Evaluating Store Design Responsiveness to Product Line Margin Changes: An Empirical Analysis of U.S. Public Retailers*

Jeff Shockley, Radford University
Lawrence A. Plummer, University of Oklahoma
Aleda V. Roth, Clemson University
Lawrence D. Fredendall, Clemson University

This paper subjects to rigorous empirical scrutiny the influence of retail store design responsiveness on firm ROA performance. We posit that on average, retail store systems, which are adjusted dynamically to be responsive to changes in product line gross margin, will improve retail firm performance (ROA). We employ an econometric model to tests our theory using company panel data collected from Compustat, 10-K, and S&P industry reports for “bricks and mortar” store retailers for the period 1994 – 2006.

The study findings/contributions include:

• On average, store capital and labor are not managed as efficiently as might be expected.
• Store system capital investment must be responsive to product line gross margin shifts to expand firm profits.
• The financial benefits of being design responsive are only realized in the short-term (within one year); and therefore, dynamic adjustments are needed.

 

* This is a working paper that will be presented at an invited Retail Operations track at the POMS 21st Annual Conference.