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

Between 1987 and 1997, the number of eating places increased by more than one-fifth--the largest percent increase of any retail group--while employment increased by about one-quarter, which also is among the highest increases recorded. (38) Productivity trends, however, do not seem to have been influenced by changes in the industry's structure: Table service establishments, for example, have consistently accounted for about one-half of total industry sales and number of establishments. (39)

Miscellaneous retail stores (SIC 59). Labor productivity in miscellaneous retail stores--a group comprising a diverse blend of specialized retailers--grew by 2.6 percent per year over the 1987-99 period, which reflected per annum output growth of 4.5 percent and hours growth of 1.6 percent. Growth in average annual labor productivity varied considerably among the several types of specialized retailers--ranging from 1.1 percent for liquor stores (SIC 592) to 6.9 percent for nonstore retailers (SIC 596).

As with other major industries within retail trade, productivity growth for miscellaneous retail stores was greater during the second half of the 1990s than during the first half of the decade (5.3 percent versus 1.7 percent per year). During the 1990-95 period, output grew by 2.8 percent per annum, and employee hours grew by 1.0 percent per year. From 1995 to 1999, however, average annual output and hours growth more than doubled, rising to 7.5 percent and 2.1 percent, respectively.

Productivity growth for drug stores also was higher during the 1995-99 period. (40) Reflecting average output growth of 6.4 percent and hours growth of 2.3 percent, labor productivity during the latter half of the 1990s averaged 4.0 percent per year--nearly 4 times the rate recorded in the first half of the decade (0.9 percent per annum) (41). Contributing to the strong growth was the introduction of a variety of computer-based systems that reduce labor requirements in such areas as billing and dispensing medications. (42) Increasingly during the 1990s, drug stores employed management information systems linking individual stores to health insurer's databases, which allowed more accurate and timely filling of prescriptions and billing. In addition, automated dispensing systems, which usually make prescription filling more efficient, increasingly are being used throughout the industry.

Reflecting different rates of productivity growth among a variety of specialty retail stores, labor productivity growth in miscellaneous shopping goods stores (SIC 594) also was higher during the 1995-99 period than during the first half of the decade (4.2 percent versus 2.8 percent) (43). While industry hours advanced by an average of 2.1 percent per year over the 1995-99 period (versus 1.0 percent during the 1990-95 period), output advanced by an average of 6.4 percent (versus earlier gains of 3.8 percent).

Productivity growth for nonstore retailers (SIC 596) increased from an average annual rate of 6.5 percent during the 1990-95 period to 9.9 percent during the latter half of the decade. Catalog and mail order houses (SIC 5961), the dominant industry in this group, accounted for 79 percent of sales in 1999. Although this industry lost some market share to miscellaneous general merchandise stores (SIC 539), the desire for consumers to save time spent engaged in shopping favored the retail formats of catalog and mail order houses. (44) Productivity in this industry grew at an average annual rate of 7.0 percent during the 1990-95 period and increased to 12.4 percent per year during the 1995-99 period. Industry output growth was bolstered by increases in online sales--the vast majority of catalog companies sell on the Internet. (45) E-commerce sales accounted for 0.5 percent of total retail sales in 1999, 77 percent of these sales occurring in the nonstore retailer industry group. (46)