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How Much Lower Are Prices at Discount Stores? An Examination of Retail Food Prices

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Author Info

  • Leibtag, Ephraim S.
  • Barker, Catherine
  • Dutko, Paula

Abstract

Nontraditional stores, including mass merchandisers, supercenters, club warehouse stores, and dollar stores, have increased their food offerings over the past 15 years and often promote themselves as lower priced alternatives to traditional supermarkets. How much lower are food prices at these stores? In order to better understand nontraditional stores’ impact on the cost of food, ERS analysts evaluate food price differences between nontraditional and traditional stores at the national and market level using 2004-06 Nielsen Homescan data. Findings show that nontraditional retailers offer lower prices than traditional stores even after controlling for brand and package size. Comparisons of identical items, at the Universal Product Code (UPC) level, show an expenditure-weighted average price discount of 7.5 percent, with differences ranging from 3 to 28 percent lower in nontraditional stores than in traditional stores. Nontraditional stores in metro areas where such stores have a higher-than-average market share have smaller and less frequent price discounts than those in areas where such stores have a lower market share.

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Bibliographic Info

Paper provided by United States Department of Agriculture, Economic Research Service in its series Economic Research Report with number 96767.

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Date of creation: Oct 2010
Date of revision:
Handle: RePEc:ags:uersrr:96767

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Related research

Keywords: retail food prices; price variation; Nielsen Homescan; supercenter; club warehouse store; dollar store; traditional food retailers; nontraditional food retailers; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety; Industrial Organization; Marketing;

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References

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  1. Richard J. Volpe III & Nathalie Lavoie, 2006. "The Effect of Wal-Mart Supercenters on Grocery Prices in New England," Working Papers 2006-8, University of Massachusetts Amherst, Department of Resource Economics.
  2. King, Robert P. & Leibtag, Ephraim S. & Behl, Ajay S., 2004. "Supermarket Characteristics And Operating Costs In Low-Income Areas," 2004 Annual meeting, August 1-4, Denver, CO 20361, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. repec:ags:uersib:96654 is not listed on IDEAS
  4. Emek Basker, 2006. "The Causes and Consequences of Wal-Mart's Growth," Working Papers 0611, Department of Economics, University of Missouri.
  5. Einav, Liran & Leibtag, Ephraim S. & Nevo, Aviv, 2008. "On the Accuracy of Nielsen Homescan Data," Economic Research Report 56490, United States Department of Agriculture, Economic Research Service.
  6. Woo, Byung-Joon & Huang, Chung L. & Epperson, James E. & Cude, Brenda J., 2001. "Effect Of A New Wal-Mart Supercenter On Local Retail Food Prices," Journal of Food Distribution Research, Food Distribution Research Society, vol. 32(01), March.
  7. Jean Kinsey & Ben Senauer, 1996. "Consumer Trends and Changing Food Retailing Formats," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(5), pages 1187-1191.
  8. Leibtag, Ephraim S., 2006. "The Impact Of Big-Box Stores On Retail Food Prices And The Consumer Price Index," Economic Research Report 7238, United States Department of Agriculture, Economic Research Service.
  9. Emek Basker & Michael Noel, 2007. "The Evolving Food Chain: Competitive Effects of Wal-Marts Entry into the Supermarket Industry," Working Papers 0712, Department of Economics, University of Missouri.
  10. Todd, Jessica E. & Mancino, Lisa & Leibtag, Ephraim S. & Tripodo, Christina, 2010. "Methodology Behind the Quarterly Food-at-Home Price Database," Technical Bulletins 97799, United States Department of Agriculture, Economic Research Service.
  11. Courtemanche, Charles & Carden, Art, 2009. "The skinny on big box retailing: Wal-Mart, warehouse clubs, and obesity," MPRA Paper 25326, University Library of Munich, Germany.
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Cited by:
  1. Anania, Giovanni & Nistico, Rosanna, 2012. "Price dispersion, search costs and consumers and sellers heterogeneity in retail food markets," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125594, International Association of Agricultural Economists.
  2. Giovanni Anania & Rosanna Nisticò, 2011. "Price Dispersion, Search Costs And Consumers And Sellers Heterogeneity In Retail Food Markets," Working Papers 201105, Università della Calabria, Dipartimento di Economia, Statistica e Finanza (Ex Dipartimento di Economia e Statistica).

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