Staying small, staying strong? Retail store underexpansion and retailer profitability

Scott Fay, Cong Feng and Pankaj C. Patel

Journal of Business Research, 2022, vol. 144, issue C, 663-678

Abstract: Drawing upon the literatures on threat rigidity, the resource-based view of the firm, and investment efficiency, we study the relationship between store underexpansion and retailer profitability. We conceptualize underexpansion as a strategy that can encourage a retailer to operate consistently fewer and smaller stores compared to those expected based on sales. Developing a novel metric that operationalizes this conceptualization and counter to our expectations, we find that underexpansion has a non-negative effect on retailer profitability in the presence of moderators. Specifically, our marginal effect analysis suggests that a better corporate culture, higher selling, general, and administrative (SG&A) capital, and higher intangibility can outweigh the negative direct effect of underexpansion, leading to a positive marginal effect of underexpansion on profitability. These results imply that retailers could benefit from adopting an underexpansion strategy if they have adequate corporate culture, sufficient SG&A capital, or a significant amount of intangible assets.

Keywords: Store underexpansion; Corporate culture; SG&A capital; Intangibility; Profitability (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:144:y:2022:i:c:p:663-678

DOI: 10.1016/j.jbusres.2022.02.022

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