Modular Store Design and Firm Performance

Abstract

Modern stores are becoming increasingly modular in design. One example of the modular store design is a Wal-Mart Supercenter, which is a discount store-supermarket combination unit. The success of store chains can hinge on finding a right combination “ ” of store modules: While Wal-Mart has been able to expand its store base using Supercenters, K-Mart’s new format “Big K-Mart” has not fared well. Despite the growing importance of modular store design and its effect on firm performance, the extant literature does not provide any guidance to store managers on which store modules to adopt in order to improve store revenue. In this paper I study the effects of different store modules on firm performance. Specially, I estimate the effects of banks, ATMs, pharmacies and gas stations on weekly sales volume of grocery stores of the two largest supermarket chains in the state of Georgia. The results show that store characteristics account for the majority of variation in weekly sales volume of stores, whereas local business conditions? notably demographics and competition measures?do not possess much explanatory power. One thousand square feet of store size is equivalent to about five thousand dollars in weekly sales volume, about forty percent of store revenue on average. Adding a pharmacy leads to an increase of one hundred twenty thousand dollars in weekly store sales, a gas station eighty four thousand dollars and a bank sixty eight thousand dollars. The results illustrate the importance of choosing right modules in store design on firm performance.