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The Evolution of U.S. Retail Concentration

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  • Dominic A. Smith
  • Sergio Ocampo

Abstract

Increases in national concentration have been a salient feature of industry dynamics in the U.S. and have contributed to concerns about increasing market power. Yet, local trends may be more informative about market power, particularly in the retail sector where consumers have traditionally shopped at nearby stores. We find that local concentration has increased almost in parallel with national concentration using novel Census data on product-level revenue for all U.S. retail stores between 1992 and 2012. The increases in concentration are broad based, affecting most markets, products, and retail industries. We show that the expansion of multi-market firms into new markets explains most of the increase in national retail concentration, with consolidation via increases in local market shares increasing in importance between 1997 and 2007, and single-market firms playing a negligible role. Finally, we find that increases in local concentration can explain one-quarter to one-third of the observed rise in retail gross margins.

Suggested Citation

  • Dominic A. Smith & Sergio Ocampo, 2022. "The Evolution of U.S. Retail Concentration," Papers 2202.07609, arXiv.org, revised Oct 2023.
  • Handle: RePEc:arx:papers:2202.07609
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    References listed on IDEAS

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    1. Emek Basker, 2005. "Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 174-183, February.
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    3. Peter Arcidiacono & Patrick Bayer & Jason R. Blevins & Paul B. Ellickson, 2016. "Estimation of Dynamic Discrete Choice Models in Continuous Time with an Application to Retail Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(3), pages 889-931.
    4. John Haltiwanger & Ron Jarmin & C. J. Krizan, 2010. "Mom-and-Pop Meet Big-Box: Complements or Substitutes?," NBER Chapters, in: Cities and Entrepreneurship, National Bureau of Economic Research, Inc.
    5. Ben Lipsius, 2018. "Labor Market Concentration does not Explain the Falling Labor Share," 2018 Papers pli1202, Job Market Papers.
    6. Ron S Jarmin & Javier Miranda, 2002. "The Longitudinal Business Database," Working Papers 02-17, Center for Economic Studies, U.S. Census Bureau.
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    Cited by:

    1. Oz Shy, 2021. "College Education, Earning Inequality, and Market Power," Journal of Labor Research, Springer, vol. 42(3), pages 334-357, December.
    2. David Autor & Christina Patterson & John Van Reenen, 2023. "Local and national concentration trends in jobs and sales: The role of structural transformation," POID Working Papers 069_updated, Centre for Economic Performance, LSE.
    3. Giroldo, Renato & Hollenbeck, Brett, 2021. "Concentration, Retail Markups, and Countervailing Power: Evidence from Retail Lotteries," MPRA Paper 109039, University Library of Munich, Germany.

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    JEL classification:

    • L8 - Industrial Organization - - Industry Studies: Services

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