The Wal-Mart Effect
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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.
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.
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