Benchmarking the performance of department stores within an income elasticity of demand perspective

Abstract

Purpose – The purposes of this study are twofold: first, the authors attempt to confirm the effect of the income elasticity of demand in the retail industry by investigating the performance of department stores; second, the authors measure and benchmark the performance of individual department stores in order to develop strategic insights. Design/methodology/approach – The authors employ data envelopment analysis for measuring and benchmarking the relative performance of department stores by using pertinent variables collected over a five-year period – 2006-2010. Findings – The results confirmed that the luxury department stores were more sensitive to an economic cycle, and all department stores in this study demonstrated higher performance in recent years, except for one discount department store that showed consistently deteriorating performance over the observation period. Research limitations/implications – The limitations of this study include the use of financial data from companies' annual reports, along with the limited number of decision-making units and variables. Originality/value – Major contributions of this study include the confirmation of the effect of the income elasticity of demand in the retail industry in general and suggested strategic implications for specific department stores, which are not found in the current literature at the time of this study.