Retail Markups and Discount Store Entry
AbstractThe first paper, Retail Markups and Discount Store Entry, by Chenarides, Gomez, Richards,
and Yonezawa, studies the effect of entry of one hard-discount format on markups earned by
existing retail stores. The paper focuses on grocery markets in the Eastern U.S. to estimate storelevel
markups using the production-side approach by De Loecker and Warzynski (2012). The
research indicates that the net effect of hard-discounter entry reduces store profitability, regardless
of higher sales realized by incumbent retailers. Such insights are crucial because “hard discounters”
are retail formats that set retail food prices even lower than existing discount formats.
At the same time, they offer limited assortments and focus on store brands, implying that these
formats could significantly change the competitive food retail landscape.