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Adolescence and the Path to Maturity in Global Retail

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  • Bart J. Bronnenberg
  • Paul B. Ellickson

Abstract

We argue that, over the past several decades, the adoption and diffusion of "modern retailing technology" represents a substantial advance in productivity, providing greater product variety, enhanced convenience, and lower prices. We first describe modern retailing, highlighting the role of modern formats, scale (often transcending national boundaries), and increased coordination with upstream and downstream partners in production and distribution. In developed markets, the transition to modern retailing is nearly complete. In contrast, many low-income and emerging markets continue to rely on traditional retail formats, that is, a collection of independent stores and open air markets supplied by small-scale wholesalers, although modern retail has begun to spread to these markets as well. E-commerce is a notable exception: the penetration of e-commerce in China and several developing nations in Asia has already surpassed that of high-income countries for some types of consumer goods. To understand the forces governing the adoption of modern technology and the unique role of e-commerce, we propose a framework that emphasizes the importance of scale and coordination in facilitating the transition from traditional to modern retailing. We conclude with some conjectures regarding the likely impact of increased retail modernization for the developing world.

Suggested Citation

  • Bart J. Bronnenberg & Paul B. Ellickson, 2015. "Adolescence and the Path to Maturity in Global Retail," Journal of Economic Perspectives, American Economic Association, vol. 29(4), pages 113-134, Fall.
  • Handle: RePEc:aea:jecper:v:29:y:2015:i:4:p:113-34 Note: DOI: 10.1257/jep.29.4.113
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    References listed on IDEAS

    as
    1. Paul B. Ellickson, 2007. "Does Sutton apply to supermarkets?," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 43-59, March.
    2. Ronald S. Jarmin & Shawn D. Klimek & Javier Miranda, 2009. "The Role of Retail Chains: National, Regional and Industry Results," NBER Chapters,in: Producer Dynamics: New Evidence from Micro Data, pages 237-262 National Bureau of Economic Research, Inc.
    3. Marianne Bertrand & Francis Kramarz, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1369-1413.
    4. Brianna Cardiff-Hicks & Francine Lafontaine & Kathryn Shaw, 2015. "Do Large Modern Retailers Pay Premium Wages?," ILR Review, Cornell University, ILR School, vol. 68(3), pages 633-665, May.
    5. Emek Basker, 2012. "Raising the Barcode Scanner: Technology and Productivity in the Retail Sector," American Economic Journal: Applied Economics, American Economic Association, pages 1-27.
    6. Fernando Alvarez & Andrew Atkeson & Patrick J. Kehoe, 1999. "Money and Interest Rates with Endogeneously Segmented Markets," NBER Working Papers 7060, National Bureau of Economic Research, Inc.
    7. Kenneth R. Troske, 1999. "Evidence On The Employer Size-Wage Premium From Worker-Establishment Matched Data," The Review of Economics and Statistics, MIT Press, pages 15-26.
    8. Holmes, Thomas J, 2001. "Bar Codes Lead to Frequent Deliveries and Superstores," RAND Journal of Economics, The RAND Corporation, pages 708-725.
    9. Fiona Scott Morton & Florian Zettelmeyer & Jorge Silva-Risso, 2001. "Internet Car Retailing," NBER Chapters,in: E-commerce, pages 501-519 National Bureau of Economic Research, Inc.
    10. Morton, Fiona Scott & Zettelmeyer, Florian & Silva-Risso, Jorge, 2001. "Internet Car Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 501-519, December.
    11. Bart J. Bronnenberg & Paul B. Ellickson, 2015. "Adolescence and the Path to Maturity in Global Retail," Journal of Economic Perspectives, American Economic Association, pages 113-134.
    12. Mark Doms & Ron Jarmin & Shawn Klimek, 2004. "Information technology investment and firm performance in US retail trade," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 13(7), pages 595-613.
    13. Panle Jia, 2008. "What Happens When Wal-Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry," Econometrica, Econometric Society, vol. 76(6), pages 1263-1316, November.
    14. Paul B. Ellickson & Stephanie Houghton & Christopher Timmins, 2013. "Estimating network economies in retail chains: a revealed preference approach," RAND Journal of Economics, RAND Corporation, vol. 44(2), pages 169-193, June.
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    Cited by:

    1. Ali Hortaçsu & Chad Syverson, 2015. "The Ongoing Evolution of US Retail: A Format Tug-of-War," Journal of Economic Perspectives, American Economic Association, pages 89-112.
    2. repec:krk:eberjl:v:5:y:2017:i:1:p:11-26 is not listed on IDEAS

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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