Publication:
Inferring the economics of store density from closures: the Starbucks made

Placeholder

School / College / Institute

Program

KU Authors

Co-Authors

Publication Date

Language

Embargo Status

Journal Title

Journal ISSN

Volume Title

Alternative Title

Abstract

This paper proposes a method that makes use of firms' mass store closures to measure the store network effects of cannibalization and density economies. I calculate each store's contribution to chain-level profits via one-store perturbations on the set of retained stores, and map these onto the firm's closure choices. To separate the demand and supply-side store network effects, I exploit the fact that the business-stealing effect intensifies with local network density, whereas the supply-side disadvantage prevails at sparse regions of the network. I apply the method to study the Starbucks chain. The average rate of cannibalization imposed by a neighbor outlet is 1.2% within one mile and 0.4% within one to three miles. For remote outlets, operation costs increase by 0.3% of revenues for each mile of distance from the network. Counterfactual analyses suggest that income level is a more important determinant of demand than population count at low levels of store penetration, whereas high-population regions can sustain denser store networks because of the softening of the cannibalization effect.

Source

Publisher

Informs

Subject

Business

Citation

Has Part

Source

Marketing Science

Book Series Title

Edition

DOI

10.1287/mksc.2017.1078

item.page.datauri

Link

Rights

Copyrights Note

Endorsement

Review

Supplemented By

Referenced By

0

Views

0

Downloads

View PlumX Details