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Why are Walmart and Target Next-Door neighbors?

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  • Schuetz, Jenny

Abstract

One of the most notable changes in the U.S. retail market over the past twenty years has been the rise of Big Box stores, retail chains characterized by physically large stores selling a wide range of consumer goods at discount prices. A growing literature has examined the impacts of Big Box stores on other retailers and consumers, but relatively little is known about how Big Box stores choose locations. Because Big Box stores offer highly standardized products and compete primarily on price, it is likely that they will seek to establish spatial monopolies, far from competitor stores. In this paper, I examine where new Big Box stores locate with respect to three types of existing establishments: own-firm stores, other retailers in the same product space (competitors), and retailers in other product spaces (complements). Results indicate that new Big Box stores tend to avoid existing own-firm stores and locate near complementary Big Box stores. However, there is little evidence that new Big Boxes seek to avoid competitors. Firms in the same product space may not be perfect substitutes, or firms may prefer to share consumers in a desirable location rather than cede the entire market to competitor firms.

Suggested Citation

  • Schuetz, Jenny, 2015. "Why are Walmart and Target Next-Door neighbors?," Regional Science and Urban Economics, Elsevier, vol. 54(C), pages 38-48.
  • Handle: RePEc:eee:regeco:v:54:y:2015:i:c:p:38-48
    DOI: 10.1016/j.regsciurbeco.2015.07.002
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    Cited by:

    1. Isabelle M. Nilsson & Oleg A. Smirnov, 2017. "Clustering vs. relative location: Measuring spatial interaction between retail outlets," Papers in Regional Science, Wiley Blackwell, vol. 96(4), pages 721-741, November.
    2. Bonein, Aurélie & Turolla, Stéphane, 2017. "Spatial competition with demand uncertainty: A laboratory experiment," Working Papers 266260, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    3. John M. Clapp & Stephen L. Ross & Tingyu Zhou, 2019. "Retail Agglomeration and Competition Externalities: Evidence from Openings and Closings of Multiline Department Stores in the U.S," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(1), pages 81-96, January.
    4. Zhou, Tingyu & Clapp, John M., 2015. "The location of new anchor stores within metropolitan areas," Regional Science and Urban Economics, Elsevier, vol. 50(C), pages 87-107.

    More about this item

    Keywords

    Retail location; Spatial competition; Agglomeration; Big Box stores;

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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