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Assessing Performance Impacts in Food Retail Distribution Systems: A Stochastic Frontier Model Correcting for Sample Selection

Published online by Cambridge University Press:  15 September 2016

Timothy A. Park
Timothy A. Park*
Affiliation:
U.S. Department of Agriculture Economic Research Service
*
Correspondence: Timothy Park ▪ FMB/FED/ERS ▪ 355 E Street SW ▪ Washington, DC 20024-3221 ▪ Phone 202.694.5446 ▪ Emailtapark@ers.usda.gov.
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Abstract

A key organizational decision for retailers is whether to self-distribute or rely on a wholesaler-supplied network and yet little is known about the impact of this strategic choice on store-level productivity. We estimate a stochastic frontier model for food retailers that accounts for selectivity effects linked to the choice of distribution strategy. We find that adoption of data-sharing technologies has a positive impact on store-level gross margins of stores in self-distributing chains. Technical inefficiency among U.S. food retailers leads to a gross margin that is around $5,000 less for a conventional food retailer and about $7,670 less for a supercenter.

Keywords

food retailingsample selectionself-distributionstochastic frontier
Type
Research Article
Information
Agricultural and Resource Economics Review , Volume 43 , Issue 3 , December 2014 , pp. 373 - 389
Copyright
Copyright © 2014 Northeastern Agricultural and Resource Economics Association 

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