Labor productivity in the retail trade industry, 1987-99: faced with fierce competition, consolidation, and increased demand, the industry experienced strong growth in labor productivity over the period, partially due to increased investments in information technologies

Monthly Labor Review, Dec, 2001 by Mark Sieling, Brian Friedman, Mark Dumas

Among the seven three-digit SIC industries making up the food stores group (SIC 54), the grocery stores group (SIC 541) was by far the largest in terms of both number of employees and annual sales. In 1997, grocery stores employed 3.2 million workers (87 percent of food store employment) and registered sales of more than $402 billion (95 percent of total food store sales). Average annual changes in output, employee hours, and productivity in grocery stores over the 1987-99 period were influenced by shifting consumer spending patterns and changes in industry structure. Consumers increasingly turned away from conventional grocery stores for their food purchases, choosing instead superstores and hypermarkets. These stores typically offer a wide variety of general merchandise in addition to food products, and many are classified as part of the general merchandise retail group. In addition, there was strong growth in convenience food stores in combination with service stations and classified as part of the service station industry. In 1988, conventional grocery stores accounted for 42.8 percent of all consumer expenditures for food at home; by 1998, that proportion had fallen to 13.4 percent. (20)

In response to these changes in consumer spending patterns, the overall number of grocery stores shrank over the 1987-97 period--from 137,584 to 126,546, an 8.0-percent drop. At the same time, however, overall floor space increased, as newly opened establishments tended to be larger sized establishments. (21) A wide range of technologies and processes designed to improve customer service and profits also was introduced in many establishments. (22) These include the growing use of POS data and continuous replenishment programs to better control inventories, electronic data interchange and computer assisted ordering to increase the speed and reduce errors in ordering, and new standard bar codes for case lots and variable weight products like produce. (23) The positive effect on labor productivity that these new technologies and processes offer, however, was dampened to some degree by an increase in the percentage of establishments offering specialized services. These services--such as delicatessens, full-service bakeries, and specialized meat and fish departments--are more labor intensive than self-service operations. (24)

Automotive dealers and gasoline service stations (SIC 55). Labor productivity in this industry grew at an average annual rate of 1.8 percent over the 1987-99 period, while output increased by 2.6 percent per year, and hours grew by 0.8 percent per year. Labor productivity growth in the second half of the 1990s grew at a slightly faster pace than in first half--2.3 percent per annum versus 1.8 percent per annum. Productivity changes for this retail group reflect the changes in its dominant industries--new and used car dealers (SIC 551), auto and home supply stores (SIC 553), and gasoline service stations (SIC 554)--which together account for about 85 percent of sales and employment. (25)