UNITED NATIONS STATISTICS DIVISION Trade Statistics Branch Distributive Trade Statistics Section

1. Performance IndicatorsWorkshop for African countries on the Implementation of International Recommendations for Distributive Trade Statistics27-30 May 2008, Addis Ababa, Ethiopia UNITED NATIONS STATISTICS DIVISION Trade Statistics Branch Distributive Trade Statistics Section

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. Thank You