Modell's DEA analysis and applications

DEA Analysis of Modell's

The Data Envelopment Analysis study conducted on Modell's yields a wealth of information regarding the productivity of the chain's stores, even without engaging in a detailed statistical analysis or quantitative manipulation of the data. A cursory examination makes it clear that traffic is not correlated with the size of the store, nor is there a direct or observable relationship between the size of the store and the number of transactions carried out at the store. There is not even a strong relationship between traffic and transaction number (although examining these numbers in relation to each other yields an important metric). All of this suggests that certain practices within the stores and in some cases perhaps the environment of the stores are more responsible for generating sales than are physical constraints of each individual store itself. That is, bigger stores do not necessarily experiences more traffic or generate more sales than do smaller stores, and vice versa.

Dividing store traffic by transaction volume provides a loose estimate of productivity, and from this it can be seen that the store identified as KPLZ King's is far and away the top performer, with a conversion rate of over sixty-five percent, compared to runner-up Pelham's rate of just over forty percent. MCI brings up the rear of the pack with a conversion rate under six percent; Lehigh Valley is the next least-productive operator with thirteen percent. This is only one measure of productivity, and other measures yield slightly different results, but this is an effective way to measure store performance in terms of the ability to actually generate sales form the amount of foot traffic and sales potential provided.

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Several of the components examined in the DEA study seem to be correlated with higher levels of productivity, though without more in-depth statistical analysis it is difficult to say to what degree these correlations exist. Footwear sales seem to have a generally positive relationship with overall productivity, with MCI (the lowest performing store by this measure) actually showing negative performance in the footwear category and with many higher performers posting higher numbers of performance in footwear, although there are many stores in the middle of the pack that also have high footwear sales. Both regular time and over time numbers are also generally positively correlated with increased productivity, meaning that more labor led to more sales. As intuitive as this might seem, it is clearly something that is not fully recognized throughout the Modell's chain and that this analysis will hopefully bring to the attention of store managers and corporate executives that can address the problem.