Efficiency Assessment Through Peer Evaluation and Benchmarking: A Case Study of a Retail Chain Using DEA

Retail industry in developing countries like India has observed immense growth in the past two decades and has marked a significant position in the global retail market due to technological advancements, globalization, rise in customer expenditure, emergence of multiple retail formats and increasing interest of investors in this sector. The growth in the retail sector is coupled with intense competition, shrinking revenues and rising expenditure on promotional activities, drawing attention of the decision-makers towards efficient operations. It is imperative to develop a robust approach for efficiency measurement for retail stores to support planning and implementation of efficient operations and expand the supply chain capabilities. The existing literature for retail stores efficiency assessment has mostly considered the self-appraisal approach, limiting its practical application due to inherent issues of total weight flexibility and pseudo-efficiency. In this study, we have presented an approach for efficiency assessment of retail stores through peer evaluation using the cross-efficiency models of Data Envelopment Analysis (DEA) to address these issues. The study also identifies pseudo-efficient stores using the concept of maverick index and defines benchmarks for all inefficient stores including maverick stores for developing improvement strategies. A case study of Indian electronic retail chain is presented to demonstrate the application.