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Market Structure Across Retail Formats

  • Karsten Hansen


    (Kellogg School of Management, Northwestern University, Evanston, Illinois 60208)

  • Vishal Singh


    (Stern School of Business, New York University, New York, New York 10012)

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    We study how market structure within a product category varies across retail formats. Building on the literature on internal market structure, we estimate a joint store and brand choice model where the loading matrix of brand attributes are allowed to be retail format specific. The approach allows us to recover brand maps for different retail formats while controlling for the short-term marketing mix activities at these stores and the self-selection of households that frequent a particular format. The model is applied to consumer panel data from two product categories, where households are observed to make purchases across three store types: high-end grocery store, traditional supermarket, and large everyday low pricing (EDLP) formats. Our results show strong correlations between the marketing mix sensitivities, store format preference, and unobserved brand attributes. These correlations translate into significant differences in market structure across retail formats and in the direction and size of preference vectors for unobservable brand attributes. We find a tight clustering of brands at the EDLP format, whereas brands are found to compete in distinct subgroups at other stores. Results show that failure to account for retail format effects can substantially bias the understanding of underlying market structure and could lead to incorrect implications in applications such as new product entry.

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    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 28 (2009)
    Issue (Month): 4 (07-08)
    Pages: 656-673

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    Handle: RePEc:inm:ormksc:v:28:y:2009:i:4:p:656-673
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