Bain: Traditional Accounting Doesn’t Capture Full Value of Stores
January 4, 2017,
BOSTON-In an omnichannel world, retailers must adjust their accounting methods to determine the real value of their brick-and-mortar stores, according to a report from management consulting firm Bain & Co.
Titled, “The Power of Omnichannel Stores,” the report asserts that traditional cost-based accounting (valuing stores and their inventories based on their costs) can be misleading in assessing the value of stores. “Physical locations impact brand awareness, consideration and sales both in stores and online, meaning their value is becoming harder to quantify,” according to the report. “For example, Bain finds that physical stores can increase online sales by 15 percent to 30 percent in their catchment areas [the geographic areas from which the stores derive most of their customers].”
Instead, Bain recommends that stores be valued based on a variety of scenarios. “For example, what happens over the next three years if we close 40 percent of our stores and build two new fulfillment centers? What happens if we close some stores, open others and sell two of our fulfillment centers?”
“Most retailers (especially smaller ones) are likely to see a significant cost advantage on one-day shipping by shipping directly from stores,” according to the report. “In addition, technology improvements, including robotics that will do more of the picking and packing in stores and driverless cars that will be available for last-mile delivery, also will benefit the relative economics of ship-from-store over the long term.”
This is one reason that stores remain an integral part of the future of retailing. “For omnichannel retailers, websites and mobile apps are not just a means of ordering: They are front doors to their stores,” Bain said in the report. “And stores are not just showrooms: They offer inspiration and community, and they function as test labs, help desks, purchase points, pickup and return locations, and shipping centers.”