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The impact of Wal-Mart supercenters on supermarket concentration in U.S. metropolitan areas

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  • Andrew W. Franklin

    (Food Marketing Policy Center, University of Connecticut, U-21, Storrs, CT 06269-4021)

Abstract

Wal-Mart's 1999 sales in its Supercenter stores will rival that of Kroger, the leading national supermarket chain. With estimated sales at $45-47 billion plus growth of 40% from $32 billion in prior year sales, Wal-Mart's growth has been accomplished without expansion by acquisition or merger. This growth was achieved by capital investment, building new or reformatting existing Wal-Mart stores with the Supercenter format, a hypermarket with general merchandising and full-size supermarket areas. Currently, the number of Wal-Mart Supercenters exceeds 721. Wal-Mart opened 275 Supercenters during 1998 and 1999 and will continue the pace, exceeding 1,400 by the year 2005. These Supercenters will affect the market position and competitive strategies of other food retailers. To date, most reformatting has been in smaller cities and rural areas, perhaps because they tend to have less organized labor markets. This study finds Wal-Mart Supercenter entry had little impact on food seller concentration in major metropolitan areas between 1993 and 1999. Wal-Mart entered 54 of the largest 100 metro areas. Wal-Mart tended to enter cities in the south and east. There is no correlation between entry and city size. Multiple linear regression analysis however indicates that Wal-Mart's market shares are highest in lower income and smaller metro areas. [Econ-Lit citations: L130, L200] © 2001 John Wiley & Sons, Inc.

Suggested Citation

  • Andrew W. Franklin, 2001. "The impact of Wal-Mart supercenters on supermarket concentration in U.S. metropolitan areas," Agribusiness, John Wiley & Sons, Ltd., vol. 17(1), pages 105-114.
    • Handle: RePEc:wly:agribz:v:17:y:2001:i:1:p:105-114
    DOI: 10.1002/1520-6297(200124)17:1<105::AID-AGR1005>3.0.CO;2-N
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    References listed on IDEAS

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    1. Ronald W. Cotterill, 1991. "Food Retailing: Mergers, Leveraged Buyouts, and Performance," Food Marketing Policy Center Research Reports 014, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
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    Cited by:

    1. Rebecca Cleary & Jean-Paul Chavas, 2022. "Strategic supermarket pricing of private labels and manufacturer brands," Empirical Economics, Springer, vol. 62(6), pages 2921-2950, June.
    2. Fernando Borraz & Juan Dubra & Daniel Ferrés & Leandro Zipitría, 2014. "Supermarket Entry and the Survival of Small Stores," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(1), pages 73-93, February.
    3. Herrmann, Roland & Moser, Anke, 2003. "Price Variability Or Rigidity In The Food-Retailing Sector? Theoretical Analysis And Evidence From German Scanner Data," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25867, International Association of Agricultural Economists.
    4. Srikanth Paruchuri & Joel A. C. Baum & David Potere, 2009. "The Wal‐Mart Effect: Wave of Destruction or Creative Destruction?," Economic Geography, Clark University, vol. 85(2), pages 209-236, April.
    5. Emek Basker & Michael Noel, 2009. "The Evolving Food Chain: Competitive Effects of Wal‐Mart's Entry into the Supermarket Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 977-1009, December.
    6. Michael Hicks, 2015. "Does Wal-Mart Cause an Increase in Anti-Poverty Expenditures?," Social Science Quarterly, Southwestern Social Science Association, vol. 96(4), pages 1136-1152, December.
    7. Bonanno, Alessandro, 2008. "An Empirical Investigation of Wal-Mart’s Expansion into Food Retailing," Research Reports 149931, University of Connecticut, Food Marketing Policy Center.
    8. P. J. Glandon & Matthew Jaremski, 2014. "Sales and Firm Entry: The Case of Wal‐Mart," Southern Economic Journal, John Wiley & Sons, vol. 81(1), pages 168-192, July.
    9. Bonfrer, André & Chintagunta, Pradeep & Dhar, Sanjay, 2022. "Retail store formats, competition and shopper behavior: A Systematic review," Journal of Retailing, Elsevier, vol. 98(1), pages 71-91.
    10. Volpe, Richard J., III & Lavoie, Nathalie, 2006. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," Working Paper Series 14515, University of Massachusetts, Amherst, Department of Resource Economics.
    11. Richard Volpe, 2014. "Supercenters, Unionized Labor, and Performance in Food Retail," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(2), pages 325-355, April.
    12. Niklas Rudholm & Yujiao Li & Kenneth Carling, 2022. "How does big-box retail entry affect labor productivity in durable goods retailing? A synthetic control approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(1), pages 89-117, August.
    13. Russell S. Sobel & Andrea M Dean, 2008. "Has Wal‐Mart Buried Mom And Pop?: The Impact Of Wal‐Mart On Self‐Employment And Small Establishments In The United States," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 676-695, October.
    14. Hicks, Michael J. & Wilburn, Kristy L., 2001. "The Regional Impact of Wal-Mart Entrance: A Panel Study of the Retail Trade Sector in West Virginia," The Review of Regional Studies, Southern Regional Science Association, vol. 31(3), pages 305-313, Winter.
    15. Neil Wrigley, 2001. "The consolidation wave in U.S. food retailing: A European perspective," Agribusiness, John Wiley & Sons, Ltd., vol. 17(4), pages 489-513.
    16. Karande, Kiran & Lombard, John R, 2005. "Location strategies of broad-line retailers: an empirical investigation," Journal of Business Research, Elsevier, vol. 58(5), pages 687-695, May.
    17. Stephan J. Goetz & Hema Swaminathan, 2006. "Wal‐Mart and County‐Wide Poverty," Social Science Quarterly, Southwestern Social Science Association, vol. 87(2), pages 211-226, June.
    18. Alessandro Bonanno & Stephan J. Goetz, 2012. "WalMart and Local Economic Development," Economic Development Quarterly, , vol. 26(4), pages 285-297, November.
    19. repec:rre:publsh:v:39:y:2009:i:1:p:73-83 is not listed on IDEAS
    20. Michael J. Hicks & Stanley R. Keil & Lee C. Spector, 2012. "Mom-and-Pops or Big Box Stores," Economic Development Quarterly, , vol. 26(4), pages 311-320, November.
    21. Zhang, Yuehua & Rao, Xudong & Wang, H. Holly, 2019. "Organization, technology and management innovations through acquisition in China’s pork value chains: The case of the Smithfield acquisition by Shuanghui," Food Policy, Elsevier, vol. 83(C), pages 337-345.

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