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Spillover effects when IKEA enters: Do incumbent retailers win or lose?

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  • Sven‐Olov Daunfeldt
  • Oana Mihaescu
  • Helena Nilsson
  • Niklas Rudholm

Abstract

We investigate the effects of IKEA entry in three Swedish municipalities, finding that revenues for incumbent retailers located 1 km from the new IKEA store experienced a 7% increase due to positive spillover. The effect was insignificant for retailers located in city centres or more than 1 km from IKEA. Moreover, the positive agglomeration effects only dominate the negative competition effects for stores that sell complementary products, while same‐market retailers located between 2 and 5 km from the new IKEA store experienced revenue loss due to IKEA entry. In contrast to retail revenues, the effects on employment were statistically insignificant. Se investigan los efectos de la apertura de IKEA en tres municipios suecos y se descubrió que los ingresos de los minoristas existentes situados a 1 km de la nueva tienda de IKEA experimentaron un aumento del 7% debido a efectos de spillover positivos. El efecto fue insignificante para los minoristas situados en el centro de las ciudades o a más de 1 km de IKEA. Además, los efectos positivos de la aglomeración sólo predominan sobre los efectos negativos de la competencia en las tiendas que venden productos complementarios, mientras que los minoristas del mismo mercado situados entre 2 y 5 km de las nuevas tiendas de IKEA experimentaron una pérdida de ingresos debido a la entrada de IKEA. A diferencia de los ingresos de los minoristas, los efectos sobre el empleo no fueron significativos estadísticamente. 抄録: スウェーデンの3つの県におけるイケア(IKEA)の進出の影響を検討したところ、イケアの新店舗からの距離が1kmの大手小売店では、プラスのスピルオーバー効果を受けて7%の増益があったことがわかった。都市中心部またはイケアの店舗から1km以上離れた小売店では、その効果はごくわずかであった。さらに、補完的商品を取り扱う店では、正の集積効果が負の競争効果には勝っており、一方ではイケアの新店舗から2~5kmに立地する同業者の店舗は、イケアの進出による減益を経験している。店の収益とは対照的に、雇用の効果は統計的には有意ではなかった。

Suggested Citation

  • Sven‐Olov Daunfeldt & Oana Mihaescu & Helena Nilsson & Niklas Rudholm, 2019. "Spillover effects when IKEA enters: Do incumbent retailers win or lose?," Papers in Regional Science, Wiley Blackwell, vol. 98(6), pages 2295-2313, December.
  • Handle: RePEc:bla:presci:v:98:y:2019:i:6:p:2295-2313
    DOI: 10.1111/pirs.12459
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    Cited by:

    1. Wei, Sheng & Huo, Hong & Xu, Ming & Kadirov, Djavlonbek & Fam, Kim-Shyan, 2021. "Shop-hop till you drop! The effect of the image gap on spillover patronage within retail agglomerations," Journal of Retailing and Consumer Services, Elsevier, vol. 63(C).
    2. Ismaëlh Cissé & Jean Dubé, 2024. "Survival of new and small retail businesses facing mega‐retailers in non‐metropolitan areas—The case of Walmart in the province of Quebec," Growth and Change, Wiley Blackwell, vol. 55(1), March.
    3. Mihaescu, Oana & Korpi, Martin & Öner, Özge, 2020. "Are New Shopping Centers Drivers of Development in Large Metropolitan Suburbs? The Interplay of Agglomeration and Competition Forces," Ratio Working Papers 332, The Ratio Institute.
    4. Thomas Wieland, 2023. "Spatial shopping behavior during the Corona pandemic: insights from a micro-econometric store choice model for consumer electronics and furniture retailing in Germany," Journal of Geographical Systems, Springer, vol. 25(2), pages 291-326, April.
    5. Jo, Wooyong & Nam, Hyoryung & Choi, Jeonghye, 2022. "Opening the OTC drug market: The effect of deregulation on retail pharmacy’s performance," International Journal of Research in Marketing, Elsevier, vol. 39(3), pages 847-866.
    6. Sven-Olov Daunfeldt & Oana Mihaescu & Niklas Rudholm, 2022. "The Decline of Small Cities: Increased Competition from External Shopping Malls or Long-Term Negative Trends?," International Regional Science Review, , vol. 45(2), pages 225-257, March.
    7. Steinbach, Sandro, 2023. "The Corporatization of Veterinary Medicine: An Empirical Analysis of Its Impact on Independent Practices," 2023 Annual Meeting, July 23-25, Washington D.C. 335481, Agricultural and Applied Economics Association.
    8. Nilsson, Helena, 2020. "IKEA entry - Effects on firms in retail and hospitality," HFI Working Papers 11, Institute of Retail Economics (Handelns Forskningsinstitut).
    9. Chung, Hwan & Ahn, Dae-Yong & Ahn, Seungho, 2022. "Spillover effects of a mega shopping complex on pre-existing, small retail shops over space, over time and across retail types," Journal of Retailing and Consumer Services, Elsevier, vol. 65(C).

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