| Behind The Store Front
Prepared for the Retail Council of Canada in partnership with Industry Canada By Jacobson Consulting Inc.
The Retail Sector |
Labour is the most significant single input in the retail service sector. It is the key input to the distribution process. Generally speaking, labour costs represent between 50% and 60% of total expenses in most retail sectors or consume between 10% and 17% of operating revenue. Analysis of the data indicates general stability of these proportionality relationships in the individual sectors over time. However, over the time period available (1999-2003) (Table 22), there have been modest increases in the labour cost weight in sectors such as computer stores and home electronics.
The next chart (Figure 16) shows labour costs for 2003 relative to total operating revenue. In this presentation, labour costs include the wages and salaries of employees as well as the employer portion of employee benefits. Health and education payroll taxes are not included. The automotive-related sectors, auto sales and gasoline distribution, are noted for the relatively low role played by labour costs relative to their total sales. Supermarkets are at the lower end of the distribution of labour shares reflecting the somewhat more volume-oriented distribution model. The very low share for the alcoholic beverage distribution sector is attributable to the very high margins associated with the administered prices in the sector.
Over time (Figure 17), the general share of labour costs relative to operating expenses in the retail sector has remained relatively consistent.
Modest changes up and down are likely attributable to firm or chain specific factors rather than broad industry trends.