Our colleagues and experts on competition economics, Charlotte Evensen and Simen Ulsaker, have had an article accepted in the prestigious Journal of the European Economic Association. The article is coauthored with Professor Frode Steen (NHH Norwegian School of Economics) and investigates competition between grocery stores and general merchandise stores, asking: How is a grocery store affected when a variety discount stores establishes itself in the area?
Variety discount stores are stores with a wide range of products, including food and non-food products, and these stores are taking an increasingly larger share of the grocery market. Charlotte and Simen have examined how grocery stores’ sales are affected by the proximity of newly established variety discount store. The consequences for the grocery store depend on how close the variety discount store establishes itself. If a variety discount store has a shared parking lot with the grocery store, so that customers can reach both stores with one stop, then the establishment of the variety discount store has a positive effect on sales and customer numbers of the grocery store. However, the effect becomes negative if the grocery store and the variety discount stores are not accessible from the same parking lot.
In summary, the establishment of a VDS has two effects on the grocery store: (1) it creates stronger competition for certain types of products, and (2) it has a pull effect that can bring more customers and sales to the grocery store. Which effect dominates depends on whether the grocery and variety discount store can be accessed from the same parking lot.
You can read more about our work within competition and market analysis on this page.
