Mom-and-pop meet big-box: Complements or substitutes?

 
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Since the mid-1970s, chain retailers have grown significantly in the United States, and now account for a substantial share of retail sales and employment in the retail sector. This rise has raised concerns about the stores’ impact on smaller, family-owned retailers. The advancement of chain retailers is said to have caused the closing of smaller establishments, the decline in downtown retail districts and increased unemployment.

The validity of these preconceptions is examined in a 2009 paper by the University of Maryland and the Center for Economic Studies, “Mom-and-Pop Meet Big-Box: Complements or Substitutes?” This study quantifies the effects of the entry and growth of multi-store retailers within the Washington, D.C., metropolitan area.

Key findings include:

  • Employment growth and survival of independent stores and smaller chains that operate in the same industry as a big-box chain are negatively affected by the entry and growth of big-box stores.
  • Most of the negative effect is due to smaller stores being forced to close rather than reducing the scale of their operations. The negative effect is greatest for stores that are located within one to five miles of a big-box store.
  • In terms of smaller chain stores in other sectors, the results are mixed.  The one positive big-box effect is on smaller chain restaurants.

Tags: economy, employment

    Writer: | Last updated: February 26, 2010

    Citation: Haltiwanger, John C.; et al, "Mom-and-Pop Meet Big-Box: Complements or Substitutes?", National Bureau of Economic Research, September 2009, Working Paper No. 15348.
     

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