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An empirical investigation of Wal-Mart's expansion into food retailing

Bonanno, Alessandro
Agribusiness 2010 v.26 no.2 pp. 220-242
supermarkets, food retailing, retail marketing, business planning, decision making, business development, rural areas, population density, Supplemental Nutrition Assistance Program, marketing strategies, United States
After revolutionizing the concept of mass merchandising with its Discount Stores, Wal-Mart has entered food retailing with its Supercenters, and has become the largest food retailer in the United States. Despite its relevance, little empirical research has focused on explaining the company's entry and expansion into food retailing. Wal-Mart's expansion into food retailing through its store conversion strategy is analyzed using an industrial organization entry framework. The results show that Wal-Mart's store conversion strategy has targeted largely populated areas with low population density, a high percentage of population receiving food stamps, and where the presence of incumbents is modest. The results also provide evidence that as the company moves toward saturation of local markets and increases store conversion rates, it may be forced to reconsider some of its strategic decisions based on the exploitation of economies of density and store conversion.