EconPapers    
Economics at your fingertips  
 

Surviving Competition: Neighborhood Shops vs. Convenience Chains

Miguel Talamas Marcos

No 13018, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Hundreds of millions of microenterprises in emerging economies face increased competition from the entry and expansion of large firms that offer similar products. This paper studies how one of the world's most prevalent microenterprises, neighborhood shops, confront competition from convenience chains (e.g., 7-Eleven) in Mexico. To address the endogeneity in time and location of chain store openings, I pair two-way fixed effects with a novel instrument that, at the neighborhood level, shifts the profitability of chains but not of shops. An expansion from zero to the average number of chain stores in a neighborhood reduces the number of shops by 15%. This reduction is not driven by increased shop exits but by decreased shop entries. Shops retain their sales of fresh products and 96% of their customers, but customers visit shops less often and spend less on non-fresh and packed goods. The evidence suggests that shops survive by exploiting comparative advantages stemming from being small and owner-operated, such as lower agency costs, relationships with the community, broader and tailored product mix, and informal credit. The welfare gains of convenience chains replacing shops are increasing in household income.

Keywords: Development; microenterprise dynamics; Competition; entry (search for similar items in EconPapers)
JEL-codes: D22 D25 D40 O10 (search for similar items in EconPapers)
Date: 2023-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://publications.iadb.org/publications/english ... nvenience-Chains.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:13018

DOI: 10.18235/0005065

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().

 
Page updated 2025-03-30
Handle: RePEc:idb:brikps:13018