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- Hernant, Mikael, et al.
(författare)
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Does local competition make a difference for store profitability? : An empirical study of 168 Swedish supermarkets
- 2020
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Annan publikation (övrigt vetenskapligt/konstnärligt)abstract
- Much of what we know about the effects of competition on store performance emanate from SCP studies of grocery retail stores located in different geographical markets. These studies have provided empirical support for the notion that low competition endows firms with market power, enabling them to set higher prices compared to firms located in more competitive markets. However, to what extent the effect of competition on prices translates into higher gross margins and higher profits and profitability on the store level appears to be an unanswered question. One reason being that valid and reliable data on the profitability of individual stores never or very seldom are disclosed for research by retail companies. This study takes previous empirical research on the effects of local competition in retailing one step further, by investigating the relationships between competition and various aspects of economic performance of 168 supermarkets, all owned and managed by individual retailers affiliated to the voluntary ICA chain in Sweden. A unique database has been created by pooling data from income statements and balance sheets with details on local competition. Local competition is depicted in three dimensions: concentration, horizontal vs. intertype competition, and spatial monopoly. The main contribution of this study is that it establishes an empirical relationship between competition and bottom-line economic performance. The results show that competition has a significant effect on conduct and financial performance. In more competitive markets, supermarkets price lower, conduct “more” on non-price attributes, and achieve lower profitability compared to stores facing little competition. This study thus validates the SCP-paradigm and it explicitly shows that market power opportunities on the local market level is translated into higher profitability performance of stores. As such, the study has important implications for competition authorities’ actions as well as for retail management decisions.
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- Hernant, Mikael, et al.
(författare)
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Managing retail chain profitability based on local competitive conditions : Preliminary analysis
- 2007
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Ingår i: International Journal of Retail & Distribution Management. - : Emerald Group Publishing Limited. - 0959-0552 .- 1758-6690. ; 35:11, s. 912-935
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Tidskriftsartikel (refereegranskat)abstract
- Abstract:Purpose – The purpose of this study is to describe the determinants of profitability in terms of the strategic profitability model (the Du Pont model), depicting the “route” to high profitability in grocery retail stores located in market areas possessing dissimilar competitive conditions. Design/methodology/approach – Different physical characteristics (e.g. store formats) have traditionally been used as control criteria, but it is argued in this paper that management principles in retail chains should be based on different clusters of stores, formed from local competitive conditions. The paper proposes a clustering method based on five indicators of local competition. The research results are derived from local competitive conditions and the performance of 168 supermarkets, located in Sweden, and controlled by one retail chain. Findings – The paper identifies four clusters of local markets labeled monopoly, fleet market, venue, and duopoly, based on local competitive conditions. The findings show that the “route” to profitability significantly differs between the clusters. In monopoly the route to high profitability goes through high-gross margin, while in fleet market the key figures are low cost, large number of shoppers per week, and high productivity. Venue and duopoly both gain from high-average transactions per shopper. Practical implications – Supermarkets under different competitive conditions have different critical success factors and would probably be better managed, supported and evaluated on a different basis, i.e. retail chains need to adjust their approach to their supermarkets depending on local competitive conditions. Originality/value – Based on the findings the paper proposes unique management strategies for different clusters of local markets to further enhance current strength areas.
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- Hernant, Mikael, et al.
(författare)
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Now what? : Evaluating the sales effects of introducing an online store
- 2017
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Ingår i: Journal of Retailing and Consumer Services. - : Elsevier. - 0969-6989 .- 1873-1384. ; 39, s. 305-313
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Tidskriftsartikel (refereegranskat)abstract
- This study creates a framework for evaluating the sales impact of adding an online channel to an existing network of physical stores. Using a unique database consisting of pooled customer data from a Swedish retailer's online and offline stores, it investigates the purchase behavior of customers before and after the introduction of an online channel. The data overcome a crucial obstacle present in previous studies in that they permit matching of individual-level customer data for both online and offline behavior. The results show significant and substantial effects of online channel introduction on customer acquisition as well as on cannibalization of physical stores.
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