Analysis of the Use of Retail Floorspace

A. Roy Thurik is head of the Department of Basic Research at the Research Institute for Small and Medium-Sized Business in The Hague, Netherlands. Professor Dr.Johan Koerts is professor of Mathematical Statistics at the Econometric Institute, Erasmus University, Rotterdam, Netherlands. They study the relationship between sales and floorspace in small retail establishments, which is of importance for retail planning, shop design, efficiency diagnosis, evaluation, evaluation of the role of assortment composition, environment. Their study investigates the relationship between total available floorspace, the value of total annual sales, and the partitioning of total available floorspace for small retail establishments into selling area and remaining space

Behaviour of retail entrepreneurs

Retailers' goal attainment is studied using a model consisting of relationships concerning the productivity of labour and floor-space. Evidence from large supermarkets shows that retailers concentrate on the maximisation of the value of annual sales rather than on maximising annual profit

Market Disequilibria and Their Influence on Small Retail Store Pricing

In this paper a quantitative model is developed to explain differences in average store price levels. We assume that stores may operate under different economic regimes, that is, under excess capacity or excess demand. Prices are expected to be higher than average in case of an excess demand regime and lower in an excess capacity situation. Actual information regarding the regime that applies to each individual store is not available. Therefore, we propose to use a so-called 'switching model' with endogenous regime choice to analyse the store price differences. The model developed m the paper is estimated using four largely differing types of stores from the Durch retail trade. These samples consist mainly of small stores

On the measurement of retail marketing mix effects in the presence of different economic regimes

This study deals with the measurement of the effects of retail marketing instruments on annual sales in retail stores. We assume that the sales level in retail stores is determined by an interplay of supply capacity and demand factors. In some stores sales are supply-determined, whereas in other stores sales are demand-determined. If it is not known a priori what economic regime applies, the more traditional approaches lead to biased estimation results. Therefore, a switching regression model is proposed to estimate the marketing mix effects. Our ideas are tested using data from four different types of stores in the Dutch retail trade and a comparison is made with a more traditional approach. The main conclusions are: the traditional approach leads to underestimation of the marketing mix effects. A switching regression model seems to be a promising instrument for analyzing these effects. The method has a wider applicability than the retail trade

On Storekeepers' Pricing Behavior.

This research note deals with a quantitative analysis of differences in percentage gross margin between individual stores in the retail trade. A number of hypotheses on pricing behavior of storekeepers are tested using Dutch survey data from nine different types of retail stores. We define percentage gross margin as a percentage mark-up on costs and make a distinction between out-of-pocket and remaining costs. It appears that the remaining costs are not always passed on completely into the percentage gross margin. This result can be explained in two ways: competition is possibly so heavy that storekeepers are not always in a position to pass on completely their remaining costs, or storekeepers are not very careful about passing on this type of cost to customers. Another finding is that percentage gross margin is inversely related to sales size due to the fact that a higher sales size requires a lower percentage of sales to achieve a given basic reward for storekeepers' labor. Percentage gross margin is of course affected by the competitive strength of a store. This influence is approximated by a store's sales

The measurement of labour productivity in wholesaling

Labour productivity is often discussed in economic literature, yet productivity studies in wholesaling are rare. On the whole, wholesaling is a neglected area of research in contrast with its important position in the distribution channel. Our analysis of labour productivity in wholesaling makes use of a labour-cost relationship — originally developed for retailing — to study differences in labour productivity across wholesale business types. For this purpose, averaged data are used of 61 German wholesale types for the 7-year period, 1979 through 1985. The labour-output relationship is estimated applying a pooled, an error-component and a variable-intercept model. Also, heteroskedasticity is considered

On the use of disequilibrium models in applied microeconomic research and the value of sample separation information

The use of disequilibrium models in applied microeconomic research is evaluated. A disequilibrium or switching regime model is used to explainsales levels of individual retail stores. It is investigated whether substantial differences are found if an equilibrium approach is followed instead. Disequilibrium models are known to suffer from the fact that sample separation is unknown. Usually this information is not available. Our sample contains explicit information with respect to the regime to which an observation belongs. Therefore, the value of sample separation information in estimating the disequilibrium model is investigated. Finally, Monte Carlo experiments are conducted to get more insight into these matters.