Does efficiency matter? Examining the efficiency‐profitability link in the US specialty retailers and food consumer stores

Abstract

Purpose

The purpose of this paper is to examine the link between efficiency and profitability in the US specialty retailers and food consumer stores using cross‐sectional data for the year 2007.

Design/methodology/approach

This study uses a non‐parametric data envelopment analysis (DEA) approach to measure the relative efficiency of 45 retailers in the USA. The study also quantitatively examines the link between efficiency and profitability.

Findings

The results indicate that there is a positive link between efficiency and profitability in the US specialty retailers and food consumer stores. The results also indicate that the performance of several retailers is sub‐optimal, suggesting the potential for significant improvements over both profitability and marketability dimensions. Separate benchmarks were derived for possible reductions in resources used, and significant savings are possible on this account.

Originality/value

From a policy perspective, this study highlights the economic importance of encouraging increased efficiency throughout the retailing sector in the US. At the theoretical level, the study empirically confirms the existence of a positive and significant link between efficiency and profitability in the US specialty retailers and food consumer stores.

Citation

Mostafa, M.M. (2010), "Does efficiency matter? Examining the efficiency‐profitability link in the US specialty retailers and food consumer stores", International Journal of Productivity and Performance Management, Vol. 59 No. 3, pp. 255-273. https://doi.org/10.1108/17410401011023582