Technical efficiency in the retail food industry: The influence of inventory investment, wage levels, and age of the firm

Abstract

Purpose

The purpose of this paper is to estimate the influence of inventory investment, wage levels, and age of the firm on retailer technical efficiency.

Design/methodology/approach

The methodology is based on the estimation of a stochastic parametric function. To estimate technical efficiency the output supermarket chain sales volume is used, calculated by isolating the retailer price effect on sales revenue.

Findings

The empirical analyses applied to panel data show that inventory investment and wage level have a positive impact on technical efficiency.

Research limitations/implications

The limitations of the study include the generalisation of the conclusions to the entire sector, which must be done with due care, since only one of the players in the distribution channel (supermarket chains) has been analysed.

Practical implications

First, the estimation of the efficiency of the different supermarket chains helps the management of producers, since they can identify efficient supermarket chains, which is important for vertical relationships in the distribution channel. Second, the analysis of the determinant factors of efficiency for different chains may be used as external benchmarking.

Originality/value

The focus of the paper is on developing a useful methodology for managers, determining some of the sources of retail efficiency gains. The paper develops and tests a composite set of hypotheses, analysing the influence of some managerially controlled factors on technical efficiency.

Citation

Sellers‐Rubio, R. and Más‐Ruiz, F.J. (2009), "Technical efficiency in the retail food industry: The influence of inventory investment, wage levels, and age of the firm", European Journal of Marketing, Vol. 43 No. 5/6, pp. 652-669. https://doi.org/10.1108/03090560910946981