Who Benefits from Store Brand Entry?
Marketing Science
Understanding Store-Brand Purchase Behavior Across Categories
Marketing Science
Editorial: Does Good Marketing Cause Bad Unemployment?
Marketing Science
Market Structure Across Retail Formats
Marketing Science
Dynamic Customer Management and the Value of One-to-One Marketing
Marketing Science
Intra-and Interformat Competition Among Discounters and Supermarkets
Marketing Science
A Regime-Switching Model of Cyclical Category Buying
Marketing Science
Predicting customer churn through interpersonal influence
Knowledge-Based Systems
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This paper provides an empirical study of entry by a Wal-Mart supercenter into a local market. Using a unique frequent-shopper database that records transactions for over 10,000 customers, we study the impact of Wal-Mart's entry on consumer purchase behavior. We develop a joint model of interpurchase time and basket size to study the impact of competitor entry on two key household decisions: store visits and in-store expenditures. The model also allows for consumer heterogeneity due to observed and unobserved factors. Results show that the incumbent supermarket lost 17% volume---amounting to a quarter million dollars in monthly revenue---following Wal-Mart's entry. Decomposing the lost sales into components attributed to store visits and in-store expenditures, we find that the majority of these losses were due to fewer store visits with a much smaller impact attributed to basket size. We also find that Wal-Mart lures some of the incumbent's best customers, and that retention of a small number of households can significantly reduce losses at the focal store. Finally, certain observed household characteristics such as distance to store, shopping behavior, and product purchase behavior are found to be useful in profiling the defectors to Wal-Mart. Implications and strategies for supermarket managers to compete with Wal-Mart are discussed.