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Productivity
Bureau of Labor Statistics > Productivity > Publications > Articles and Research

Sectoral versus Gross Margin: Alternative Measures of Output and Labor Productivity for Retail Industries

Current annual BLS labor productivity data for retail industries use a real sectoral output approach to measure changes in output per hour worked, or labor productivity.[1] Real sectoral output is measured as total sales revenue[2] deflated by the prices of products sold outside the industry. Retail sales prices[3] reflect the entire value chain of the product sold from product design to delivery to the final consumer.

Retail output can be considered as a service rather than the quantity of products it delivers to consumers. Gross margin output[4] is measured as the difference of total sales less the cost of goods sold and reflects the services provided by retail establishments that help facilitate the sale of goods to the public. Margin prices[5], calculated as the difference between the sales price and the acquisition price, reflect the value added by retailers for services such as the procurement, storage, marketing, and display of goods for sale. Gross margin output isolates the services that retailers provide to consumers by excluding the quantity of goods flowing through retail establishments.

This page compares trends in real sectoral output and estimates of real gross margins and their corresponding labor productivity[6] measures for three retail industries that touch our day-to-day lives: gasoline stations, grocery stores, and clothing stores.

About our measures:

Gasoline stations

Perhaps no other retail industry can best offer itself as a case study for productivity analysis than gasoline stations. Almost all sales distill down to two products – unleaded fuel and diesel. These two highly homogenous goods have remained relatively constant over time and across establishments. Gasoline stations saw major breakthroughs in automation with self-service in the 1980s and pay-at-the pump in the early 2000s.[8]

Charts 1 and 2 highlight recent trends in real output, hours worked, and labor productivity for gasoline stations. Since 2004, hours worked barely budged, increasing +0.2 percent per year[9] from 2004 through 2022. We see a wide divergence in real sectoral output (increasing +0.4 percent per year) versus real gross margin output (decreasing -1.7 percent per year), leading to a similar divergence in sectoral versus gross margin labor productivity.

Line charts of sectoral vs gross margin output, hours worked, and productivity for gasoline stations from 2004 to 2022. Chart data are included in the linked table below.

 

Charts 1 and 2 data. Indexes of sectoral and gross margin output, hours worked, and labor productivity in gasoline stations (2004=100), 2004-2022

 

Grocery stores

On the other side of the spectrum from gasoline stations, grocery stores sell a huge variety of products and use fluctuating business models that can vary widely across establishments. Grocery stores have been expanding their spaces, products, and services by adding in-store pharmacies, ready-to-go meals and snacks, and more general and diversified merchandise.[10]

Since 2004, hours worked for grocery stores have remained flat (0.0 percent per year). As depicted in charts 3 and 4, real sectoral output has been steadily increasing (+1.3 percent per year) whereas gross margin output is slowly declining (-0.2 percent per year), resulting in the divergence of trends between sectoral versus gross margin labor productivity.

Line charts of sectoral vs gross margin output, hours worked, and productivity for grocery stores from 2004 to 2022. Chart data are included in the linked table below.

 

Charts 3 and 4 data. Indexes of sectoral and gross margin output, hours worked, and labor productivity in grocery stores (2004=100), 2004-2022

 

Clothing stores

As illustrated in charts 5 and 6, trends in sectoral versus gross margin output and labor productivity have tracked more closely for clothing stores. Since 2004, hours worked declined by -2.1 percent per year while both measures of output have been rising, with sectoral (+2.7 percent per year) outpacing gross margin (+1.5 percent per year). Both sectoral and gross margin measures of labor productivity are increasing.

Line charts of sectoral vs gross margin output, hours worked, and productivity for clothing stores from 2004 to 2022. Chart data are inlcuded in the linked table below.

 

Charts 5 and 6 data. Indexes of sectoral and gross margin output, hours worked, and labor productivity in clothing stores (2004=100), 2004-2022

 

Notes

[1] The BLS also publishes total factor productivity measures for the retail sector on a gross margin basis as featured in the Total Factor Productivity in Major Industries news release.

[2] Estimated annual sales of U.S. retail firms from the Census Annual Retail Trade Survey. For retail industries, sectoral output is approximately equal to total sales, or gross output, as intra-industry transactions are tiny or nonexistent.

[3] Primarily BLS Consumer Price Indexes (CPIs).

[4] Estimated gross margin of U.S. retail firms from the Census Annual Retail Trade Survey.

[6] Labor productivity is calculated by dividing indexes of real output with hours worked. Sectoral and gross margin labor productivity compares different output concepts with the same measure of hours worked for each industry.

[7] Source: CNSTAT Consensus Panel Study, Recommendation 5: The satellite account should focus on examining multiple measures of output, deflators, and labor input. Output measures should include gross sales and gross margins for trade industries, gross sales/revenues for other industries, and value-added for all industries. Deflators should include current margin deflators and new options that capture the changing characteristics of retail trade. Labor input measures should include both simple hours worked and quality-adjusted hours worked to capture the changes in workforce quality. Modules should also be used to evaluate alternative approaches to estimating the split between retail-related and nonretail-related for both output and input.

[8] Self-service was introduced in 1947 and was widespread by the 1980s. Pay-at-the-pump was invented in 1973 and became widespread by the early 2000s. Source: A brief history of self-serve gas stations, Petroleum Service Company, January 2018.

[9] The annual percent change is the compound annual growth rate in an index series over a period of more than one year. The change of an index series varies from year to year. However, the annual percent change is the constant rate that can be applied to each year in a period, from the start to the end, that would give the same total result. It is calculated as (Ending Value/Starting Value)^(1/Number of Years)-1.

Last Modified Date: September 25, 2023