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Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices

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  • Charles J. Courtemanche
  • Art Carden
Abstract
Prior research shows grocery stores reduce prices to compete with Walmart Supercenters. This study finds evidence that the competitive effects of two other big box retailers - Costco and Walmart-owned Sam's Club - are quite different. Using city-level panel grocery price data matched with a unique data set on Walmart and warehouse club locations, we find that Costco entry is associated with higher grocery prices at incumbent retailers, and that the effect is strongest in cities with small populations and high grocery store densities. This could be explained by a segmented-market model, or by incumbents competing with Costco along non-price dimensions such as product quality or quality of the shopping experience. We find no evidence that Sam's Club entry affects grocery stores' prices, consistent with Sam's Club's focus on small businesses instead of consumers.

Suggested Citation

  • Charles J. Courtemanche & Art Carden, 2011. "Competing with Costco and Sam's Club: Warehouse Club Entry and Grocery Prices," NBER Working Papers 17220, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17220
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    Cited by:

    1. Charles J. Courtemanche & Joshua C. Pinkston & Christopher J. Ruhm & George L. Wehby, 2016. "Can Changing Economic Factors Explain the Rise in Obesity?," Southern Economic Journal, John Wiley & Sons, vol. 82(4), pages 1266-1310, April.
    2. Chenarides, Lauren & Gomez, Miguel I. & Richards, Timothy J. & Yonezawa, Koichi, 2021. "Retail Markups and Discount Store Entry," 2021 Annual Meeting, August 1-3, Austin, Texas 313348, Agricultural and Applied Economics Association.
    3. Ollinger, Michael & Ver Ploeg, Michele & Dicken, Chris, 2021. "Super Stores’ Impact on the Availability of Supplemental Nutrition Assistance Program-Approved Stores," Economic Research Report 327192, United States Department of Agriculture, Economic Research Service.
    4. Zeballos, Eliana & Dong, Xiao & Islamaj, Ergys, 2023. "A Disaggregated View of Market Concentration in the Food Retail Industry," USDA Miscellaneous 333546, United States Department of Agriculture.
    5. P. J. Glandon & Matthew Jaremski, 2014. "Sales and Firm Entry: The Case of Wal‐Mart," Southern Economic Journal, John Wiley & Sons, vol. 81(1), pages 168-192, July.
    6. Hunt Allcott & Rebecca Diamond & Jean-Pierre Dubé & Jessie Handbury & Ilya Rahkovsky & Molly Schnell, 2019. "Food Deserts and the Causes of Nutritional Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(4), pages 1793-1844.
    7. Charles Courtemanche & Art Carden & Xilin Zhou & Murugi Ndirangu, 2019. "Do Walmart Supercenters Improve Food Security?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(2), pages 177-198, June.
    8. Emek Basker, 2015. "Change at the Checkout: Tracing the Impact of a Process Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 339-370, June.
    9. Emek Basker & Muhammad Taimur Khan, 2016. "Does the Minimum Wage Bite into Fast-Food Prices?," Journal of Labor Research, Springer, vol. 37(2), pages 129-148, June.
    10. Meilin Ma & Tina L Saitone & Richard J Volpe & Richard J Sexton & Michelle Saksena & Craig GundersenEditor, 2019. "Market Concentration, Market Shares, and Retail Food Prices: Evidence from the U.S. Women, Infants, and Children Program," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 41(3), pages 542-562.
    11. Lauren Chenarides & Miguel I. Gómez & Timothy J. Richards & Koichi Yonezawa, 2024. "Retail Markups and Discount-Store Entry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(1), pages 147-181, February.
    12. Zipitría, Leandro, 2011. "Impacto económico del Supermercadismo [The Economics of Supermarkets: A Brief Literature Review]," MPRA Paper 28419, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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