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Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices

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  • Courtemanche, Charles

    ()
    (University of North Carolina at Greensboro, Department of Economics)

  • Carden, Art

    ()
    (University of North Carolina at Greensboro, Department of Economics)

Abstract

Research shows that grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big box retailers – Costco and Walmart-owned Sam's Club – are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers, and that the effect is strongest in cities with small populations and high grocery store densities. This is consistent with incumbents competing with Costco along non-price dimensions such as product quality or quality of the shopping experience. We find no evidence that Sam’s Club entry affects grocery stores’ prices, consistent with Sam’s Club’s focus on small businesses instead of consumers.

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Bibliographic Info

Paper provided by University of North Carolina at Greensboro, Department of Economics in its series Working Papers with number 11-7.

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Length: 47 pages
Date of creation: 28 Feb 2011
Date of revision:
Handle: RePEc:ris:uncgec:2011_007

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Postal: Box 26165, Greensboro, NC 27402-6165
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Fax: (336) 334-4089
Web page: http://www.uncg.edu/bae/econ/
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Keywords: Wal-Mart; Walmart; Costco; Sam’s Club; warehouse clubs; grocery prices; competition; retail;

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References

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  1. Dube, Arindrajit & Lester, T. William & Eidlin, Barry, 2007. "Firm Entry and Wages: Impact of Wal-Mart Growth on Earnings Throughout the Retail Sector," Institute for Research on Labor and Employment, Working Paper Series qt22s5k4pv, Institute of Industrial Relations, UC Berkeley.
  2. Jerry Hausman & Ephraim Leibtag, 2006. "Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart," CeMMAP working papers CWP06/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  3. 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.
  4. Stephan J. Goetz & Anil Rupasingha, 2006. "Wal-Mart and Social Capital," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(5), pages 1304-1310.
  5. David Neumark & Junfu Zhang & Stephen Ciccarella, 2005. "The Effects of Wal-Mart on Local Labor Markets," NBER Working Papers 11782, National Bureau of Economic Research, Inc.
  6. Emek Basker, 2007. "When Good Instruments Go Bad," Working Papers 0706, Department of Economics, University of Missouri.
  7. Basker, Emek, 2005. "Selling a cheaper mousetrap: Wal-Mart's effect on retail prices," Journal of Urban Economics, Elsevier, vol. 58(2), pages 203-229, September.
  8. Ellickson, Paul, 2005. "Does Sutton Apply to Supermarkets?," Working Papers 05-05, Duke University, Department of Economics.
  9. Courtemanche, Charles & Carden, Art, 2011. "Supersizing supercenters? The impact of Walmart Supercenters on body mass index and obesity," Journal of Urban Economics, Elsevier, vol. 69(2), pages 165-181, March.
  10. Jerry Hausman & Ephraim Leibtag, 2004. "CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?," NBER Working Papers 10712, National Bureau of Economic Research, Inc.
  11. Art Carden & Charles Courtemanche & Jeremy Meiners, 2009. "Does Wal-Mart reduce social capital?," Public Choice, Springer, vol. 138(1), pages 109-136, January.
  12. 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.
  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. Emek Basker, 2002. "Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion," Working Papers 0215, Department of Economics, University of Missouri, revised 14 Jan 2004.
  15. Ellickson, Paul B., 2006. "Quality competition in retailing: A structural analysis," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 521-540, May.
  16. Paul B. Ellickson, 2007. "Does Sutton apply to supermarkets?," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 43-59, 03.
  17. Carden, Art & Courtemanche, Charles & Meiners, Jeremy, 2008. "Painting the Town Red? Wal-Mart and Values," Working Papers 09-5, University of North Carolina at Greensboro, Department of Economics, revised 01 Apr 2009.
  18. Art Carden & Charles Courtemanche, 2009. "Wal-Mart, Leisure, And Culture," Contemporary Economic Policy, Western Economic Association International, vol. 27(4), pages 450-461, October.
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Cited by:
  1. Emek Basker, 2013. "Change at the Checkout: Tracing the Impact of a Process Innovation," Working Papers 1302, Department of Economics, University of Missouri.

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