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Explanation of Benchmarking Revisions, Summary of Changes, Definitions |
INTRODUCTION
The
U.S. Census Bureau produces the Annual Benchmark Report for Retail Trade
and Food Services to provide national estimates by kind of business of
annual and monthly sales for establishments classified in the retail trade
and food services industries. Estimates of end-of month inventories, inventory-to-sales
ratios, annual purchases, gross margin, gross margin as a percent of sales,
end-of-year accounts receivable, and per capita sales are also provided, but
only for retail establishments.
We develop the estimates in this report using data
from the Monthly Retail
Trade Survey (MRTS), Annual
Retail Trade Survey (ARTS), and administrative records. For each survey,
questionnaires are mailed to a probability sample of firms located in the
United States and having paid employees. The samples are updated regularly
and periodically reselected. These samples include firms of all sizes. Administrative
records data are used to account for firms without paid employees.
Additional information on MRTS and ARTS can be found on the Census Bureau Web site at http://www.census.gov/econ/www/retmenu.html.
COVERAGE
The estimates in this publication are summarized by kind of-business classification based on the 1997 North American Industry Classification System (NAICS). NAICS groups establishments into industries based on the activities in which they are primarily engaged. This system was developed by the joint efforts of statistical agencies in Canada, Mexico, and the United States. The common industry definitions allow for statistics to be compared by business activity across North America.
Retail trade, as defined by NAICS sectors 44-45, includes establishments engaged in selling merchandise in small quantities to the general public, without transformation, and rendering services incidental to the sale of merchandise. Two principal types of establishments classified in retail trade can be distinguished:
1. Store
retailers operate fixed point-of-sale locations, located and designed to attract
a high volume of walk-in customers. They have extensive displays of merchandise,
use mass-media advertising to attract customers and typically sell merchandise
to the general public for personal or household use. Some store
2. Nonstore retailers also serve the general public, but their retailing methods differ. Such methods include "infomercials," paper and electronic catalogs, door-to-door solicitation, in-home demonstration, selling from portable stalls or through vending machines.
Food services, as defined by NAICS subsector 722,
New samples were introduced with the 1999 Annual Retail Trade Survey and with the March 2001 Monthly Retail Trade Survey. The new samples were designed to produce NAICS estimates and replace the samples designed to produce Standard Industrial Classification (SIC) estimates.
A summary of changes from the prior benchmark report
SUMMARY OF CHANGES
Unadjusted estimates of monthly sales were revised for January 1998 through January or February 20041(if an advance sales estimate was computed). Unadjusted estimates of end-of-month inventories were also revised for January 19982 through January 2004.
The revised monthly unadjusted sales and end-of-month inventories estimates reflect revised results from the 1999, 2000, and 2001 annual surveys, as well as the new results from the 2002 annual survey. We derived revised purchases and gross margin estimates for 19983 through 2001 and new purchases, gross margin, and accounts receivables estimates for 2002.
New seasonal, trading-day, and holiday adjustment factors were computed and used to adjust sales for January 1995 through January or February 20044 (if an advance sales estimate was computed). New seasonal adjustment factors were computed and used to adjust inventories for January 19955 through January 2004.
REVISIONS TO PREVIOUSLY PUBLISHED ESTIMATES
Annual Estimates
Sales, end-of-year inventories, purchases, and accounts receiveables for 2002 were estimated from the 2002 Annual Retail Trade Survey (ARTS), For 2001, 2000, and 1999, revisions were applied to the previously published sales, end-of-year inventories, and purchases. There were no revisions to the previously published 19986 annual sales estimates. However, there were revisions to the previously published 1998 annual purchases and end-of-year inventories. Because these revisions were not significant, we did not revise purchases or end-of-year inventories7 prior to 1998. Accounts receivable estimates were revised for 2001.
Estimates of Monthly Sales
For December 1997 through January 2004, monthly retail and food services sales estimates were input to the benchmarking program. The December 1997 through February 2001 estimates were developed by restating the SIC-based estimates on a NAICS basis. Estimates from March 2001 through January or February 2004 were derived from the NAICS sample. Also, for selected kinds of business, corrections were applied to the estimates. The estimates were revised in a manner that -
- constrained the sum of the 12 monthly sales estimates for a particular year to equal the corresponding annual sales estimates (benchmarks) derived for the years 1998 through 2002.
- minimized the differences between the month-to-month changes of the input and revised estimates.
- used
the previously published December 1997 estimate to link the revised estimates
to the previously published estimates.
A mathematical result of the benchmarking methodology is that all revised estimates following the end of the last benchmark year (2002) are derived by multiplying the corresponding input estimates by the ratio of benchmarked-to-input estimate for the last month of the last benchmark year. Therefore, for a specified sales series, a ratio of the December 2002 benchmarked estimate to the December 2002 input estimate was computed. Estimates for periods following December 2002 were multiplied by these constant ratios (called carry-forward factors) to derive published sales estimates. The carry-forward factors remain constant until the next benchmarking operation.
Estimates of End-of-Month Inventories
For December 1997 through January 20048, monthly retail end-of-month inventory estimates were input to the benchmarking program. December 1997 through February 2001 estimates were developed by restating the SIC-based estimates on a NAICS basis. Estimates from March 2001 through January 2004 were derived from the NAICS sample. Also, for selected kinds of business, corrections were applied to the estimates. The estimates were revised in a manner that -
- equated the December or end-of-year inventory estimates for 1997 through 2002 to the end-of-year inventory estimates derived from the annual survey.
- minimized the differences between the month-to-month changes of the input and revised estimates.
- used the previously published December 1997 estimate to link the revised estimates to the previously published estimates.
Estimates subsequent to December 2002 were derived by multiplying the input estimates by the ratio of the December 2002 published estimate to the input estimate for December 2002. This ratio is the carry-forward factor for inventory and remains constant for all series until the next benchmarking operation.
REVISIONS OF SALES AND INVENTORIES
The following table shows a comparison of the revised
2003
Retail and Food Services Sales and Retail Inventories Comparison of the Revised
Estimates
to the Previously Published Estimates
(Millions
of dollars)
|
NAICS code |
Kind of Business |
Revised |
Previously published |
Percent difference |
| SALES | ||||
| Retail and food services sales, total | 3,756,688 | 3,780,616 | -0.6 | |
| Retail, total | 3,399,544 | 3,421,870 | -0.7 | |
| 441 | Motor vehicle and parts dealers | 895,703 | 904,352 | -1.0 |
| 442 | Furniture and home furnishings stores | 97,977 | 100,220 | -2.2 |
| 443 | Electronics and appliances stores | 94,561 | 95,368 | -0.8 |
| 444 | Building mat., garden equip., & supplies dealers | 321,134 | 323,049 | -0.6 |
| 445 | Food and beverage stores | 505,933 | 508,581 | -0.5 |
| 446 | Health and personal care stores | 192,191 | 191,611 | 0.3 |
| 447 | Gasoline stations | 268,519 | 263,258 | 2.0 |
| 448 | Clothing and clothing access. stores | 178,435 | 178,674 | -0.1 |
| 451 | Sporting goods, hobby, book, & music stores | 79,447 | 81,520 | -2.5 |
| 452 | General merchandise stores | 471,078 | 476,143 | -1.1 |
| 453 | Miscellaneous store retailers | 104,865 | 104,969 | -0.1 |
| 454 | Nonstore retailers | 189,701 | 194,125 | -2.3 |
|
722
|
Food Services and drinking places | 357,144 | 358,746 | -0.4 |
| INVENTORIES* | ||||
| Retail, total | 446,637 | 453,551 | -1.5 | |
|
441
|
Motor vehicle and parts dealers | 155,953 | 162,516 | -4.0 |
| 442,443 | Furniture, home furnishings, electronics, and appliance stores | 27,112 | 28,395 | -4.5 |
| 444 | Building mat., garden equip., & supplies dealers | 46,093 | 45,917 | 0.4 |
| 445 | Food and beverage stores | 35,495 | 35,339 | 0.4 |
| 448 | Clothing and clothing access. stores | 34,411 | 33,907 | 1.5 |
| 452 | General merchandise stores | 63,528 | 63,577 | -0.1 |
* End of December, not adjusted for seasonal variations.
Reasons for Monthly Revisions
There are several reasons for revisions. The main contributors to the revision from the previously published estimates are:
- Timing. The respondents have
more time to prepare their annual reports than they do for their monthly
reports. The annual responses are requested at a time when many firms
have already compiled audited book figures for their own use. The timing
of the annual survey is such that we are also able to obtain independent
verification of the reported data from such sources as a company's annual
report. On the other hand, respondents to the monthly survey have just
a few weeks to provide reports of their sales and end-of-month inventories.
Sometimes these reports are based on incomplete or unaudited records.
These include estimates by the respondents to represent their understanding
of their business.
- Sampling. As described in
more detail in Appendix
A of this report, the estimates derived from the annual survey are
based on a sample that is much larger than the samples used to produce
the monthly sales or inventory estimates. Furthermore, the monthly inventory
estimates are based on a sample with fewer units than the sample used
to produce the monthly sales estimates. This often results in larger revisions
for inventory estimates than for sales estimates.
- Response. The annual estimates
are based on more reported data than are the monthly estimates. The response
to the Annual Retail
Trade Survey is required by law. This requirement results in a dollar
volume response rate for sales above 90 percent. The response to our
monthly survey is not mandatory. The dollar volume response rates
for the monthly surveys are usually around 80 percent for sales and 72
percent for inventories. The sales and inventories for the non responding
firms have trends similar to the responding firms in their respective
kind of business.
DEFINITION OF TERMS
Dollar Values
All dollar values presented are expressed in current dollars; that is, the estimates are not adjusted to a constant dollar series. Consequently, when comparing estimates to prior years, users also should consider price level changes.
Confidentiality
Title 13 of the United States Code authorizes the Census Bureau to conduct censuses and surveys. Section 9 of the same Title requires that any information collected from the public under the authority of Title 13 be maintained as confidential. Section 214 of Title 13 and Sections 3559 and 3571 of Title 18 of the United States Code provide for the imposition of penalties of up to 5 years in prison and up to $250,000 in fines for wrongful disclosure of confidential census information. In accordance with Title 13, no estimates are published that would disclose the operations of an individual firm.
The Census Bureau's Internal Disclosure Review board sets the confidentiality rules for all data releases. A checklist approach is used to ensure that all potential risks to the confidentiality of the data are considered and addressed.
Disclosure Limitation
A disclosure of data occurs when an individual can use published statistical information to identify either an individual or firm that has provided information under a pledge of confidentiality. Disclosure limitation is the process used to protect the confidentiality of the survey data provided by an individual or firm. Using disclosure limitation procedures, the Census Bureau modifies or removes the characteristics that put confidential information at risk for disclosure. Although it may appear that a table shows information about a specific individual or business, the Census Bureau has taken steps to disguise or suppress the original data, while making sure the results are still useful. The techniques used by the Census Bureau to protect confidentiality in tabulations vary, depending on the type of data.
Unpublished Estimates
Additional statistics, such as dollar volume estimates for some kinds of business not separately shown in this report, are produced as a byproduct of the regularly published statistics. These additional estimates have not been included in this publication because high sampling variability, poor response, or other factors that may make them potentially misleading. Upon written request, for a nominal fee, the Census Bureau will release these estimates for individual use, though not for publication. It should be noted that some unpublished estimates can be derived directly from this report by subtracting published estimates from their respective totals. However, the estimates obtained by such subtraction would be subject to the poor response rates or high sampling variability described previously for unpublished kinds of business.
Individuals who use estimates in this report to create new estimates should cite the Census Bureau as the source of only the original estimates.
Adjustment Factors
The X-12 ARIMA program was used to derive the factors for adjusting estimates for seasonal variations and, in the case of sales, for trading-day and holiday differences. Unadjusted sales and inventory estimates for January 1992 through January or February 2004 (if an advance sales estimate was computed) were input to this program.
Seasonal adjustment of estimates is an approximation based on current and past experiences. Therefore, the adjustment could become less precise because of changes in economic conditions and other elements that introduce significant changes in seasonal, trading-day, or holiday patterns.
Sales
Sales include merchandise sold (for cash or credit at retail or wholesale) by establishments primarily engaged in retail trade. Services that are incidental to the sale of merchandise, and excise taxes that are paid by the manufacturer or wholesaler and passed along to the retailer are also included. Sales are net, after deductions, for refunds and allowances for merchandise returned by customers. Sales exclude sales taxes collected directly from customers and paid directly to a local, state, or federal tax agency.
The estimates of sales measure the operations receipts rendered by stores that primarily sell at retail. The sales estimates represent total sales and receipts of all establishments primarily engaged in retail trade. They do not include sales at retail by manufacturers, wholesalers, service establishments, and others whose primary activity is other than retail trade. Because the retail establishment is the basic unit of measure, the published estimates of sales by type of retail store are not intended to measure the total sales for a given commodity or merchandise line.
Inventories
Merchandise inventories are the value of stocks of goods held for sale through retail stores. The inventories estimates represent the value, at cost, of the merchandise available for sale as of the last day of the report period. Methods of valuation may vary according to the accounting practices of each firm. The estimates provided in this report are valued on a non-LIFO (last in, first out) basis. Note-LIFO is a method of valuing inventory where the latest items of merchandise added to the inventory are the first ones taken out. Non-LIFO would mean that another method, such as FIFO (first in, first out), was used to establish the value of the inventory available for sale. Merchandise inventories are shown for stores and warehouses servicing retail establishments. Included are only those warehouses that maintained supplies of merchandise primarily intended for distribution to retail stores within the organization.
Most firms reported the value of their inventories as of the close of the calendar year. Some firms, using a fiscal year rather than a calendar year for accounting purposes, valued their inventory as of some date other than the last day of the calendar year. About 35 percent of the retail inventory estimate from the Annual Retail Trade Survey was based on data reported on an end-of-fiscal year other than December 31. In the annual survey, inventories reported for a date in a month other than December were adjusted to a December 31 equivalent, based on ratios developed from the monthly inventory sample.
Inventories/Sales Ratios
The inventories/sales ratios show the relationship of the end-of-month values of inventory to the monthly sales. These ratios can be looked at as indications of the number of months of inventory that are on hand in relation to the sales for a month. For example, a ratio of 2.5 would indicate that the retail stores have enough merchandise on hand to cover two and a half months of sales.
Purchases
Purchases represent the total cost of merchandise that was purchased for resale during the year, whether or not payment for the merchandise was made during the year.
Purchases data include cash and credit purchases made at central offices and company warehouses. The purchases, however, exclude deliveries from central offices or warehouses to retail stores owned by other companies. Those companies engaged in both manufacturing and retailing are asked to include purchases at the cost value of inter-company transfers from their plant or warehouses to their retail stores and to include the cost of outside purchases.
Cost of Goods Available for Sale and Cost of Goods Sold
To calculate the cost of goods available for sale, the purchases made during the year were added to the preceding year's end-of-year inventories. To calculate the cost of goods sold, the end of the current year's value of inventories were deducted from the cost of goods available for sale.
Gross Margin
The measure of gross margin represents total sales less
Accounts Receivable Balances
Retail accounts receivable are amounts owed to retail stores by their customers for purchases made on credit. The estimate in this publication refer to receivables outstanding as of December 31, including receivables against which the firm has borrowed. However, credit paper discounted or sold to others and amounts actually charged off as bad debts are excluded. Also excluded are amounts charged on credit cards issued by oil companies, banks, and other organizations that issue credit cards.
Charge accounts are credit accounts for which full payment is scheduled to be made at the end of the customary billing period. Installment accounts are classified as open-end or closed-end.
