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The Wal-Mart Effect

Information technology isn't the whole story behind productivity.

By Bradford C. Johnson | 
 

Article at a glance:
Who would have expected the retail sector to be a big part of the new-economy story in the United States? Retailers seemed to have been left out of the technological and operational improvements that transformed US manufacturing. Yet retail-labor productivity growth more than tripled after 1995, contributing roughly one-quarter of the national productivity acceleration of 1995-99. The reason can be explained in just two syllables: Wal-Mart, whose operational innovations -- including the "big-box" format, "everyday low prices," electronic data interchange with suppliers, and economies of scale in warehouses -- forced competitors to adapt.

The take-away:
Wal-Mart's innovations, both large and small, are now retail-industry standards. Yet Wal-Mart still has a sizable productivity edge over its competitors and continues to raise the bar. The result should be more productivity growth in the retail sector in the five years to come.

To read the full article, follow the link below to the McKinsey Quarterly Web site. PLEASE NOTE: In order to read the full-text, you must be a registered member of the McKinsey Quarterly site. Registration is free.

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Copyright © 1992-2002 McKinsey & Company, Inc.

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