Rural Food Retailing and Independent Grocery Retailer Exits

Abstract

We investigate the food retailing landscape and the exit of independent grocery stores in rural America using U.S. NETS data. Our paper makes several contributions that could potentially help the agenda for future research and public policy. We begin by documenting local concentration trends in food retailing and how they change across rural and urban markets from 1990 to 2015. Then, we conduct two event studies to examine how entry by a large chain is associated with the local market concentration and independent grocery retailer (IGR) exits. Last, we document the IGR exit rate in rural markets for a period of twenty‐five years and investigate its determinants in a regression framework. Our results show that market concentration in food retailing has increased since 1990, but the increasing trend after the Great Recession of 2008 is particularly noticeable. The local concentration differs substantially by the urban status of markets. Focusing on rural markets, we show that entry by a large food retailer is associated with higher market concentration and the decreasing number of IGRs. We also find that the annual average IGR exit rate is around 6.6% during the study period. The IGRs that are younger that operate in relatively more competitive markets, and that face entry by a large chain, are more likely to exit. Also, IGR rates are higher in markets with lower median income and higher poverty rates. We discuss how our results can potentially inform policies on sustainable rural development, food access, and food insecurity in rural communities.

COVID‐19 and fresh produce markets in the United States and China

“…Second, the 2008 recession accelerated the market concentration in food retailing, mostly due to the exit of small, independent food retailers. Notably, in rural America, the independent grocery retailers' exit rate increased from an average of 6% to an average of 10% after the recession (Çakır et al, 2020). In the current recession, such an effect may not be observed in food retailing due to the substantial increase in demand.…”

Dollar store expansion and independent grocery retailer contraction

“…Our empirical strategy relies on a detailed historical account of U.S. food retail business information at the establishment level from 2000 to 2019. We exploit the spatial and temporal features of our dataset to estimate the effects of dollar store entry on the economic outcomes of incumbent independent grocery retailers (Arcidiacono et al, 2020;Çakir et al, 2020;Chenarides et al, 2023). The empirical model is applied to the number (count), employment, and sales of independent grocery retailers at the census-tract-year level.…”

“…This choice implies that our main results are conditional on those fixed effects absorbing the unobserved correlation at those levels that could potentially bias our estimates. Related empirical studies rely on various fixed effects structures when estimating the entry effects in grocery retail markets (see, e.g., Arcidiacono et al, 2020;Çakir et al, 2020;Caoui et al, 2023;Chenarides et al, 2023). To test the robustness of our main results to the choice of the fixed effects, we estimate Equation 1 excluding the linear market trends in Model (1) and adding state-year fixed effects in Model (2) and county-year fixed effects in Model (3), as presented in Appendix Table A.6.…”

“…Thus, our findings enhance those by Çakir et al (2020), Caoui et al (2023), and Chenarides et al (2023) by offering insights into how the dollar store entry effect operates across extensive and intensive margins and showing that dollar store entry harms independent grocery retailers, increasing their exit probability and reducing their employment and sales. Second, from a methodological standpoint, we add to the literature concerned with spatial dynamics of entry effects, using event studies, as well as heterogeneous effects of dollar store entry in local food markets (Çakir et al, 2020;Chenarides, Bonanno, & Palmer, 2021;Chenarides, Cho, et al, 2021;Grigsby-Calage et al, 2021;Shannon, 2021). Event studies indicate that the adverse impact on sales and employment of independent grocery retailers disappears gradually in urban areas but persists in rural communities.…”

“…An emerging literature studies the implications of dollar store entry on the U.S. grocery retail market structure and performance. Çakir et al (2020) assess concentration trends in food retailing and point toward the growing role of dollar stores in the grocery retail market. Grigsby‐Calage et al (2021) study the spatial dimension of dollar store expansion and suggest that given their small market areas, low costs, and low prices, dollar stores can operate in competitive environments that conventional grocers or larger big‐box discounters cannot survive in.…”