Benchmarking Performance in Retail Chains: An Integrated Approach

Authors:
Dinesh Kumar Gauri;Janos Gabor Pauler;Minakshi Trivedi
Affiliations:
Whitman School of Management, Syracuse University, Syracuse, New York 13244;Department of Computer Applications, Pollack Mihaly Faculty of Engineering, University of Pécs, H-7622 Pécs, Hungary;Department of Marketing, School of Management, State University of New York at Buffalo, Buffalo, New York 14260
Venue:
Marketing Science
Year:
2009

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Abstract

Standardizing performance expectations across different outlets within a chain, differing in their individual features, their consumers, and the nature of competition they face, can be an onerous task. We develop an integrated, nonlinear, block group-level market share model of store expectations that draws upon the existing trade area as well as store performance literatures. By incorporating and normalizing a large number of external and internal factors impacting performance, we are able to offer a means for the retailer to determine equitable standards. The model is estimated using a variation of the maximum-likelihood estimation, on a data set fashioned from several sources and aggregated at the block group and store levels. Finally, we propose a set of indices that allows us to evaluate relative performances of stores and regions given the competitive environments they face. We find that a block group-level model offers a better fit, as well as significantly richer implications, than a traditional store-level model. Results show that a significant number of stores operate well below their expected levels, an insight not obvious from the raw numbers used to report store statistics to upper management.