Efficiency measurement among hypermarkets and supermarkets and the identification of the efficiency drivers

Abstract

PurposeThe purpose of this paper is to analyse a representative sample of hypermarkets and supermarkets working in the Portuguese market, using a benchmark procedure to compare companies that compete in the same market and thereby deriving managerial and policy implications.Design/methodology/approachA two‐stage procedure to benchmark the companies was adopted. In the first stage data envelopment analysis (DEA) is used and in the second stage a Tobit model is employed to estimate the efficient drivers.FindingsFirst, that, on average, the efficiency of hypermarket and supermarket retail companies is high compared with that to be found in other sectors. Second, larger retail groups are, on average, more efficient than the smaller retailers, and third, that national retailers are on average more efficient than regional retailers. Finally, scale plays an important role in this market. The efficiency drivers are market share, number of outlets and location. Finally, regulation has a negative effect on efficiency.Research limitations/implicationsThis paper has two limitations. The first is in relation to the data set, and the second in relation to the DEA method. With reference to the data set, the homogeneity of the retailers used in the analysis is questionable, since retailers of different sizes, production characteristics and locations are compared, which may face different restrictions and therefore might not be considered to be directly comparable. However, it can always be claimed that the units are not comparable and that it would consequently be equally impossible to undertake a ratio analysis. Moreover, the data set is short, so that the conclusions are limited. For the conclusions to be generalised, a larger panel data set would be required.Practical implicationsThese can be separated into managerial and competitive – more importantly, the latter with its implications for the retailing industry and its future evolution.Originality/valueClarifies two issues: the changes in the fortunes of the retail companies, as observed in their sales volume ranking, and the need to look for the causes of retail efficiency, apart from internal managerial procedures.