Apparel stores display above-average productivity Essay

Output per hour of all persons in the retail apparel store industry
increased at an average annual rate of 2.9 percent between 1967 and
1983, compared with an average annual rate of 1.2 percent for the total
nonfarm business sector of the economy during the same period. This gain
in productivity over the 16-year period reflects average annual
increases of 4.5 percent in output and 1.5 percent in hours of all
persons in the apparel store industry. (See table 1.)



Productivity trends can be divided into two periods, 1967-77 and
1977-83. During the first period, productivity rose at an average
annual rate of 2.8 percent, and in the latter period, it accelerated to
3.6 percent, reflecting average growth in output and little increase in
hours.

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During the 1967-77 period, productivity advances were not steady;
in 1972 and 1973, there were relatively large increases. In 1972,
productivity rose 8.2 percent as output increased 6.3 percent and hours
declined 1.8 percent. In 1973, output advanced 11.3 percent, while
hours increased only 1.7 percent, resulting in a productivity increase
of 9.5 percent. However, there were moderate productivity declines in
1967, 1970, 1974, 1976, and 1977. Output experienced only two declines
during the period, falling in the recession years of 1970 and 1974. In
1969, 1976, and 1977, increases in hours exceeded increases in output,
resulting in the productivity falloffs.



During the 1977-83 period, there were no productivity declines, and
only one small output decline in 1982. In 1978, output per hour rose
10.0 percent based on very strong growth in output of 13.4 percent and
moderate gains in hours of 3.1 percent. Output recorded moderate growth
in 1980 and above-average growth in 1981 (6.1 percent), while industry
hours declined in 1980 and 1982. Productivity had above-average gains in
1980 and 1981. Trends in four subindustries


The retail apparel store industry consists of several
subindustries. In addition to productivity measures for the total
industry, separate measures are presented for men’s and boys’
clothing and furnishing stores, women’s ready-to-wear stores,
family clothing stores, and shoe stores. (See table 2.)



Men’s and boys’ apparel stores. Productivity grew
moderately in the men’s and boys’ apparel store industry,
accounting for 15 percent of total sales and 11 percent of total
employment in 1983. Output per hour grew at an annual average rate of
2.5 percent between 1967 and 1983, reflecting average annual growth in
output of 1.8 percent and an average annual decline of 0.6 percent in
hours.



Productivity grew at an annual rate of 3.8 percent between 1977 and
1983 compared with a 2.2-percent increase in 1967-77. This gain
reflected a slowing of the increase in output from a rate of 2.9 percent
between 1967 and 1977 to an average decline of 0.4 percent between 1977
and 1983. Hours declined at a rate of 4.1 percent from 1977 to 1983
compared with a small average gain of 0.7 percent in the preceding
period. Among apparel stores, this subindustry alone showed a definite
trend toward fewer number of stores.



Among the retail apparel subindustries, men’s and boys’
apparel stores had the slowest output growth between 1967 and 1983.
This subindustry was also the most cyclical, experiencing output
declines in 1970, 1974, and 1980-83.



Women’s ready-to-wear-stores. This subindustry, the largest,
accounting for 36 percent of sales and 33 percent of employment in 1983,
experienced the highest gain in productivity among those measured.
Output per hour rose at an average annual rate of 4.4 percent from 1967
to 1983 as output increased 5.5 percent and all person hours grew 1.1
percent annually.



Between 1967 and 1977, productivity increased at an average annual
rate of 4.3 percent, while output grew 5.6 percent and hours 1.3
percent. In the 1977-83 period, productivity growth increased to 6.3
percent annually reflecting average annual output gains of 5.5 percent
and an average hours decline of 0.7 percent.



Productivity showed declines in only 1976 and 1977. Output
declined only in 1977 and showed no growth in 1980. Hours of all
persons, however, declined in 1968, 1970, 1974, 1975, and 1980-82.



Family clothing stores. In 1983, family clothing stores accounted
for 22 percent of retail apparel store sales and 18 percent of
employment. Despite a strong overall increase in output, long-term productivity growth was moderate, reflecting above-average growth in
employment. Output per hour grew at an average annual rate of 2.7
percent from 1967-83 as output rose 5.2 percent and hours increased at a
rate of 2.4 percent.


Productivity showed periods of both growth and decline. Between
1967 and 1973, productivity grew at an average annual rate of 5.9
percent with very strong growth in productivity and output in 1971,
1972, and 1973. During 1967-73, hours increased at an annual rate of
only 0.1 percent. Between 1973 and 1978, productivity declined at an
average annual rate of 2.5 percent as output grew 3.8 percent and hours
soared to an average annual growth of 6.5 percent. In response to a
strong demand for casual clothing, especially jeans, the number of
family clothing stores increased during this period. Productivity
declines were recorded in 1974, 1976, 1977, and 1978. Between 1978 and
1983, productivity rebounded with an average annual growth of 4.4
percent as output rose 4.6 percent and hours showed very little
growth–0.1 percent. As the number of stores began to decrease, hours
declined in 1979, 1980, and 1983.



Shoe stores. Shoe stores, which accounted for 17 percent of sales
and 21 percent of all persons in the apparel store industry, posted the
smallest productivity gain from 1967 to 1983 among the subindustries
studied. Productivity grew at an average annual rate of only 0.8
percent between 1967 and 1983, reflecting output increases of 3.0
percent and hours increases of 2.2 percent.



During the 1967-77 period, output per declined at an average annual
rate of 0.2 percent. There were strong productivity declines in 1970,
1971, and 1974. During this period, both output and hours had average
annual gains of 1.3 percent and 1.5 percent, respectively.



During the 1977-83 period, productivity increased at an average
annual rate of 0.3 percent, as output increased 3.3 percent per year and
hours grew 3.0 percent annually. Much of this increase was due to the
demand for athletic footwear. Output showed very strong gains in 1978
and 1979 and a large decline in 1982. Productivity declined in 1980,
1982, and 1983. Factors affecting productivity



Growth in apparel store productivity has been influenced by broad
trends in general retailing. These trends include the growth of chain
stores within the industry, movement to better locations in shopping
centers, more efficiently designed stores geared toward consumer
self-selection, and the use of computers for store operations.



Changes in industry structure. Most retail apparel stores are
independents, not affiliated with chains. The number of chain stores
and the proportion of chain stores within the retail apparel store
industry increased between 1967 and 1983.



In 1967, 80.6 percent of all apparel stores were independents,
accounting for 62.1 percent of sales. Chains accounted for 19.4 percent
of establishments and 37.9 percent of sales. By 1977, the proportion of
independent apparel stores had declined to 73.2 percent. The 26.8
percent of stores associated with chains had captured 50.2 percent of
sales.



There is every indication that chain stores continued a strong
growth pattern in the retail apparel store industry after 1977. These
companies have grown by acquiring smaller chains and independents.
Also, larger nonapparel retailing corporations have purchased apparel
chain stores in their efforts to diversify. In 1981, the leading 25
apparel chains alone increased their number of establishments by 12.1
percent, accounting for 8,771 stores.



On average, stores associated with chains tended to be larger in
terms of sales. In 1967, the average independent apparel store had
annual sales of a little under $117,000 per establishment, while the
average chain store had sales of over $295,000 per establishment. By
1977, the gap between independents and chains had widened with average
sales per establishment of $167,300 and $476,400, respectively.



Chain stores also had higher sales per all persons than did the
independents, although in 1967, the difference was not very large.
However, by 1977, the sales per all persons of chains was not only
higher than that for independents, but the gap in sales per person
between chain and independents had widened markedly.



Independents have always been a sizable portion of all apparel
stores. These stores are generally more labor-intensive and emphasize
personal service to generate regular clientele. Through careful choice
of location and catering to the needs of their customers, independents
are able to compete with chains. The change in industry structure
toward more chain stores, however, has been a factor in promoting
industry output-per-hour gains.



An important trend in apparel store industry structure has been the
rapid growth of discount apparel stores. “Off-price” apparel
stores sell moderate to higher price brand name clothing at a lower
price than conventional stores. They are able to buy clothing at
discount prices later in the selling season than conventional stores.
They locate in small shopping centers, away from other types of apparel
and department stores, which are the apparel manufacturers’ main
accounts. The middle 1970’s through the 1980’s saw a decline
in the percentage of disposable income allotted for clothing. It is
believed that the average middle income consumer became much more
cost-conscious. Consumers became more willing to delay their clothing
purchases until sales were held in conventional stores, or they would
shop at off-price stores. The number of off-price apparel stores is
estimated to have increased sharply, and their number is expected to
continue to grow.



The growth of “off-price” apparel stores has likely
provided a boost to industry productivity gains in recent years. Stores
are mostly affiliated with large major chains, although there are also
small chains and some independents. Store layout is generally geared
toward self-selection and central checkout. Employees stock the shelves
and racks and run the cash registers and provide little personalized service.



Factory outlet apparel stores are quite similar to the
“off-price” stores and also grew rapidly in recent years,
probably aiding productivity in the industry. These stores are supplied
with clothing from parent manufacturing companies at large discounts.
They are often anchor stores in small shopping centers, and more
recently, several different factory outlet stores have combined to form
malls located away from conventional malls and shopping centers, where
the parent manufacturers have their primary department store and
conventional apparel store accounts.



Store location. Store location is important. Accessibility and
exposure to shopper traffic is a prime determinant of how well store
capacity is utilized.



The strong growth in the number of malls and shopping centers in
suburban locations between 1967 and 1983 has probably had a positive
influence on productivity. Although there are no data pinpointing the
type of apparel store by location, industry experts believe that mostly
major chains and larger independents moved into the large shopping
malls, which draw their customers from a wide area. Smaller chains and
independents, however, moved into the many smaller shopping centers.
This movement of independents into shopping centers probably helped
their competitive position in an industry shifting toward corporate
chain structure.



Competition and seasonality. It is difficult for retailers to
forecast product demand because fashion trends are highly seasonal and
consumer tastes are somewhat unpredictable. Also, competition among the
different types of apparel stores, as well as department stores, is very
strong. During the 1970’s, a substantial market share was lost to
national department store chains. In the late 1970’s, discount
department stores began to compete more vigorously with apparel stores.
The industries that sell retail apparel are “in a constant state of
ferment, and competition is recognized as being more virulent in
retailing than in any other branch of American industry.”



The strongly competitive nature of apparel retailing has led to
periods of overexpansion followed by “shake-outs,” when large
numbers of marginal stores went out of business. The lower level of
capacity utilization which accompanies overexpansion probably caused
downward pressure on productivity growth. The elimination of marginal
stores probably boosted productivity.



Output per hour of all persons in apparel stores grew rather
unsteadily, especially between 1967 and 1977. It is probable that the
variability of productivity growth was caused, in part, by overexpansion
and “shake-outs.”



Technology. The major technological change within the apparel
store industry has been the increased use of computers for retail
operations. Electronic data processing is used in conjunction with
point-of-sale technology. Through coding of merchandise, marketing
information can be gathered as a by-product of merchandise sales.
Point-of-sale technology can be used for inventory control, sales
audits, automatic computer-generated stock purchasing, employment
planning, sales forecasts, interstore transfers, accounts receivable,
and credit verification. This technology provides accurate, useful, and
readily available information for use in both the operational and
merchandising aspects of the industry. Surveys have shown that
retailers who use point-of-sale technology report that it allows their
stores to operate with reduced inventory while preventing out-of-stock
situations. Product mix can be better targeted to customer needs with
better marketing information. It saves employee hours in taking
inventory and lowering prices because of overstocked or slow moving
inventory.



The amount of information that is gathered using point-of-sale
technology and how much this information is used varies greatly
throughout the industry. The use of some form of point-of-sale
technology in the apparel store industry is fairly widespread. For
example, electronic cash registers that can be used to gather some
inventory information have been available for some time.



“Automated accounts recievable,” is another technological
innovation that is used in the industry. The riskiest delinquent accounts are flagged and computer-typed collection notices are sent
automatically. This system reduces employee hours in the accounts
collection department. Other technological advances include marking
systems and security surveillance systems that aid in the prevention of
shoplifting.



Large electronic data processing systems and other forms of
advanced technology are used primarily by large chains. The much larger
operation of a major chain makes the use of electronic data processing
almost a necessity. Independents and even small chains “are
usually unable to afford such equipment, nor make cost-effective use of
it.” Higher levels of sales per person recorded by chains,
however, are probably caused to some extent by electronic data
processing.



Advertising. Advertising has been important in increasing shopper
traffic and sales in apparel stores. Recent trends indicate strong
customer response to special sales and highly advertised products.
Retail apparel stores generally advertise in newspapers and on radio.
Radio programming allows the apparel store industry to reach a target
audience. Also, some stores have sponsored sporting events to aid sales
of their activewear.



Some analysts believe that the growth in retail advertising has
been designed in part as a substitute for personnel, especially skilled
salesworkers, in retail industries. Active selling is accomplished by
educating the consumer through advertising, leading to more
self-selection and, therefore, lower unit labor requirements in the
stores. Employment changes.



The number of persons working in the apparel store industry has
increased 38 percent from 786,600 in 1967 to 1,088,400 in 1983. This
represents an average annual increase of 2.1 percent. Hours of all
persons, however, have increased at a slower rate of 1.5 percent per
year because of a steady decline in average weekly hours. This is
especially true of nonsupervisory workers, whose average weekly hours
declined from 32.5 in 1967 to 28.1 in 1983.



The apparel store industry is composed of partners and proprietors,
nonsupervisory workers, and supervisory workers. Nonsupervisory workers
made up the largest group, which includes salespersons, cashiers, stock
workers, and nonsupervisory office workers. Nonsupervisory workers
represented 79 percent of all persons in 1967 and 74 percent in 1983.
The decrease in average weekly hours indicates an increase in part-time salespersons, often of school age, who work during weekends and
evenings.



Self-employed partners and proprietors accounted for 10.5 percent
of all persons in the industry in 1967 and 10.6 percent in 1982. The
actual number of self-employed grew slowly, from 82,000 in 1967 to
129,000 in 1982. The number of self-employed typically declined in
times of recession as the smaller, privately owned stores had more
difficulty staying in business, although 1982 was an exception.



The number of self-employed as a proportion of all persons is lower
for the four apparel subindustries than for the overall industry. The
percentage of self-employed in the overall industry is influenced by the
remainder of the apparel store industry, for which separate measures are
not available. This portion of the industry has a higher than average
proportion of self-employed because it includes many small independent
specialty stores.



The number of supervisory workers–office supervisors, store
managers, and assistant managers–has doubled from 1967 to 1983 in the
total retail apparel store industry. The growth in supervisory workers
goes hand in hand with the growth in chains, both corporate and
privately owned.



Retainining experienced personnel is a major problem for all retail
stores. Some studies show that retail employee turnover is as high as
60 percent per year. The high turnover rate among nonsupervisory
workers hinders gains in industry output per hour because new employees
must undergo training and are not as productive during this period.



One factor contributing to a high incidence of employee turnover is
the industry’s low hourly earnings. For example, in 1980, average
hourly earnings of nonsupervisory employees were 12 percent below the
total retailing average and 41 percent below average hourly earnings of
production workers in manufacturing industries. Productivity outlook
uncertain



In terms of the number of stores and sales, the apparel store
industry expanded during the 1960’s and 1970’s but may now
begin to slow. The number of prime locations for conventional apparel
stores is decreasing, as the construction of shopping centers slows.
Competition is also increasing from national department store chains as
well as discount department stores with both marketing some brand name
clothing.



Because of new building and acquisition, chains will probably
continue to grow in terms of the number of stores and as a proportion of
total stores, but at a slower rate than in the 1970’s. Independents
will probably remain a sizable portion of all stores because of the
targeting of specific customers. “Off-price” stores will also
probably continue to grow rapidly.



Management strategies to improve productivity within chains can be
expected to continue, including increased use of computers, a fine
tuning of product mix, and additional training of sales personnel. Most
efforts among chains to increase productivity, however, resolve around
increasing sales per square foot in stores. In the near future, greater
emphasis may be placed on customer service, including additional sales
personnel and more convenient shopping hours. This trend could have a
dampening effect on future output per hour growth. However, personal
computers, with software geared toward the small retailer, are becoming
avaialble as well as affordable and may have some effect on productivity
in the independent segment of the industry.

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