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When Walmart Enters: How Incumbent Retailers React and How This Affects Their Sales Outcomes

Journal of Marketing Research (JMR), 2009

51 Pages Posted: 21 Jan 2015  

Kusum L. Ailawadi

Tuck School of Business at Dartmouth

Jie Zhang

Stephen M. Ross School of Business at the University of Michigan

Aradhna Krishna

University of Michigan, Stephen M. Ross School of Business

Mike Kruger

Dominican University

Date Written: June 1, 2009

Abstract

The authors examine incumbent retailers’ reactions to a Wal-Mart entry and the impact of these reactions on the retailers’ sales. They compile a unique dataset which represents a natural experiment consisting of incumbent supermarket, drug, and mass stores in the vicinity of seven Wal-Mart entries and control stores not exposed to the entries. The dataset includes weekly store movement data for 46 product categories before and after each entry and allows them to measure reactions and sales outcomes using a before-and-after-with-control-group analysis. They find that, overall, incumbents suffer significant sales losses due to Wal-Mart entry, but there is substantial variation across retail formats, stores, and categories both in incumbent reactions and in their sales outcomes. Moreover, they find that a retailer’s sales outcomes are significantly affected by its reactions, and the relationship between reactions and sales outcomes varies across retail formats. These findings provide valuable insights on how retailers in different formats can adjust their marketing mix to mitigate the impact of Wal-Mart entry.

Suggested Citation

Ailawadi, Kusum L. and Zhang, Jie and Krishna, Aradhna and Kruger, Mike, When Walmart Enters: How Incumbent Retailers React and How This Affects Their Sales Outcomes (June 1, 2009). Journal of Marketing Research (JMR), 2009. Available at SSRN: https://ssrn.com/abstract=2552149

Kusum Ailawadi (Contact Author)

Tuck School of Business at Dartmouth ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-2845 (Phone)
603-646-1308 (Fax)

Jie Zhang

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Aradhna Krishna

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Mike Kruger

Dominican University ( email )

7900 West Division Street
River Forest, IL 60305
United States

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