Measuring and estimating retail productivity
This policy brief explores the unique challenge of measuring retail productivity and introduces a new method tailored to the retail sector. It finds that a flexible, retail-specific approach provides more accurate insights, highlighting the need for policies to support retailers across all their operations, which include marketing, logistics, and inventory choice.
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Samaniego de la Parra and Shenoy Policy Brief September 2024.pdf
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- Productivity captures how efficiently a firm creates value given any fixed quantity of inputs. Measures of productivity can enhance policy impact by directing resources to the most capable firms and targeting productivity gaps where needed.
- Retail productivity fundamentally differs from manufacturing, as “output” involves matching goods to customers rather than producing physical units. Standard productivity measures are ill-suited for this context and can lead to biased estimates and flawed policy recommendations.
- A flexible, retail-specific method captures shops’ logistics, inventory choice, and marketing ability, providing more accurate insights and highlighting the importance of targeting specific productivity dimensions to ensure effective policy interventions.
- Data from shops in Lusaka, Zambia, highlight wide variations in productivity and profitability.
- Different dimensions of productivity are positively correlated with each other, but the correlation is far from perfect. This indicates that policy interventions that do not target the right productivity dimension might be ineffective and even counterproductive.