The effect of entry by supercenter and warehouse club retailers on grocery sales and small supermarkets: A spatial analysis (original) (raw)

The Impact of Retail Location on Retailer Revenues: An Empirical Investigation

Southern Methodist University, mimeo, 2007

This paper investigates the impact of store location, a retailer's most costly and long-term marketing mix decision, on retailer revenues. We estimate models of consumer spending at the leading packaged goods retailers in a metropolitan market based on two dimensions of retail location: (i) proximity to consumers, i.e., travel times, and (ii) proximity to other stores, i.e., agglomeration. Both are important predictors of consumer spending and hence retailer revenues.

Impact of Wal-Mart Supercenter on a Traditional Supermarket: An Empirical Investigation

2000

Supermarkets operate in an increasingly competitive environment. The rapid growth of alternative retail formats has transformed not only the competitive structure of the industry, but also the way in which consumers shop. The biggest challenge to the industry is coming from none other than the world's largest retailer: Wal-Mart. Although a relatively new player, Wal-Mart through its supercenter format has become the nation's largest grocer and is cited by supermarket managers as their biggest concern in the coming years. Despite the dramatic proliferation of supercenters, relatively little is known about the impact it has on the performance of a traditional grocery store or how it changes consumer buying behavior. This paper provides an empirical study of entry by a Wal-Mart supercenter into a local market. Using a unique frequent shopper database from a supermarket, we study the impact of Wal-Mart's entry on household purchase behavior. The database records purchases for over 10,000 households before and after Wal-Mart's entry. We develop a joint model of inter-purchase time and basket size and allow for a structural break at the time of competitive entry. The model allows us to evaluate the impact of Wal-Mart on household store visit frequency and basket size, while allowing for consumer heterogeneity. We investigate the shopping and demographic characteristics of the consumers that are most likely to shift purchases to Wal-Mart.

The Impact of Wal-Mart Supercenters on Supermarkets’ Profit Margins

2010

The Impact of Wal-Mart Supercenters on Supermarkets’ Profit Margins. XIAOOU LIU (Email: xiaoou2010@gmail.com, School of Agricultural Economics and Rural Development, Renmin University of China, Beijing, China 100872) RIGOBERTO LOPEZ (Professor and Department Head, Department of Agricultural and Resource Economics, Storrs, CT 06269) This paper quantifies the impact of Wal-Mart Supercenters on supermarkets’ profitability via a two-stage dynamic entry game, using simulated methods of moment and milk scanner data from Dallas/Fort Worth supermarkets. The empirical findings show that the entry of Wal-Mart Supercenters accounts for about an average of 50% decreases in profit margins for incumbent supermarkets. The effect of scale of economies is found to be more significant for Wal-Mart Supercenters than for incumbent supermarkets.

Supermarket Entry and the Survival of Small Stores

Review of Industrial Organization, 2014

We analyze the effect of supermarket entry on the exit of small stores in the food retailing sector in Montevideo between 1998 and 2007. We use detailed geographical information to identify the link between supermarket entry and the exit of nearby small stores. Entry of supermarkets using small-to medium-size formats creates a competitive threat for the existing small stores, decreasing their probability of survival. The result is robust to several model specifications and varying definitions of what constitutes a supermarket. The impact of supermarket entry is unequivocal for groceries, bakeries, fresh pasta shops, and butcher shops.

A locational analysis of convenience food stores in metropolitan Denver

The Annals of Regional Science, 1976

The study examines the spatial arrangement of convenience food stores in the Denver metropolitan area. It deviates from the traditional approach in that not only the overall locational pattern of the stores was examined, but it also identified stores of different chains, and hypotheses were formulated to investigate various locational strategies as manifested in the spatial pattern the stores assumed. Site economics, a location factor rarely treated empirically, was also closely studied. Among the findings worthy of note are first, income and household density provide unexpectedly low statistical explanation of the spatial pattern of the stores; and second, stores of a given chain tend to locate closer to each other than to stores of a competing chain.

Effects of neighbourhood characteristics on store performance supermarkets versus hypermarkets

Journal of Retailing and Consumer Services, 2005

We investigate the impact of neighbourhood characteristics on the relative attractiveness of product categories within a store, with special attention for the differences between hypermarkets and supermarkets. We consider two questions. Firstly, is the impact of neighbourhood-specific factors on attractiveness of product categories smaller for hypermarkets than for supermarkets? Secondly, is there a difference in relative attractiveness of product categories between supermarkets and hypermarkets and to what extent is this difference dependent on kind of neighbourhood? For the impact of store and trading area characteristics on category and store performance, we use a framework that was originally presented in Campo et al. (J. Int. Res. Market 17 (2000) 225). Empirical application to national stores of a European retail chain confirms the differential impact of neighbourhood characteristics on supermarkets and hypermarkets. The research proves that geomarketing analysis can be useful for developing micromarketing strategies. r

Location strategies of broad-line retailers: an empirical investigation

Journal of Business Research, 2005

This research is an exploratory investigation into location strategies used by broad-line specialist retailers. Location data for 86 broad-line specialists in the home repair and office supply category located in three southeast metropolitan areas are analyzed. Using distance as a measure of retail structure, it is shown that broad-line specialist retailers tend to locate close to general merchandise retailers. Also, broad-line specialists employ two location strategies with respect to other broad-line specialists-proximity (locating close to a competing broad-line specialist) and distancing (not locating close to a competing broad-line specialist). Moreover, the adoption of proximity or distancing as a location strategy depends upon market characteristics. Broad-line specialists tend to use proximity in trade areas with high income, high population density, high per capita income, with younger populations, and high home ownership. Managerial implications and suggestions for future research are offered. D

Dynamic Spatial Competition Between Multi-Store Retailers

Journal of Industrial Economics, 2016

We propose a dynamic model of an oligopoly industry characterized by spatial competition between multi-store retailers. Firms compete in prices and decide where to open or close stores depending on demand and cost conditions, the number of competitors at different locations, and on location-specific private-information shocks. The model distinguishes multiple forces in the spatial configuration of store networks, such as cannibalization of revenue between stores of the same retail chain, economies of density, competition, consumer transportation costs, or positive demand spillovers from other stores. We develop an algorithm to approximate a Markov Perfect Equilibrium in our model, and propose a procedure for the estimation of the parameters of the model using panel data on number of stores, prices, and quantities at multiple geographic locations within a city. We also present a numerical example to illustrate the model and algorithm. I. INTRODUCTION RETAIL CHAINS ACCOUNT FOR MORE THAN 60% OF SALES IN U.S. RETAILING (see Hollander and Omura [1989], and Jarmin, Klimek and Miranda [2009]). Geographic location is in many cases the most important source of product differentiation for these firms. It is also a forward looking decision with significant non-recoverable entry costs, mainly due to capital investments which are both firm and location specific. Thus, the sunk cost of setting up a new store, and the dynamic strategic behavior associated with them, is a potentially important force behind the configuration of the spatial market structure that we observe in retail markets. Despite its relevance, there have been very few studies analyzing spatial competition as a dynamic oligopoly game. Existent models of industry