Measuring Operational Efficiency of Retail Stores in Chandigarh Tri-City Using Dea

By Sharma, Vandana; Choudhary, Himanshu | Journal of Services Research, October 1, 2010 | Go to article overview

Measuring Operational Efficiency of Retail Stores in Chandigarh Tri-City Using Dea


Sharma, Vandana, Choudhary, Himanshu, Journal of Services Research


(ProQuest: ... denotes formulae omitted.)

INTRODUCTION

Indian retailing industry has experienced remarkable growth in the last few years. The contribution of organised retailing is significant in this growth. Organised retail is expected to contribute 10% of total retailing in India by the end of the year 2010. Also this sector will show a compounded annual growth rate of 49.53 per cent from the years 2006 to 2010 (RNCOS' India Retail Sector Analysis, 2007). Major players currently operating in the Indian organised retail industry include Future Group, Trent Ltd, RPG Enterprise, Vishal Retail Ltd, Shoppers Stop Ltd, Bata India Ltd, Provogue India Ltd, Videocon Appliances Ltd., I.T.C. Ltd, Godrej Agrovert Ltd, and DCM - Hariyali Kisaan Bazaar etc. ( RNCOS' India Retail Sector Analysis , 2007). New multi -national entrants in this sector will further boost the growth of organised retailing in India. As organized retail is taking an upstream growth swing, it is very important for the retailers to understand that the business in which they are investing money, must give them satisfactory returns. To attain satisfactory returns a retailer must be efficient in his operations which would determine his success. Every retailer formulates many plans during every fiscal year, new season and festive season to increase their sales and improve their customer satisfaction. These are important determinants/ parameters for measuring efficiency of operations in a retail store. Apart from these important factors, the other factors that are planned include, profit margins, choosing product assortment, product pricing, inventory of various products, furnishing of stores, setting of stock keeping units/ gondulas, physical layout and design of the stores and turnover of the store.

Organised retailing is blooming in tier-I and tier II cities as well along with the metros. For this reason one of the upcoming cities of northern India- Chandigarh and its peripheral cities Mohali and Panchkula were selected for the purpose of present study. The retail stores here are evolving very fast as organized stores; therefore, it is essentially important for them to understand all the above mentioned facts regarding operational efficiency. During the pre- testing of the retailers it was observed that there are stores which are efficient and among them are the ones which are relatively not, in spite of the fact that all give due consideration to planning their operations efficiently. The point which holds importance here is that how effectively the operations are planned and implemented. The retailers who understand the underscored facts effectively become efficient and the others lag. However, if these underscored facts are studied and analyzed well, the inefficient retailers can also significantly improve their performance and become efficient over a period of time.

REVIEW OF LITERATURE

India has a highly competitive retail industry, therefore, it is very essential to have know- how of all those factors which help retailers to sustain in the long run. One of the major factors which will keep the retailers a class apart is knowledge regarding operational efficiency. As Charles Darwin said "survival of the fittest", similarly operational efficiency of a retailer will enable him to function in his market with minimal inputs and give him maximum output to be the fittest among all.

It is important to analyse productivity and efficiency in retailing (Barros and Alves, 2004; Lusch et al., 1995; Kamakura et al., 1996). From the literature regarding the contemporary researches in the measurement of efficiency that were published over the last few years (Thomas et al., 1998; Ratchford, 2003; Donthu and Yoo, 1998; Keh and Chu, 2003; Barros and Alves, 2003, 2004), it is evident that DEA has been extensively used to measure the retail efficiency and productivity. The literature review suggests that there are many factors that affect the operational efficiency of a firm such as labor intensive activity (Ingene, 1984 ), competitive conditions (Goldman, 1992), sales volume (Lusch & Serpkenci, 1990), size of firm (Ratchford & Stoops, 1988) and location (Donthu & Yoo, 1998). …

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