Title
Shopping Activity at Warehouse Club Stores and Its Competitive and Network-Density Implications
Document Type
Article
Publication Date
Summer 6-2-2020
Journal Title
Production and Operations Management
DOI
https://doi.org/10.1111/poms.13226
Version
Post-print: the version of the article having undergone peer review but prior to being published
Disciplines
Business | Business Administration, Management, and Operations | Management Sciences and Quantitative Methods | Operations and Supply Chain Management
Abstract
Warehouse club (WC) retailers have typically expanded to new markets using stand‐alone stores, rather than pursuing dense store networks as other (non‐WC) retailers have in the past. While this strategy generates operating efficiencies, it also imposes high travel costs on households to shop, which calls into question WC stores’ resilience to spatial competition from stores operating other formats. We examine this phenomenon by using data on households’ shopping activity across markets served by Costco Wholesale stores. Specifically, we evaluate these stores’ resilience to spatial competition by estimating the share of households’ expenditures relative to travel costs to shop at the stores and comparing this estimate with that for non‐WC stores. Controlling for households’ travel costs across Costco and non‐WC stores, we find that households’ share of expenditures at Costco stores exceeds the share at non‐WC stores by 61%. This suggests that Costco stores have an advantage over non‐WC stores when serving market areas with sparse store networks. Nevertheless, we also find that this advantage diminishes with the distance between Costco stores and households and that there is a finite distance beyond which this advantage disappears. We show that this distance (approximately 21 miles) is an important reference point for the evaluation of spatial competition between Costco stores and other stores and the examination of demand saturation at Costco stores.
Digital USD Citation
Lim, Stanley Frederick W.T.; Rabinovich, Elliot; Park, Sungho; and Hwang, Minha, "Shopping Activity at Warehouse Club Stores and Its Competitive and Network-Density Implications" (2020). School of Business: Faculty Scholarship. 12.
https://digital.sandiego.edu/busnfaculty/12
Included in
Business Administration, Management, and Operations Commons, Management Sciences and Quantitative Methods Commons, Operations and Supply Chain Management Commons
Notes
This is the peer reviewed version of the following article: Lim, S.F.W.T..,et al. Shopping Activity at Warehouse Club Stores and Its Competitive and Network‐Density Implications. Production and Operations Management (2020) which has been published in final form at https://doi.org/10.1111/poms.13226. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.