Output per hour of all persons in the retail apparel store industryincreased at an average annual rate of 2.9 percent between 1967 and1983, compared with an average annual rate of 1.2 percent for the totalnonfarm business sector of the economy during the same period. This gainin productivity over the 16-year period reflects average annualincreases of 4.5 percent in output and 1.5 percent in hours of allpersons in the apparel store industry.
(See table 1.) Productivity trends can be divided into two periods, 1967-77 and1977-83. During the first period, productivity rose at an averageannual rate of 2.8 percent, and in the latter period, it accelerated to3.6 percent, reflecting average growth in output and little increase inhours. 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 hoursdeclined 1.8 percent. In 1973, output advanced 11.
3 percent, whilehours increased only 1.7 percent, resulting in a productivity increaseof 9.5 percent. However, there were moderate productivity declines in1967, 1970, 1974, 1976, and 1977. Output experienced only two declinesduring the period, falling in the recession years of 1970 and 1974. In1969, 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, andonly one small output decline in 1982. In 1978, output per hour rose10.
0 percent based on very strong growth in output of 13.4 percent andmoderate gains in hours of 3.1 percent. Output recorded moderate growthin 1980 and above-average growth in 1981 (6.1 percent), while industryhours declined in 1980 and 1982. Productivity had above-average gains in1980 and 1981.
Trends in four subindustries The retail apparel store industry consists of severalsubindustries. In addition to productivity measures for the totalindustry, 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 grewmoderately in the men’s and boys’ apparel store industry,accounting for 15 percent of total sales and 11 percent of totalemployment in 1983.
Output per hour grew at an annual average rate of2.5 percent between 1967 and 1983, reflecting average annual growth inoutput of 1.8 percent and an average annual decline of 0.6 percent inhours.
Productivity grew at an annual rate of 3.8 percent between 1977 and1983 compared with a 2.2-percent increase in 1967-77. This gainreflected a slowing of the increase in output from a rate of 2.9 percentbetween 1967 and 1977 to an average decline of 0.
4 percent between 1977and 1983. Hours declined at a rate of 4.1 percent from 1977 to 1983compared with a small average gain of 0.7 percent in the precedingperiod. Among apparel stores, this subindustry alone showed a definitetrend 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 outputdeclines 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 1967to 1983 as output increased 5.5 percent and all person hours grew 1.1percent annually.
Between 1967 and 1977, productivity increased at an average annualrate of 4.3 percent, while output grew 5.6 percent and hours 1.3percent. In the 1977-83 period, productivity growth increased to 6.3percent annually reflecting average annual output gains of 5.5 percentand an average hours decline of 0.
7 percent. Productivity showed declines in only 1976 and 1977. Outputdeclined only in 1977 and showed no growth in 1980. Hours of allpersons, however, declined in 1968, 1970, 1974, 1975, and 1980-82. Family clothing stores. In 1983, family clothing stores accountedfor 22 percent of retail apparel store sales and 18 percent ofemployment. Despite a strong overall increase in output, long-term productivity growth was moderate, reflecting above-average growth inemployment.
Output per hour grew at an average annual rate of 2.7percent from 1967-83 as output rose 5.2 percent and hours increased at arate of 2.4 percent. Productivity showed periods of both growth and decline. Between1967 and 1973, productivity grew at an average annual rate of 5.
9percent with very strong growth in productivity and output in 1971,1972, and 1973. During 1967-73, hours increased at an annual rate ofonly 0.1 percent. Between 1973 and 1978, productivity declined at anaverage annual rate of 2.5 percent as output grew 3.8 percent and hourssoared to an average annual growth of 6.5 percent. In response to astrong demand for casual clothing, especially jeans, the number offamily clothing stores increased during this period.
Productivitydeclines were recorded in 1974, 1976, 1977, and 1978. Between 1978 and1983, productivity rebounded with an average annual growth of 4.4percent as output rose 4.
6 percent and hours showed very littlegrowth–0.1 percent. As the number of stores began to decrease, hoursdeclined in 1979, 1980, and 1983. Shoe stores. Shoe stores, which accounted for 17 percent of salesand 21 percent of all persons in the apparel store industry, posted thesmallest productivity gain from 1967 to 1983 among the subindustriesstudied.
Productivity grew at an average annual rate of only 0.8percent between 1967 and 1983, reflecting output increases of 3.0percent and hours increases of 2.2 percent. During the 1967-77 period, output per declined at an average annualrate of 0.2 percent.
There were strong productivity declines in 1970,1971, and 1974. During this period, both output and hours had averageannual gains of 1.3 percent and 1.5 percent, respectively. During the 1977-83 period, productivity increased at an averageannual rate of 0.3 percent, as output increased 3.3 percent per year andhours grew 3.
0 percent annually. Much of this increase was due to thedemand for athletic footwear. Output showed very strong gains in 1978and 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 broadtrends in general retailing. These trends include the growth of chainstores within the industry, movement to better locations in shoppingcenters, more efficiently designed stores geared toward consumerself-selection, and the use of computers for store operations. Changes in industry structure. Most retail apparel stores areindependents, not affiliated with chains.
The number of chain storesand the proportion of chain stores within the retail apparel storeindustry 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 percentof establishments and 37.9 percent of sales. By 1977, the proportion ofindependent apparel stores had declined to 73.
2 percent. The 26.8percent of stores associated with chains had captured 50.
2 percent ofsales. There is every indication that chain stores continued a stronggrowth pattern in the retail apparel store industry after 1977. Thesecompanies have grown by acquiring smaller chains and independents.Also, larger nonapparel retailing corporations have purchased apparelchain stores in their efforts to diversify. In 1981, the leading 25apparel chains alone increased their number of establishments by 12.1percent, accounting for 8,771 stores.
On average, stores associated with chains tended to be larger interms of sales. In 1967, the average independent apparel store hadannual sales of a little under $117,000 per establishment, while theaverage chain store had sales of over $295,000 per establishment. By1977, the gap between independents and chains had widened with averagesales per establishment of $167,300 and $476,400, respectively. Chain stores also had higher sales per all persons than did theindependents, although in 1967, the difference was not very large.However, by 1977, the sales per all persons of chains was not onlyhigher than that for independents, but the gap in sales per personbetween chain and independents had widened markedly.
Independents have always been a sizable portion of all apparelstores. These stores are generally more labor-intensive and emphasizepersonal service to generate regular clientele. Through careful choiceof location and catering to the needs of their customers, independentsare able to compete with chains. The change in industry structuretoward more chain stores, however, has been a factor in promotingindustry output-per-hour gains. An important trend in apparel store industry structure has been therapid growth of discount apparel stores. “Off-price” apparelstores sell moderate to higher price brand name clothing at a lowerprice than conventional stores. They are able to buy clothing atdiscount prices later in the selling season than conventional stores.
They locate in small shopping centers, away from other types of appareland department stores, which are the apparel manufacturers’ mainaccounts. The middle 1970’s through the 1980’s saw a declinein the percentage of disposable income allotted for clothing. It isbelieved that the average middle income consumer became much morecost-conscious.
Consumers became more willing to delay their clothingpurchases until sales were held in conventional stores, or they wouldshop at off-price stores. The number of off-price apparel stores isestimated to have increased sharply, and their number is expected tocontinue to grow. The growth of “off-price” apparel stores has likelyprovided a boost to industry productivity gains in recent years. Storesare mostly affiliated with large major chains, although there are alsosmall chains and some independents. Store layout is generally gearedtoward self-selection and central checkout. Employees stock the shelvesand 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 suppliedwith clothing from parent manufacturing companies at large discounts.They are often anchor stores in small shopping centers, and morerecently, several different factory outlet stores have combined to formmalls located away from conventional malls and shopping centers, wherethe parent manufacturers have their primary department store andconventional apparel store accounts. Store location. Store location is important. Accessibility andexposure to shopper traffic is a prime determinant of how well storecapacity is utilized. The strong growth in the number of malls and shopping centers insuburban locations between 1967 and 1983 has probably had a positiveinfluence on productivity. Although there are no data pinpointing thetype of apparel store by location, industry experts believe that mostlymajor chains and larger independents moved into the large shoppingmalls, which draw their customers from a wide area.
Smaller chains andindependents, however, moved into the many smaller shopping centers.This movement of independents into shopping centers probably helpedtheir competitive position in an industry shifting toward corporatechain structure. Competition and seasonality. It is difficult for retailers toforecast product demand because fashion trends are highly seasonal andconsumer tastes are somewhat unpredictable. Also, competition among thedifferent types of apparel stores, as well as department stores, is verystrong. During the 1970’s, a substantial market share was lost tonational department store chains. In the late 1970’s, discountdepartment stores began to compete more vigorously with apparel stores.
The industries that sell retail apparel are “in a constant state offerment, and competition is recognized as being more virulent inretailing than in any other branch of American industry.” The strongly competitive nature of apparel retailing has led toperiods of overexpansion followed by “shake-outs,” when largenumbers of marginal stores went out of business. The lower level ofcapacity utilization which accompanies overexpansion probably causeddownward pressure on productivity growth. The elimination of marginalstores probably boosted productivity. Output per hour of all persons in apparel stores grew ratherunsteadily, especially between 1967 and 1977. It is probable that thevariability of productivity growth was caused, in part, by overexpansionand “shake-outs.” Technology. The major technological change within the apparelstore industry has been the increased use of computers for retailoperations.
Electronic data processing is used in conjunction withpoint-of-sale technology. Through coding of merchandise, marketinginformation can be gathered as a by-product of merchandise sales.Point-of-sale technology can be used for inventory control, salesaudits, automatic computer-generated stock purchasing, employmentplanning, sales forecasts, interstore transfers, accounts receivable,and credit verification. This technology provides accurate, useful, andreadily available information for use in both the operational andmerchandising aspects of the industry. Surveys have shown thatretailers who use point-of-sale technology report that it allows theirstores to operate with reduced inventory while preventing out-of-stocksituations.
Product mix can be better targeted to customer needs withbetter marketing information. It saves employee hours in takinginventory and lowering prices because of overstocked or slow movinginventory. The amount of information that is gathered using point-of-saletechnology and how much this information is used varies greatlythroughout the industry. The use of some form of point-of-saletechnology in the apparel store industry is fairly widespread. Forexample, electronic cash registers that can be used to gather someinventory information have been available for some time. “Automated accounts recievable,” is another technologicalinnovation that is used in the industry. The riskiest delinquent accounts are flagged and computer-typed collection notices are sentautomatically.
This system reduces employee hours in the accountscollection department. Other technological advances include markingsystems and security surveillance systems that aid in the prevention ofshoplifting. Large electronic data processing systems and other forms ofadvanced technology are used primarily by large chains. The much largeroperation of a major chain makes the use of electronic data processingalmost a necessity. Independents and even small chains “areusually unable to afford such equipment, nor make cost-effective use ofit.” Higher levels of sales per person recorded by chains,however, are probably caused to some extent by electronic dataprocessing. Advertising. Advertising has been important in increasing shoppertraffic and sales in apparel stores.
Recent trends indicate strongcustomer 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 targetaudience. Also, some stores have sponsored sporting events to aid salesof their activewear. Some analysts believe that the growth in retail advertising hasbeen designed in part as a substitute for personnel, especially skilledsalesworkers, in retail industries. Active selling is accomplished byeducating the consumer through advertising, leading to moreself-selection and, therefore, lower unit labor requirements in thestores.
Employment changes. The number of persons working in the apparel store industry hasincreased 38 percent from 786,600 in 1967 to 1,088,400 in 1983. Thisrepresents an average annual increase of 2.1 percent. Hours of allpersons, however, have increased at a slower rate of 1.5 percent peryear because of a steady decline in average weekly hours. This isespecially true of nonsupervisory workers, whose average weekly hoursdeclined 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 workersmade up the largest group, which includes salespersons, cashiers, stockworkers, and nonsupervisory office workers.
Nonsupervisory workersrepresented 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 andevenings. Self-employed partners and proprietors accounted for 10.5 percentof all persons in the industry in 1967 and 10.6 percent in 1982. Theactual number of self-employed grew slowly, from 82,000 in 1967 to129,000 in 1982. The number of self-employed typically declined intimes of recession as the smaller, privately owned stores had moredifficulty staying in business, although 1982 was an exception.
The number of self-employed as a proportion of all persons is lowerfor the four apparel subindustries than for the overall industry. Thepercentage of self-employed in the overall industry is influenced by theremainder of the apparel store industry, for which separate measures arenot available. This portion of the industry has a higher than averageproportion of self-employed because it includes many small independentspecialty stores. The number of supervisory workers–office supervisors, storemanagers, and assistant managers–has doubled from 1967 to 1983 in thetotal retail apparel store industry.
The growth in supervisory workersgoes hand in hand with the growth in chains, both corporate andprivately owned. Retainining experienced personnel is a major problem for all retailstores. Some studies show that retail employee turnover is as high as60 percent per year. The high turnover rate among nonsupervisoryworkers hinders gains in industry output per hour because new employeesmust undergo training and are not as productive during this period. One factor contributing to a high incidence of employee turnover isthe industry’s low hourly earnings.
For example, in 1980, averagehourly earnings of nonsupervisory employees were 12 percent below thetotal retailing average and 41 percent below average hourly earnings ofproduction workers in manufacturing industries. Productivity outlookuncertain In terms of the number of stores and sales, the apparel storeindustry expanded during the 1960’s and 1970’s but may nowbegin to slow. The number of prime locations for conventional apparelstores is decreasing, as the construction of shopping centers slows.Competition is also increasing from national department store chains aswell as discount department stores with both marketing some brand nameclothing. Because of new building and acquisition, chains will probablycontinue to grow in terms of the number of stores and as a proportion oftotal stores, but at a slower rate than in the 1970’s. Independentswill probably remain a sizable portion of all stores because of thetargeting of specific customers.
“Off-price” stores will alsoprobably continue to grow rapidly. Management strategies to improve productivity within chains can beexpected to continue, including increased use of computers, a finetuning of product mix, and additional training of sales personnel. Mostefforts among chains to increase productivity, however, resolve aroundincreasing sales per square foot in stores. In the near future, greateremphasis may be placed on customer service, including additional salespersonnel and more convenient shopping hours. This trend could have adampening effect on future output per hour growth. However, personalcomputers, with software geared toward the small retailer, are becomingavaialble as well as affordable and may have some effect on productivityin the independent segment of the industry.