Walmart Supercenters Research Articles

Format blurring: how the advent of the Walmart Supercenter has changed the U.S. grocery industry

This paper develops a game-theoretic model that analyzes how a grocery store responds to the entry of a Walmart Supercenter using its store-format choice. By adopting a set of realistic assumptions, such as the cost advantage of Walmart and differentiated services of grocery stores, we find that the distance to a Walmart Supercenter is a key moderating factor in the store-format choice of grocery stores. Grocery stores would prefer to sell non-food items, but when sufficiently close to Walmart Supercenters they would specialise in food items, as consumers find it less costly to engage in two-stop shopping, making the gain from non-food items smaller. So an asymmetric equilibrium becomes feasible, wherein grocery stores carrying increasingly more non-food products and a new grocery store concept like Whole Foods and Wild Oats emphasising high-quality, organic foods can coexist. Our results yield important managerial implications. Under the specialisation strategy, the quality of its differentiated services should be sufficiently high, at least two to four times the disutility of two-stop shopping. Under the expansion strategy, grocery stores should engage in loss leadership, pricing non-food items below cost to lure large-basket consumers while earning higher margins from food items to compensate for the loss.

A Consideration of the Evaluation of Demonstration Projects to End Childhood Hunger (EDECH)

A Consideration of the Evaluation of Demonstration Projects to End Childhood Hunger (EDECH)

Do Walmart Supercenters Improve Food Security?

AbstractThis paper examines the effect that Walmart Supercenters, which lower food prices and expand food availability, have on food insecurity. Data come from the 2001–2012 Current Population Survey Food Security Supplements matched to Walmart Supercenter entry dates and locations. Using instrumental variables models that leverage Walmart’s predictable expansion pattern outward from corporate headquarters, we find that closer proximity to a Walmart Supercenter improves household and child food security, as measured by affirmative responses to a food insecurity questionnaire and an indicator for food insecurity. The effects are largest among low‐income households and children but are also sizeable for middle‐income children.

Do Walmart Supercenters Improve Food Security?

This paper examines the effect of Walmart Supercenters, which lower food prices and expand food availability, on household and child food insecurity. Our food insecurity-related outcomes come from the 2001-2012 waves of the December Current Population Study Food Security Supplement. Using narrow geographic identifiers available in the restricted version of these data, we compute the distance between each household’s census tract of residence and the nearest Walmart Supercenter. We estimate instrumental variables models that leverage the predictable geographic expansion patterns of Walmart Supercenters outward from Walmart’s corporate headquarters. Results suggest that closer proximity to a Walmart Supercenter improves the food security of households and children, as measured by number of affirmative responses to a food insecurity questionnaire and an indicator for food insecurity. The effects are largest among low-income households and children, but are also sizeable for middle-income children.

Technical Solar Photovoltaic Potential of Scaled Parking Lot Canopies: A Case Study of Walmart U.S.A.

Solar photovoltaic (PV) technology can provide sustainable power for the growing global population in cities, but it demands considerable land area. This is a challenge for densely populated cities. However, the stranded assets of non-productive parking lots areas can be converted to solar farms with PV canopies, enabling sustainable electricity generation while preserving their function to park automobiles. This study provides a method for determining the technical and economic potential for converting a national scale retail company’s parking lot area to a solar farm. First, the parking lot area for the company is determined and divided into zones based upon solar flux using virtual maps. Then the potential PV yield in each zone is calculated. A sensitivity analysis is performed on the price per unit power installed, solar energy production as a proxy for conversion efficiency, electricity rates and revenue earned per unit area. To demonstrate this method, analysis of Walmart Supercenters, USA is presented as a case study. The results show solar canopies for parking lot areas are a profitable as well a responsible step in most locations and there is significant potential for sustainable energy deployment in cities by other similar retailers using solar PV canopies.

The impact of Wal-Mart Supercenters’ entry on incumbent supermarkets’ profit margins

PurposeThe purpose of this paper is to quantify the impact of Wal-Mart Supercenters (WMSs) on supermarkets’ profit margins using fluid milk in the Dallas/Fort Worth metropolitan area in the USA as a case study.Design/methodology/approachThe authors develop a two-stage dynamic entry game to model market competition in the pre- and post-WMS stages, and test the theoretical model using the method of simulated moments and milk scanner data from Dallas/Fort Worth supermarkets.FindingsThe empirical findings show that the entry of WMSs accounts for an average of about 16.29-25.69 percent decline in milk profit margins of nearby, or incumbent, supermarkets. Economies of scale and chain synergies are found to be five times more significant for WMSs than for incumbent supermarkets, granting Wal-Mart a significant competitive edge.Originality/valueThis paper quantifies the impact of WMS’s entry on incumbent supermarkets’ profit margins through a structural model of entry. In addition, this paper assesses the effect economies of scale stemming from the ability to provide shopping convenience to consumers as well as chain economies from operating stores near each other.

The Impact of Walmart Supercenter Conversion on Consumer Shopping Behavior

This paper presents an empirical study of the impact of Walmart supercenter conversion on consumer shopping behavior. By using a difference-in-difference estimator, we find that Walmart gains 41% in weekly revenue from the conversion. Decomposing the revenue gains into components attributable to store visits and per-visit expenditures, we find that the majority of these gains were due to larger expenditures, with a much smaller impact from store visits. By contrast, among competing retailers, grocery stores experience the most significant loss (20% weekly revenue) mostly from fewer store visits, with a much smaller impact attributable to per-visit expenditure. Taken together, these findings show that consumers may benefit from reduced shopping costs by making fewer overall trips and increasing their Walmart basket sizes. In addition, we find that overall revenue gains for Walmart from conversion outweigh the small cannibalization loss at the existing Walmart supercenters located farther away. Finally, from category-level analyses, we find evidence of increases in category-level spending in preexisting categories in the converted supercenter. However, we also find that positive demand externality is more pronounced in food categories, mainly as a result of increased purchase incidence. We discuss the implications of our findings for academics and retail managers. This paper was accepted by Pradeep Chintagunta, marketing.

Brand Performance Across Store Formats: Beyond Walmart's Low Prices

We study whether certain types of brands are more likely to perform better at Walmart supercenters as compared to supermarkets. We correlate the variation in brand sales performance at these two store formats (over time and across markets) with marketing mix variables such as prices, promotions, assortments, and competition while controlling for market and time specific trends, and differences in consumers shopping at different formats. Based on data from four product categories in the Nielsen homescan panel, we consistently find that value brands perform better at Walmart supercenters, while premium brands perform better at supermarkets. We find substantial differences in assortments carried at Walmart supercenters and supermarkets. On average, assortment explains 30% of the variation in relative brand shares while prices and promotions explain 24% of the variation. Importantly, this pattern persists among consumers not loyal to either format i.e., who split their spending at different formats. We also find that consumers spending over 75% of their basket expenditures on Walmart shop premium and value brands in more similar proportions across formats as compared to consumers spending over 75% in supermarkets. These latter consumers purchase premium brands in greater proportions when shopping at the supermarkets and value brands in greater proportions when shopping at Walmart. Finally, consumers who split their baskets more evenly across formats are more price sensitive than loyal consumers. These results provide several managerial and policy implications for retail managers looking to increase sales of or focus on specific brand tiers. Our analysis can be extended to other store formats beyond Walmart supercenters and supermarkets.

Competitive Effects of Wal-Mart Supercenter Entry: Moderating Roles of Category and Brand Characteristics

In this paper, the authors investigate whether a Wal-Mart supercenter entry engenders differential effects on competitive draws across different product categories and across distinct groups of brands within a product category sold at incumbent supermarkets, and if so, how. They use data from a natural field experiment created by openings of Wal-Mart supercenters near six stores of a major US supermarket chain. Using two different analyses – a before-and-after-with-control-group analysis of weekly sales, and an individual household level analysis of change in weekly spending – they find that Wal-Mart entry does produce differential effects across categories and brand groups. Mid-tier national brands are more vulnerable to Wal-Mart entry than brands on the boundary of the price-quality continuum, such as premium and economy national brands. Food categories are more vulnerable to Wal-Mart entry, whereas promotion intensive categories and categories with low brand concentration are less vulnerable. Their findings suggest the potential for specific category and brand assortment differentiation strategies that can help conventional supermarkets to better compete with Wal-Mart.

Understanding the Strategies behind Wal-Mart ‘Neighborhood’ Market—How It Is Used and Why

In this paper we study the factors underlying the pattern of store openings for Wal-Mart Neighborhood Market(or Wal-Mart Market), Wal-Mart’s newest store format. The previous literature has identified three major groups of variables that affect the openings of retail establishments: demographics, competitive conditions(including from both K-Mart’s and Wal-Mart’s stores), and transportation costs via the distance distribution centers. We estimate the effects of these variables on the openings of Wal-Mart discount stores, Supercenters, and Markets and thereby gain insight into strategic uses of different store formats by Wal-Mart. We found that not all store formats are created equal—a certain demographics prefer Wal-Mart discount stores(e.g., Hispanics), while others prefer Wal-Mart Supercenters(e.g., whites, Hispanics); younger population and females also prefer these store formats. But we did not find any strong evidence that Wal-Mart Markets are favored by any subgroup of population. While a Wal-Mart discount store and a Supercenter compete with each other to a large extent, a Wal-Mart Market complements(and is complemented by) Wal-Mart discount stores and Supercenters. The findings suggest that Wal-Mart might have different strategic uses for its store formats and are consistent with the statement made by one Wal-Mart CEO on the positioning of Wal-Mart Market in the market: While Wal-Mart is aggressively expanding its discount-store and Supercenter format nationwide, it seems to deploy Wal-Mart Markets format sparingly to selective areas to complement its discount stores and Supercenters and fulfill consumer needs left by the other two formats. The findings also suggest the following policy implications regarding the Korean retailing: Super Supermarkets(SMM) might benefit from both agglomeration economies(e.g., from sharing local market knowledge among the same chain’s stores in nearby markets) and economies of density(i.e., from cost savings in distribution or operation spread across the same chain’s stores); the results depict a dire situation for traditional markets, which simply put together many independent and different varieties of stores in one location; the stores in traditional markets are less likely share local market knowledge due to idiosyncratic consumer needs across their product categories, and they are also unlikely to benefit from savings in common costs; hence SSMs are likely to expand their reach and influence over the traditional markets.

Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices

Prior research shows that grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big‐box retailers—Costco and Walmart‐owned Sam's Club—are quite different. Using city‐level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers and that the effect is strongest in cities with small populations and high grocery store densities. This is consistent with incumbents competing with Costco along nonprice dimensions, such as product quality or quality of the shopping experience. We find no evidence that Sam's Club entry affects grocery stores' prices, consistent with Sam's Club's focus on small businesses instead of consumers.

Supermarket responses to Wal-Mart Supercenter expansion: a structural approach

The impact of Wal-Mart in lowering incumbents’ retail prices has been well documented by previous studies using reduced form models. This article uses a structural model to examine the pricing behavior and promotion responses of incumbent supermarkets to a rapid expansion of Wal-Mart Supercenters (WMS) using the Dallas–Fort Worth milk market as a case study. Empirical results verify that WMS expansion disciplines incumbent supermarkets by decreasing oligopoly power and numbing consumer responsiveness to promotion. In addition, WMS expansion lures away price-sensitive consumers, leaving incumbent supermarkets to face more price-inelastic but lower demands for milk.

Walmart Store # 5861

Most Walmart Supercenters never close. These expansive 24-hour discount retail stores sell electronics, clothing, toys, home furnishings, and groceries, and often include a number of support progra...

Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices

Research shows that grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big box retailers – Costco and Walmart-owned Sam's Club – are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers, and that the effect is strongest in cities with small populations and high grocery store densities. This is consistent with incumbents competing with Costco along non-price dimensions such as product quality or quality of the shopping experience. We find no evidence that Sam’s Club entry affects grocery stores’ prices, consistent with Sam’s Club’s focus on small businesses instead of consumers.

Supersizing supercenters? The impact of Walmart Supercenters on body mass index and obesity

Researchers have linked the rise in obesity to technological progress reducing the opportunity cost of food consumption and increasing the opportunity cost of physical activity. We examine this hypothesis in the context of Walmart Supercenters, whose advancements in retail logistics have translated to substantial reductions in the prices of food and other consumer goods. Using data from the Behavioral Risk Factor Surveillance System matched with Walmart Supercenter entry dates and locations, we examine the effects of Supercenters on body mass index (BMI) and obesity. We account for the endogeneity of Walmart Supercenter locations with an instrumental variables approach that exploits the unique geographical pattern of Supercenter expansion around Walmart’s headquarters in Bentonville, Arkansas. An additional Supercenter per 100,000 residents increases average BMI by 0.24 units and the obesity rate by 2.3% points. These results imply that the proliferation of Walmart Supercenters explains 10.5% of the rise in obesity since the late 1980s, but the resulting increase in medical expenditures offsets only a small portion of consumers’ savings from shopping at Supercenters.

The Dynamic Competitive Effects of Walmart's Store Format Choices

We study the role of store-format choices in dynamic competition between two major chains in the U.S. discount-store industry. The aim is to measure the effect on Kmart profits of Walmart Supercenters, which combine a full-service grocery with a regular discount store. The data are a six-year panel of chains' entry and exit histories (including Walmart's format choices) in a set of small- to medium-sized markets. Using recent techniques for the empirical analysis of dynamic discrete games, we estimate Kmart's exit decision in each market as arising from an asymmetric Markov-perfect equilibrium of a dynamic game of entry and exit. In the structural estimation Kmart's per-period profits show a significantly negative response to both the Supercenter and ordinary Walmart formats. But any difference between the effects of the two formats is not statistically discernible, which is consistent with earlier research.

Supersizing Supercenters? The Impact of Wal-Mart Supercenters on Body Mass Index and Obesity

Researchers have linked the rise in obesity to technological progress reducing the opportunity cost of food consumption and increasing the opportunity cost of physical activity. We examine this hypothesis in the context of Walmart Supercenters, whose advancements in retail logistics have translated to substantial reductions in the prices of food and other consumer goods. Using data from the Behavioral Risk Factor Surveillance System matched with Walmart Supercenter entry dates and locations, we examine the effects of Supercenters on body mass index (BMI) and obesity. We account for the endogeneity of Walmart Supercenter locations with an instrumental variables approach that exploits the unique geographical pattern of Supercenter expansion around Walmart’s headquarters in Bentonville, Arkansas. An additional Supercenter per 100,000 residents increases average BMI by 0.24 units and the obesity rate by 2.3 percentage points. These results imply that the proliferation of Walmart Supercenters explains 10.5% of the rise in obesity since the late 1980s, but the resulting increase in medical expenditures offsets only a small portion of consumers’ savings from shopping at Supercenters.

The Effect of Wal-Mart Supercenters on Grocery Prices in New England

This study examines the competitive price effect of Wal-Mart Supercenters on national brand and private label grocery prices in New England. For this purpose, we use primary price data collected on a basket of identical products from six Supercenters in Massachusetts, Connecticut, and Rhode Island as well as a sample of conventional supermarkets. Taking into account demographics, store characteristics, and market conditions, we estimate the average prices charged by (1) Supercenters, (2) supermarkets competing directly with Supercenters, and by (3) supermarkets geographically distant from Supercenters. By comparing prices at competing stores and at distant stores, we show that the effect of Wal-Mart Supercenters is to decrease prices by 6 to 7 percent for national brand goods and 3 to 7 percent for private label goods. Price decreases are most significant in the dry grocery and dairy departments. Moreover, WalMart sets prices significantly lower than its competitors in the food industry.

Effect of Wal-Mart Supercenters on Grocery Prices in New England

This study examines the competitive price effect of Wal-Mart Supercenters on national brand and private label grocery prices in New England. For this purpose, we use primary price data collected on a basket of identical products from six Supercenters in Massachusetts, Connecticut, and Rhode Island as well as a sample of conventional supermarkets. Taking into account demographics, store characteristics, and market conditions, we estimate the average prices charged by (1) Supercenters, (2) supermarkets competing directly with Supercenters, and by (3) supermarkets geographically distant from Supercenters. By comparing prices at competing stores and at distant stores, we show that the effect of Wal-Mart Supercenters is to decrease prices by 6 to 7 percent for national brand goods and 3 to 7 percent for private label goods. Price decreases are most significant in the dry grocery and dairy departments. Moreover, Wal-Mart sets prices significantly lower than its competitors in the food industry.

The Regulation of Superstores: The Legality of Zoning Ordinances Emerging from the Skirmishes between Wal-Mart and the United Food and Commercial Workers Union

Having saturated the less populated heartland of America, Wal-Mart is carrying its supercenter expansion program to major urban areas. Wal-Mart supercenters merge discount retail with full service grocery stores under the same roof. Because supercenters compete head-on with unionized supermarkets, they place downward pressure on grocery worker wages. The United Food and Commercial Workers, the largest representative of grocery workers, has joined other Wal-Mart critics at city halls across the country in using zoning laws to restrain Wal-Mart's supercenter expansion program. A smattering of lawsuits has ensued, and more are sure to follow. This paper describes the types of anti-superstore zoning ordinances favored by the UFCW, and the legal objections Wal-Mart can expect to be raised against them. At the top of the legal checklist are equal protection, pre-emption by the National Labor Relations Act, and prohibitions against the use of zoning to regulate economic competition. Anticipating these objections, the UFCW and its allies can make a public record sufficient to insulate virtually any anti-superstore ordinance from being invalidated in court. But this cannot be accomplished easily or inexpensively, because enacting jurisdictions wanting to avoid remand will need to commission studies to fit the claimed rationales for these laws. Market impact assessments sensitive to the local trade area will almost always be required, and in a handful of states, including New York and California, so will environmental impact reports. If the UFCW and their grocery chain allies find the zoning effort too costly and cumbersome, they may wish to consider extending living wage controls to grocery workers, a move more likely to be resisted in the political arena than blocked by courts.