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March, 1988, Vol. 111, No. 3

Productivity trends in department stores, 1967-86

Brian L. Friedman

As measured by output per employee hour, productivity in the department store industry increased at a 2.8-percent average annual rate between 1967 and 1986.¹ In comparison, the rate was 1.0 percent for the nonfarm business sector of the economy during the same period. The gain in department store productivity over the 19-year period reflects average annual increases of 3.6 percent in output and 0.8 percent in employee hours. (See table 1.)

The industry's productivity growth has been influenced by broad trends in general retailing. These trends include greater firm concentration and the resulting growth in the number of chain stores² which invested heavily in expansion; movement to better locations in shopping centers; and the use of computers in store operations. Improvements in store layout and design were also used to increase consumer service by helping salespersons serve customers more efficiently.³

The productivity trend can be divided into three periods; 1967-73, 1973-80, and 1980-86. During the first period, productivity rose at a 1.8-percent average annual rate. The rate increased to 2.9 percent in the middle period, and to 4.5 percent during the 1980-86 period.

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1 All average annual rates of change are based on the linear least squares trends of the logarithms of the index numbers.  The department store industry is designated as Standard Industrial Classification 5311.  It includes retail stores carrying a general line of appeal, home furnishings and housewares.  These and other merchandise lines are normally arranged in separate sections or departments with accounting on a departmentalized basis.  The departments and functions are integrated under a single management.  The stores usually provide their own charge accounts, deliver merchandise, and maintain open stocks.

2 A chain consists of four or more retail stores in a firm.  Larger chains consist of 11 or more stores.  In the department store industry, virtually all chains are corporately owned.

3 U.S. Industrial Outlook  (U.S. Department of Commerce, 1980), p. 457.

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