The impact of Walmart supercenter conversion on consumer shopping behavior

Minha Hwang, Sungho Park

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)817-828
Number of pages12
JournalManagement Science
Volume62
Issue number3
DOIs
StatePublished - Mar 1 2016

    Fingerprint

Keywords

  • Consumer shopping behavior
  • Demand externality
  • Interformat competition
  • One-stop shopping
  • Retailer competition
  • Revenue economy of scope
  • Walmart supercenter

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

Cite this