The impact of Wal-Mart supercenters on supermarket concentration in U.S. metropolitan areas

Abstract

Wal-Mart's 1999 sales in its Supercenter stores will rival that of Kroger, the leading national supermarket chain. With estimated sales at $45–47 billion plus growth of 40% from $32 billion in prior year sales, Wal-Mart's growth has been accomplished without expansion by acquisition or merger. This growth was achieved by capital investment, building new or reformatting existing Wal-Mart stores with the Supercenter format, a hypermarket with general merchandising and full-size supermarket areas. Currently, the number of Wal-Mart Supercenters exceeds 721. Wal-Mart opened 275 Supercenters during 1998 and 1999 and will continue the pace, exceeding 1,400 by the year 2005. These Supercenters will affect the market position and competitive strategies of other food retailers. To date, most reformatting has been in smaller cities and rural areas, perhaps because they tend to have less organized labor markets. This study finds Wal-Mart Supercenter entry had little impact on food seller concentration in major metropolitan areas between 1993 and 1999. Wal-Mart entered 54 of the largest 100 metro areas. Wal-Mart tended to enter cities in the south and east. There is no correlation between entry and city size. Multiple linear regression analysis however indicates that Wal-Mart's market shares are highest in lower income and smaller metro areas. [Econ-Lit citations: L130, L200] © 2001 John Wiley & Sons, Inc.