Opening a store is one thing—knowing if it’s actually working is another. A new store’s first year is full of unknowns, fluctuations, and learning curves. The key is to analyze what’s working, what’s not, and where to pivot before it’s too late.
Here’s how to diagnose performance, adjust expectations, and shift from pro forma to real-world forecasting.
1️⃣ The First 6-9 Months: Early Signals vs. True Trends
Retail is highly seasonal, so you CANNOT judge long-term performance too early.
Why? Because your business is impacted not just by your promotions but by your competitors’ promos, seasonal shifts, and consumer shopping habits.
📌 Example:
- You open in October → Q4 looks great (because of holiday traffic).
- You open in February → Q1 looks weak (because foot traffic is naturally low post-holiday).
- Your competitor runs a sitewide 30% off sale → Your sales dip, even if you aren’t promotional.
💡 Pro Tip: Expect it to take 6-9 months before your monthly average stabilizes enough to build a reliable trend line.
2️⃣ Compare Performance Against the Right Benchmark
In the early months, brands compare actual results to their pro forma projections—but what if the pro forma was way off?
📊 When to Stick with the Pro Forma vs. When to Adjust
✔ Pro Forma is Useful IF:
- Sales are directionally close (within ±10-20%).
- Costs (rent, payroll, COGS) are tracking as expected.
❌ Pro Forma is No Longer Useful IF:
- Sales are way off (±30% or more).
- It was built with overly optimistic or generic assumptions.
- Your business model has shifted (e.g., more in-store pickup than expected).
📌 When to Shift from Pro Forma to a Forecast
By Month 6-9, you should stop relying on the pro forma and start forecasting based on actual performance trends.
💡 Pro Tip: Use a rolling 3-month average to smooth out short-term fluctuations before making decisions.
3️⃣ Break Down Revenue Into 3 Buckets
To properly diagnose problems, don’t just look at total revenue—break it down into these 3 drivers:
🧮 Revenue = Footfall x Conversion Rate x AOV (Average Order Value)
| Metric | What It Tells You | Common Fixes |
|---|---|---|
| Footfall (Traffic) | How many people walk into your store | If low, focus on marketing, location visibility, local partnerships |
| Conversion Rate | % of visitors who buy | If low, improve staff sales training, merchandising, pricing strategy |
| AOV (Avg Order Value) | How much each customer spends per transaction | If low, improve upselling, bundling, promotions, or product mix |
💡 Pro Tip: If your revenue is off target, break it down—are you missing traffic, conversions, or AOV? Each requires a different fix.
4️⃣ Diagnosing What’s Working vs. What’s Not
| Area | If It’s Working | If It’s Not |
|---|---|---|
| Sales & Revenue | Steady growth, hitting forecasted targets | Flat or declining trend, big gaps vs. forecast |
| Customer Behavior | Loyal, repeat visitors, high engagement | One-time buyers, low conversion, frequent returns |
| Operational Efficiency | Payroll, rent, and costs are stable | High labor costs, inventory misalignment, shrinkage issues |
| Marketing & Traffic | Strong local engagement, organic foot traffic | Store depends too much on paid ads to drive traffic |
💡 Pro Tip: If traffic is high but conversions are low, it’s a sales problem. If traffic is low but conversion is high, it’s a marketing problem.
5️⃣ What to Do When Numbers Are Off
📉 If Revenue is Below Target:
- Check Footfall First – Are enough people even walking in?
- If not, fix marketing: Local partnerships, events, digital ads, signage improvements.
- Check Conversion Rate – Are people browsing but not buying?
- If not, fix sales process: Better staff training, clearer pricing, stronger product storytelling.
- Check AOV – Are people buying, but spending less?
- If not, fix product mix: Bundles, cross-selling, incentives for higher spend.
📈 If Revenue is Above Target (but Profit is Low):
- Check Operating Costs – Are labor, rent, or inventory costs eating into margins?
- Optimize Staffing – Are payroll costs too high for your traffic levels?
- Review Discounts & Promotions – Are promos driving unprofitable sales?
💡 Pro Tip: The easiest way to grow revenue is by improving conversion rate & AOV—it’s usually cheaper than driving more traffic.
6️⃣ Build a Smarter Forecast for Year 2
By Month 9-12, you should have enough data to build a realistic Year 2 forecast based on:
✔ Actual sales trends (not the original pro forma)
✔ Seasonal patterns unique to your store
✔ Customer insights from the first year
🔄 Adjust Your Forecast Quarterly
Retail isn’t static—reforecast every 3 months using your most recent performance data.
7️⃣ Don’t Overlook the Halo Effect 🌎✨
In today’s omnichannel world, stores don’t just drive in-store revenue—they also impact local e-commerce sales.
Many brands assume that opening a store will instantly increase total sales in a market, but sometimes the opposite happens at first—a short-term dip in local e-commerce sales.
📌 Why? Some online shoppers who used to buy from you digitally will now buy in-store instead, shifting revenue from one channel to another. This is called the Halo Effect—and it’s critical to measure.
🔎 How to Track Halo Effects
✅ Compare pre-store vs. post-store sales in that market → Use CBSA (Core-Based Statistical Area) data to track local online sales trends.
✅ Check both in-store + e-com sales together → If total revenue (e-comm + retail) is growing, your store is succeeding—even if one channel shifts.
✅ Look at LTV (Lifetime Value) impact → Customers who engage with both online & offline tend to be more valuable long-term.
💡 Pro Tip: Measure your store’s local e-commerce sales trends using CBSA data—I explain how to do this in this post.
