The Effect of Entry by Wal-Mart Supercenters on Retail Grocery Concentration

The U.S. retail grocery industry shifted from an industry dominated by small grocers serving local markets to one characterized by large retailers present in international markets. Average retail grocery concentration as measured by CR4 increased from 19.9 in 1997 to 31.0 in 2002 (U.S. Department of Commerce, Bureau of the Census, 2000; 2005). Wal-Mart’s tremendous growth is the catalyst to this change, but little is known about Wal-Mart’s effect on market concentration. This analysis evaluates the effects of de novo entry by Wal-Mart Supercenters on retail grocery concentration. The effect of Wal-Mart Supercenters on changes in retail grocery concentration is estimated using econometric modeling. The results show that existing Wal-Mart Supercenter operations and entry by Wal-Mart Supercenters significantly increase the rate of change in retail grocery concentration.Agribusiness, Industrial Organization,

Effects of Supply Chain Management for Food and Grocery Companies

Mass merchandisers’ entry into food retailing threatens traditional grocers’ market share. In response, traditional grocers and food manufacturers adopted Efficient Consumer Response (ECR) as an industry-wide set of supply chain management strategies that focused on cutting costs and improving product assortment, thereby improving inventory and financial performance levels. However, research findings and trade press reports question whether adopting supply chain management strategies will achieve these goals. The results of this analysis strongly support the proposition that the adoption of an ECR strategy pays off. However, the growth in profit does not appear to come from improved performance for traditional inventory measures. The driving force behind these improved financial measures can be attributed to the cash conversion cycle. Thus, the time spent in developing close relationships with buyers or suppliers and the investments in information technology have been justified. Size matters; ECR is more effective due to economies of scale and information technology. However, this may lead to more consolidations because all firms may not have sufficient capital to invest in ECR initiatives. In short, to remain competitive ECR strategies should strongly be considered by firms that are lagging in implementation.Efficient Consumer Response, supply chain management, inventory, cash conversion cycles, financial performance, grocery, food manufacturing, Financial Economics, Industrial Organization,

THE EFFECT OF ENTRY BY WAL-MART SUPERCENTERS ON RETAIL GROCERY CONCENTRATION

The U.S. retail grocery industry shifted from an industry dominated by small grocers serving local markets to one characterized by large retailers present in international markets. Average retail grocery concentration as measured by CR4 increased from 17.8 in 1982 to 43.0 in 1999 (U.S. Census Bureau, 1982; Trade Dimensions Marketing Guidebook, 2000). Wal-Mart's tremendous growth is the catalyst to this change. Although Wal-Mart has been studied from multiple perspectives, little is known about Wal-Mart's effect on market concentration. Understanding Wal-Mart's influence on market concentration is important because an extensive literature shows a pattern linking retail grocery market concentration to increases in retail grocery prices. The objective of this analysis is to evaluate the effects of de novo entry by Wal-Mart Supercenters on retail grocery concentration (CR4). Using a panel dataset complied from Trade Dimensions Marketing Guidebook and Market Scope publications, the effect of Wal-Mart Supercenters on changes in retail grocery concentration was estimated. The results show that existing Wal-Mart Supercenter operations and entry by Wal-Mart Supercenters significantly increase the rate of change in retail grocery concentration as measured by CR4.Marketing,

An analysis of the retail grocery industry: The spatial effects of supercenters

During the past two decades, grocery has shifted from an industry dominated by small grocers serving local markets to one characterized by large retailers present in international markets. Supercenter and warehouse stores continue to expand into the retail grocery industry due to many factors, including supply chain management strategies which drastically lower costs compared with traditional grocers, fewer weekly trips to supermarkets by consumers, and evolving store formats. The Schumpeterian tradition would suggest that the creative destruction introduced by supercenter and warehouse stores should drive economic progress, but concerns have emerged that the large international grocers are in a position to harm consumers. Therefore, this research analyzes he effects of entry by supercenter and warehouse stores on retail grocery market concentration, changes in the growth and location of retail grocery sales, and changes in the number of convenience and specialty stores. Urban and rural areas of the U.S. are evaluated separately, when possible, and the spatial aspects of location are considered in the models. Important results are that WalMart Supercenters increase retail grocery concentration and that entry by supercenter and warehouse stores in rural counties increases the growth in grocery sales by as much as 0.287 points. Grocery sales are shifted from counties without supercenter and warehouse stores to counties where the large stores enter and operate. The results have important implications for policy makers and the grocery industry, while the spatial methods suggest new approaches for future research. First, rural and urban differences should be considered when modeling retail grocery concentration, because large stores rely on economies of size that often cannot be supported in rural grocery markets. Therefore, large shifts in retail grocery sales are occurring from rural counties without supercenter and warehouse stores to counties with supercenter and warehouse stores. Second, location and spatial relationships are important when modeling the retail grocery industry. Large supercenter or warehouse stores affect the area entered and the effects spillover into surrounding areas up to 75 miles from the point of entry. Finally, as small supermarkets exit grocery retailing, there is new entry by convenience stores, supporting the logic of creative destruction

The Effect of Entry by Wal-Mart Supercenters on Retail Grocery Concentration

The U.S. retail grocery industry shifted from an industry dominated by small grocers serving local markets to one characterized by large retailers present in international markets. Average retail grocery concentration as measured by CR4 increased from 19.9 in 1997 to 31.0 in 2002 (U.S. Department of Commerce, Bureau of the Census, 2000; 2005). Wal-Mart’s tremendous growth is the catalyst to this change, but little is known about Wal-Mart’s effect on market concentration. This analysis evaluates the effects of de novo entry by Wal-Mart Supercenters on retail grocery concentration. The effect of Wal-Mart Supercenters on changes in retail grocery concentration is estimated using econometric modeling. The results show that existing Wal-Mart Supercenter operations and entry by Wal-Mart Supercenters significantly increase the rate of change in retail grocery concentration