Retail Format as a Barrier to Entry

Abstract

“Barriers to entry” form a key construct in strategy scholarship and pedagogy. However, limited empirical evidence exists for many putative barriers. For example, although considerable evidence suggests that managers perceive the existence of significant distribution-related barriers to entry, there is virtually no empirical evidence for distribution’s actual role as an entry barrier. We exploit a field experiment conducted by Systembolaget, the Swedish government alcohol retail monopoly, and examine the role of changes in distribution through a randomized change from counter-service to self-service stores. We find that self-service stores sell much higher product variety and new entrants do better in self-service stores. The increase in variety is comparable to the change from catalog sales to internet.

Keywords: field experiments, barriers to entry, market concentration, retail, alcohol

JEL Classification: L10, L50