Performance Indicators Workshop for African countries on the Implementation of International Recommendations for Distributive Trade Statistics May 2008, Addis Ababa, Ethiopia UNITED NATIONS STATISTICS DIVISION Trade Statistics Branch Distributive Trade Statistics Section

Need of performance indicators (1) Increased demand for information to asses businesses status in distributive trade sector Conventional data items for distributive trade Useful in analyzing the structure and production activity of distributive trade units, however Not sufficient for direct use in policy or management decisions

Need of performance indicators (2) Performance indicators make it possible to evaluate performance of distributive trade sector and its units in terms of: Profitability Productivity Efficiency The list of performance indicators in IRDTS 2008 is not definitive. Why? Diversity of users needs that may change over time Different countries circumstances

Objectives Performance indicator is: Policy relevant variable Number Quantitative description In practice, a performance indicator can be: Any ratio that summarizes two or more important measurements which is tied directly to the performance rather than the activity of a unit or a sector

Users and uses Policy makers and economic planners Evaluation of the effectiveness of the trade activity organization Identification of potential areas of improvement Making more informed strategic decisions regarding future developments Academicians and researchers Making comparisons across countries and industries and over time Identification of factors leading to better performance Businesses Assessment of business environment in which retailers and wholesalers operate Development of performance measurement programmes Identification and setting the long-term trends in performance and measuring the progress

Types of performance indicators Growth rates Ratio indicators Share indicators Hint: The importance of distributive trade and any other economic activity in total economy is measured by means of growth rates and proportions of two indicators: Generated value added Employment

Growth rates (1) Value added growth Annual (quarterly) percentage change of value added of distributive trade activity Expressed in terms of an arithmetic growth rate as (Yt/Yt-1) – 1, where Y and t denote the value and the time period Employment growth Annual (monthly or quarterly) percentage change of total number of persons employed in distributive trade sector Compiled by kind-of-activity, by employment categories, by gender and by size class of enterprises

Growth rates (2) Wholesale and Retail Trade Turnover Index Indicator of the monthly activity of distributive trade sector in nominal and real terms Describes exclusively the development and not the level of turnover Turnover Index in real terms (turnover volume index) Current values of turnover Deflated with appropriate price indices (CPI, PPI, etc.) Seasonally adjusted The rate of change (or growth) is determined as a percentage change of turnover over corresponding month of the preceding (if chain linked) or a base year Turnover Index in nominal terms (turnover value index) Current values of turnover are not deflated Calculated as a percentage change of monthly turnover over the turnover of preceding or a base year

Ratio indicators (1) Output per person employed Gross output is divided by the total number of persons employed Indicator of productivity of trade or any other activity Reflects the change in the input coefficient of labour by activity and can help in the analysis of the labour requirements by activity Value added per person employed Ratio of the total value added to the total number of persons employed Popular method for estimating the trends in labour productivity Turnover per person employed Total turnover is divided by the total number of persons employed Useful for interpreting the development in individual distributive trade sub-sectors

Ratio indicators (2) Value added per hour worked Total value added is divided by total hours worked to generate this value added Reflects better the effects of variations in the working time Measures the labour input to the process of production To provide accurate results it requires good quality data on hours worked Gross margin to turnover ratio Gross margin on goods for resale is divided by the turnover from trading activities of purchase and resale only Good indication of trade units’ performance Provides a basis for comparison between different types of trade

Ratio indicators (3) Inventories to turnover ratio Relationship of the end-of-month values of inventories to the monthly turnover Inventory management can have a significant impact on profitability of trade units Example: A ratio of 2.5 would indicate that the retailer or wholesaler have enough merchandise on hand to cover two and a half months of sales Sales per retail sales space Turnover is divided by the sales space, i.e. the estimated floor area of that part of the premises devoted to selling and display Specific categories of sales space should be defined in the context of national circumstances

Share indicators (1) Share of distributive trade value added in total value added Proportion of value added generated in distributive trade (or any other economic activity) to total value added of the economy If calculated for all economic activities Depicts the structural composition of the economy Shows contribution of individual economic activities to GDP Share of distributive trade activity employment in the total employment of the economy Proportion of the total number of persons employed in distributive trade to total number of persons employed in total economy Useful tool for assessing the segmentation and trends in labour market Share of e-commerce sales in total turnover Share of total turnover accounted for the e-commerce sales

Additional indicators (1) Do not necessarily evaluate the performance; rather they are used for monitoring of some specific aspects of organization of trade activity Their compilation requires collection of additional data The burden on respondents will be significantly increased To be compiled by countries only if their own circumstances warranted the collection of such data

Additional indicators (2) Retail accounts receivable Amounts of the credits, extended by retail stores to their customers for purchases made, outstanding as of the end of the reference period Financial indicator from the balance sheet of trade units Importance of this indicator has increased in recent years with the expansion of purchases on credit Number of retail stores Total number of retail stores operated by an enterprise Number of fixed market stands and or/stalls Total number of fixed market stands and/or permanent stalls operated by an enterprise, either owned or rented

Interpretation of performance indicators Performance indicators Are not absolute numbers Acquire meaning in the context of comparison and analysis Care should be taken when using performance indicators for comparisons To ensure that the units or phenomena are alike enough to be compared To ensure consistency of definitions and coverage of data items used in the compilation of performance indicators If any, to make the differences explicit

Recommendations Compilation of performance indicators should be considered part of distributive trade statistics programme by all countries Types and level of details of performance indicators should commensurate with countries own circumstances and user needs Compilation of performance indicators of minor importance but requiring collection of a lot of additional data should be avoided Recommended level of details and periodicity Annually - at the 3-digit (group) level of ISIC, Rev.4, Quarterly - at the 2-digit (division) level

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