Efficiency in the Hardware Retail Industry: A 22-Year Longitudinal Analysis of Chains Operating in Canada

Efficiency refers to the performance level corresponding to using minimal inputs to achieve the maximum possible outputs. Despite its importance to the Canadian economy, such performance assessments has rarely been undertaken in the hardware retail industry in recent years. We present the results of a recent study of the relative efficiencies for three major chains of hardware and renovation retail stores operating in Canada (Home Depot, Lowe’s and Rona). We use the classic and bootstrap data envelopment analysis (DEA) models to measure performance levels over the 22 years from 2000 to 2021. Overall, the firms exhibited high efficiency during this period, and operations management was the primary source of inefficiency. However, an analysis of trends over the 22 years shows that all three companies experienced periods of declining efficiency at the beginning of the study period, followed by a phase of recovery that appears to have accelerated towards the end of the study period. Our longitudinal analysis also indicates that recent shocks and crises have impacted the firms. The succession of crises at the end of the 2000s, the 2007 forestry crisis in Canada, and the 2008 global financial crisis led to the lowest period of efficiency for all the firms, from which they started rebounding in 2011. The specific impact on Rona can explain Lowe’s acquisition of Rona in 2015. However, such a move did not seem to have had a significant improvement beyond accelerating a recovery that had started a few years earlier. This may explain Lowe’s sale of all its Canadian operations in 2022, leading to a new firm called Rona+. Finally, the COVID-19 pandemic also seems to have had a similar effect: accelerating the recovery from the 2008 financial crisis that the firms had started in 2011.