Measuring retail productivity: What really matters?

Retail productivity measurement has commonly used ratios of outputs, such as sales, and input factors like capital and labour to measure different facets of productivity. However, these store-specific ratios are also likely to be influenced by other context-specific factors affecting the reliability and validity of these measures. This paper contributes to the research on productivity measurement by developing and testing a composite set of measures for retail productivity including exogenous factors. The empirical work is based on pharmacists in New Zealand (354) and Australia (336) using an instrument that is pretested in Canada (74) for both its external and internal validity. The data were analysed using LISREL to create comprehensive models of the relationships between and among the identified productivity factors. The study revealed that some competitive factors and demand-related factors play a significant role in the productivity of the stores in both New Zealand and Australia. This implies that correct measurement of retail productivity must include exogenous factors to be accurate. The theoretical and managerial implications of these results are discussed.