Efficiency Assessment of Digital and ’Phygital’ Food Retailers through Data Envelopment Analysis

Abstract

The food retail landscape has undergone significant transformation in recent years, driven by the rapid expansion of online shopping and shifts in internal and external environments. This change has catalyzed the growth of pure-play digital food retailers and the adoption of a ’phygital’ (physical and digital) approach by modern retailers. Using Data Envelopment Analysis (DEA) and Tobit model, this study evaluated the efficiency of digital (n=17) and phygital (n=42) food retailers across different regions and the key factors contributing to their efficiency. Digital food retailers were slightly more efficient than their phygital counterparts. Financial, structural, and macroenvironmental variables influence online retail efficiency, with farmer partnerships emerging as a critical factor for enhancing performance. Structural and financial factors showed the importance of experience, strong supplier relationships, and cost-control strategies in creating more efficient retail systems. Interestingly, macroenvironmental factors, such as high internet penetration rates, impeded efficiency, while a nation’s overall network readiness showed no significant influence.