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Supersize It: The Growth of Retail Chains and the Rise of the "Big Box" Retail Format

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Abstract

We offer a theory for the complementarity between the size of a retail chain and the scope of its business to explain the growth of general-merchandise firms and the expansion of the "superstore" format. The complementarity results from an interaction of the retailer's economies of scale and consumer gains from "one-stop shopping." We find support for our model in micro data from the Census of Retail Trade for 1977-2002. Retail chains with more stores carry more distinct product lines and as retail chains grow they add both stores and product lines. On average, we find that a chain adds one product line, such as shoes, computers, or jewelry, to an existing store with every new store it opens. For the average large chain, adding a new product line throughout the chain is correlated with adding 400 new stores, competing in over 8,000 new markets and increasing its competitive pressure in more than 10,000 additional markets.

Suggested Citation

  • Emek Basker & Shawn Klimek & Pham Hoang Van, 2008. "Supersize It: The Growth of Retail Chains and the Rise of the "Big Box" Retail Format," Working Papers 0809, Department of Economics, University of Missouri, revised 30 Sep 2010.
  • Handle: RePEc:umc:wpaper:0809
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    References listed on IDEAS

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    1. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 375-391, June.
    2. Emek Basker, 2005. "Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 174-183, February.
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    5. Emek Basker & Pham Hoang Van, 2007. "Wal-Mart as Catalyst to U.S.-China Trade," Working Papers 0710, Department of Economics, University of Missouri.
    6. Kyle Bagwell & Garey Ramey & Daniel F. Spulber, 1997. "Dynamic Retail Price and Investment Competition," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 207-227, Summer.
    7. Ross, Thomas W, 1984. "Winners and Losers under the Robinson-Patman Act," Journal of Law and Economics, University of Chicago Press, vol. 27(2), pages 243-271, October.
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    9. 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.
    10. Roger Betancourt & David Gautschi, 1990. "Demand Complementarities, Household Production, and Retail Assortments," Marketing Science, INFORMS, vol. 9(2), pages 146-161.
    11. Roger R. Betancourt, 2004. "The Economics of Retailing and Distribution," Books, Edward Elgar Publishing, number 3511.
    12. Lucia Foster & John Haltiwanger & C. J. Krizan, 2006. "Market Selection, Reallocation, and Restructuring in the U.S. Retail Trade Sector in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 748-758, November.
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    Cited by:

    1. Francine Lafontaine & Kathryn Shaw, 2016. "Serial Entrepreneurship: Learning by Doing?," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 217-254.
    2. 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.
    3. Maican, Florin & Orth, ´Matilda, 2013. "Entry Regulations, Product Differentiation and Determinants of Market Structure," Working Paper Series 984, Research Institute of Industrial Economics.
    4. Basker, Emek, 2011. "The Causes and Consequences of Wal-Mart’s Growth," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 110-134.
    5. John Haltiwanger & Ron Jarmin & C. J. Krizan, 2010. "Mom-and-Pop Meet Big Box: Complements or Substitutes?," NBER Chapters,in: Cities and Entrepreneurship National Bureau of Economic Research, Inc.
    6. Jonathan Haskel & Raffaella Sadun, 2012. "Regulation and UK Retailing Productivity: Evidence from Microdata," Economica, London School of Economics and Political Science, vol. 79(315), pages 425-448, July.
    7. Emek Basker, 2012. "Raising the Barcode Scanner: Technology and Productivity in the Retail Sector," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 1-27, July.
    8. Jenny Schuetz & Jed Kolko & Rachel Meltzer, 2010. "Is the 'Shop Around the Corner' a Luxury or a Nuisance? The relationship between income and neighborhood retail patterns," Working Paper 8513, USC Lusk Center for Real Estate.
    9. Raffaella Sadun, 2015. "Does Planning Regulation Protect Independent Retailers?," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 983-1001, December.
    10. Emek Basker, 2011. "Does Wal‐Mart Sell Inferior Goods?," Economic Inquiry, Western Economic Association International, vol. 49(4), pages 973-981, October.
    11. Emek Basker, 2015. "Change at the Checkout: Tracing the Impact of a Process Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 339-370, June.
    12. David Mills, 2013. "Countervailing Power and Chain Stores," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(3), pages 281-295, May.

    More about this item

    Keywords

    Retail; Chain; Big Box; Superstore; Economies of Scale; General Merchandise; One Stop Shopping;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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