Retail Store Execution: An Empirical Study

32 Pages Posted: 4 Sep 2013

See all articles by Marshall Fisher

Marshall Fisher

University of Pennsylvania - Operations & Information Management Department

Jayanth Krishnan

International Monetary Fund

Serguei Netessine

The Wharton School, University of Pennsylvania

Date Written: December 3, 2006

Abstract

We describe a methodology by which a retailer can identify action steps that are likely to increase sales and customer satisfaction and demonstrate the methodology using proprietary data from a large retailer with over 500 stores. We use monthly store-level data on a number of operational variables including in-stock rate, store staffing level as measured by payroll and store employee turnover, together with customer responses to satisfaction surveys. We develop a nested three-stage econometric model to analyze the marginal effects of various execution levers on sales, customer satisfaction and the percentage of customers who answer ‘yes’ to the question ‘Did you find everything you were looking for?’, which we term customer perceived in-stock. Our model explains approximately 75%, 97% and 71%, respectively, of the residual variation in sales, customer satisfaction, and customer perceived in-stock. We find that customer perceived in-stock is primarily driven by actual in-stock and customer rating of employee knowledge; overall customer satisfaction is primarily driven by customer perceived in-stock, payroll level, customer rating of employee knowledge and check-out efficiency; and sales is primarily driven by actual in-stock, overall satisfaction and payroll level. Finally, we estimate relative magnitudes of these effects, propose specific actions to improve sales and estimate the likely sales increase from those actions. Our results suggest that a modest reallocation of the payroll budget among stores could be expected to yield a 2-3% increase in sales with no increase in cost.

Suggested Citation

Fisher, Marshall and Krishnan, Jayanth and Netessine, Serguei, Retail Store Execution: An Empirical Study (December 3, 2006). Available at SSRN: https://ssrn.com/abstract=2319839 or http://dx.doi.org/10.2139/ssrn.2319839

Marshall Fisher

University of Pennsylvania - Operations & Information Management Department ( email )

Philadelphia, PA 19104
United States

Jayanth Krishnan

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Serguei Netessine (Contact Author)

The Wharton School, University of Pennsylvania ( email )

3730 Walnut Street
Philadelphia, PA 19104-6367
United States
(215) 573 3571 (Phone)

HOME PAGE: http://www.netessine.com

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