Recent attention has focused on the UK's productivity gap in the retail sector. A recent paper by Reynolds et al (2005) emphasises that a more thorough understanding of what drives productivity in the retail sector requires a better understanding of the 'complex mix of urban characteristics, consumer preferences and competitive rivalries'. This paper discusses some of the main issues involved in the measurement of productivity in retail, and how these problems are being tackled in new work using microdata on the UK supermarket industry.