Measuring retail productivity of food & grocery retail outlets using the DEA technique

Abstract

This paper explores the productivity measurement aspects in the Indian grocery retail sector. Here, an attempt has been made to measure the productivity of retail outlets with specific reference to Delhi and National Capital Region (NCR). Productivity is the ratio of output and input. The input and output variables for this study were selected with proper care. The variables were discussed with the retailers during the preparation of the study. In this present research, six input variables have been taken, namely: total square feet area of the store; total number of Stock Keeping Units; number of point of sales machines; labour cost/wages of employees; number of employees; and working hours of the employees. The two output variables taken are sales and customer conversion ratio.

The non-parametric technique of Data Envelopment Analysis (DEA) for measuring the efficiency of 43 retail outlets firms has been used. It was found out that 16 out of the 43 firms are efficient units (who have a score of 1), meaning they are the ones who are optimally utilising their input for the generation of output. This will help the retailers in the long term to improve them after benchmarking with the efficient retail firms.

Keywords:

• grocery
• Indian retail
• productivity
• measurement technique
• DEA

Notes

1. www.etretailbiz.com

2. Kirana stores in India are local road side grocery shops, very small in size (hardly 200–350 square feet in total), which are run by small investments owners in residential areas of different localities, sometimes as a small shop constructed within their own house premises or rented on lease agreement somewhere else. They run their business as an unorganised retailer which is not registered anywhere.