[6] Can a SSM and Traditional Market Win-Win When a SSM Owns an Exclusive Competitive Advantage?
Journal of Distribution and Management Research, Dec.2023, 26 (6), pp.5-15
[Abstract]
Purpose: Aiming to revitalize traditional markets that have been on a steady downturn over the past decades, Korean government strives for ”win-win“ between a super-supermarket (henceforth, SSM) and traditional market by inducing supermarket shoppers to make another trip to the traditional market to buy goods on their shopping list. This paper investigates whether such a multi-stop shopping arises and both markets can win-win when the SSM has a competitive edge for every product over the traditional market.
Research design, data, and methodology: For this purpose, this article adapts the framework of Brandão et al. (2014) that consider the Hotelling competition between multi-product firms differing in the modes of retail−unlike the products sold in the SSM, the prices of which are determined coordinately to maximize the joint profit, those in the traditional market are charged independently to maximize the profit of its own.
Results: The results show that as long as the traditional market lacks the competitive edge for every product, there is no multi-stop shopping behavior at the equilibrium in which consumers purchase goods from both stores. In other words, the win-win strategy of the Korean government that promotes cooperation between the two types of markets by encouraging supermarket shoppers to visit the traditional market, certainly fails. Furthermore, we find that there still exists no such an equilibrium even when the retail mode of traditional market is switched to the modes of SSM, implying that the sufficient condition to make the win-win strategy effective lies not in the way a store is organized but in how the competitive advantages are distributed among the products and stores.
Implications: In light of Lee & Kim (2023) that show the existence of a multistop shopping equilibrium when one store has store loyalty for (only) one product (not for both), our result implies that in order for both stores to win-win, the government needs to support the traditional market that enables it to foster its own strength for any product to the extent to which it offsets the store loyalty to the SSM.
Purpose: Aiming to revitalize traditional markets that have been on a steady downturn over the past decades, Korean government strives for ”win-win“ between a super-supermarket (henceforth, SSM) and traditional market by inducing supermarket shoppers to make another trip to the traditional market to buy goods on their shopping list. This paper investigates whether such a multi-stop shopping arises and both markets can win-win when the SSM has a competitive edge for every product over the traditional market.
Research design, data, and methodology: For this purpose, this article adapts the framework of Brandão et al. (2014) that consider the Hotelling competition between multi-product firms differing in the modes of retail−unlike the products sold in the SSM, the prices of which are determined coordinately to maximize the joint profit, those in the traditional market are charged independently to maximize the profit of its own.
Results: The results show that as long as the traditional market lacks the competitive edge for every product, there is no multi-stop shopping behavior at the equilibrium in which consumers purchase goods from both stores. In other words, the win-win strategy of the Korean government that promotes cooperation between the two types of markets by encouraging supermarket shoppers to visit the traditional market, certainly fails. Furthermore, we find that there still exists no such an equilibrium even when the retail mode of traditional market is switched to the modes of SSM, implying that the sufficient condition to make the win-win strategy effective lies not in the way a store is organized but in how the competitive advantages are distributed among the products and stores.
Implications: In light of Lee & Kim (2023) that show the existence of a multistop shopping equilibrium when one store has store loyalty for (only) one product (not for both), our result implies that in order for both stores to win-win, the government needs to support the traditional market that enables it to foster its own strength for any product to the extent to which it offsets the store loyalty to the SSM.