Benchmarking Retail Productivity Considering Retail Pricing and Format Strategy

Dinesh K. Gauri

Research output: Contribution to journalArticle

27 Scopus citations

Abstract

With increased competitive pressures in the grocery retailing industry, managers have greater interest in measuring the productivity of the stores of their own chain relative to the other similar stores. In this paper, we measure and compare the inefficiencies of major grocery retailers across various formats and pricing strategies using stochastic frontier (SF) methodology. Using a unique dataset covering 2500 stores across 50 chains, we find that the average inefficiency was about 28.59 percent. Kroger and Wal-Mart are found to be the least inefficient chains with inefficiencies of 2.18 percent and 3.06 percent respectively. With respect to pricing strategy, EDLP and hybrid stores are found to do better than HiLo stores in generating weekly sales and with respect to format strategy, supercenters are found to do better than supermarkets and limited assortment stores. Using SF analysis, we also find that stores could potentially reduce the proportion of inputs such as selling area, number of checkout counters, number of employees and store features without threatening outcomes (i.e., by holding the output level constant).

Original languageEnglish (US)
Pages (from-to)1-14
Number of pages14
JournalJournal of Retailing
Volume89
Issue number1
DOIs
StatePublished - Mar 1 2013

Keywords

  • Benchmarking
  • Efficiency
  • Retail formats
  • Retailing
  • Stochastic frontier

ASJC Scopus subject areas

  • Marketing

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