vehicle and parts
  • Retail sales and food services excl. gasoline stations
  • Retail sales and food services excl. motor vehicle and parts and gasoline stations
  • Retail sales, total
  • Retail sales, total (excl. motor vehicle and parts dealers)

Another report that is released on a quarterly basis is the Quarterly Ecommerce Report. This report shows e-commerce sales and their contribution to total sales for each quarter.

quarterly retail ecommerce sales
Source: U.S. Census Bureau

Importance of The Retail Sales Metric

The reason this metric is tracked and watched so closely by economists and investors is that it gives a very good indication about the economy and consumer spending.

A D V E R T I S E M E N T

Consumer spending contributes roughly 2/3 to the U.S. GDP, with retail sales (durable and non-durable goods) representing around 23%, and services around 44%.

Source: Bureau of Economic Analysis

Based on this indicator, together with other important economic indicators, such as GDP and jobs growth, economists draw the appropriate policies that are needed to ensure economic stability and health.

For investors and traders, retail sales reports are considered a market moving event, as it affects the share prices of the different companies, as well as currencies, based on the anticipated economic picture the report might infer.

For example, a report showing YoY growth means the economy could be expanding and growing, which could mean higher earnings for different companies, and, consequently, higher future market caps and share prices.

How Retailers Track Sales

Retailers usually track sales on a daily, weekly (WTD), monthly (MTD), quarterly (QTD) and yearly (YTD) basis. They generate the reports on a daily basis and track performance against their set budget, as well as last year’s performance.

The budget takes into consideration the seasonality of the business, and sets the expected sales based on that. For example, the 4th quarter usually has the highest sales in the U.S., due to increased spending in the holiday season.

In order to get the right picture and be able to compare correctly, they also measure “comps” or same store sales.

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This metric shows how this year’s sales compare to last year’s, for the same period and the same stores that have been trading that period in both years.

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