Why are Walmart and Target Next-Door neighbors?

Essays on merchant-generated contents and merchant-to-merchant spillovers in e-commerce platform

“…Firms' agglomeration has been extensively studied in previous literature (Clapp et al, 2019;Glaeser, Kallal, Scheinkman, & Shleifer, 1992;Hausman & Leibtag, 2007;Myles Shaver & Flyer, 2000;Quigley, 1998;Schuetz, 2015). It is first mentioned in the Hotelling model ( 1929) that firms tend to locate together.…”

“…Some researchers claim that firms can benefit from agglomeration because their neighbors can be served as complementary functions. Schuetz (2015) points out that if firms cannot differentiate their products, and if consumers can compare prices, then firms will locate far away from their competitors instead of clustering together. He finds that new Big Box stores tend to locate near other Big Box stores that sell products in other sectors.…”

“…On one hand, retailers could be beneficial to each other because of demand-side externalities. For instance, the reputation of competitors may attract more consumers to the marketplace (Chung & Kalnins, 2001), or the variety of products may make consumers more likely to find their optimal products (Schuetz, 2015;Stephen & Toubia, 2010), or the intensified competition indicates a credible commitment to low prices (Dudey, 1990). On the other hand, retailers' revenue may be harmed by others due to the presence of competitors and substitute products.…”

“…Existing literature has shown the benefits of agglomeration by testing merchant's entry or expansion decisions (Myles Shaver & Flyer, 2000;Schuetz, 2015;Shen & Xiao, 2014;Vitorino, 2012). A question is naturally raised.…”

“…Some researchers claim that firms can benefit from agglomeration because their neighbors can be complementary to them in terms of product categories, price, or quality, etc. (Clapp, Ross, & Zhou, 2019;Picone, Ridley, & Zandbergen, 2009;Schuetz, 2015). Other researchers argue that even firms cluster to their competitors with similar products they can also benefit from others by demand expansion and market learning effect (Li, Shen, & Bart, 2018;Shen & Xiao, 2014;Toivanen & Waterson, 2005;Yang, Lu, & Lu, 2014).…”