The impact of big-boxes on local retail : What happens when IKEA comes to town?

The development of large discount retailers, or big-boxes as they are sometimes referred to, are often subject to heated debate and their entry on a market is greeted with either great enthusiasm or dread. For instance, the world’s largest retailer Wal-Mart (Forbes 2014) has a number of anti- and pro-groups dedicated to its being and the event of a Wal-Mart entry tends to be met with protests and campaigns (Decamme 2013) but also welcomed by, for instance, consumers (Davis & DeBonis 2013). Also in Sweden, the entry of a big box is a hot topic and before IKEA’s opening i Borlänge 2013, the first in Sweden in more than five years, great expectations were mixed with worry (Västerbottens-Kuriren 2011).The presence of large scale discount retailers is not, however, a novel phenomenon but a part of a long-term change in retailing that has taken place globally over the past couple of decades (Taylor & Smalling, 2005). As noted by Dawson (2006), the trend in Europe has over the past few decades gone towards an increasing concentration of large firms along with a decrease of smaller firms.This trend is also detectable in the Swedish retail industry. Over the past decade, the retailing industry in Sweden has increased by around 190 Billion SEK, and its share of GDP has risen from 2,7% to 2,9%, while the number of employees have increased from 200 000 to 250 000 (HUI 2013). This growth, however, has not been distributed evenly but rather it has been oriented mainly towards out-of-town retail clusters. Parallel to this development, the number of large retailers has risen at the expense of market shares of smaller independent firms (Rämme et al 2010). Thereby, the presence of large scale retailers is simply part of a changing retail landscape.The effects of this development, where large scale retailing agents relocate shopping to out-of-town shopping areas, have been heavily debated. On the one hand, the big-boxes are accused of displacing independent small retail businesses in the city-centers and the residential areas, resulting in, to some extent, reduced employment opportunities and less availability for the consumers - especially the elderly (Ljungberg et al 2006). In addition, as access to shopping now tends to require some sort of a motorized vehicle, environmental aspects to the discussion have emerged. Ultimately these types of concerns have resulted in calls for regulations against this development (Olsson 2010). On the other hand, the proponents of the new shopping landscape argue that this evolution implies productivity gains, the benefits of lower prices and an increased variety of products (Maican & Orth 2012). Moreover it is argued that it leads to, for instance, better services (such as longer opening hours) and a creative destruction transformation pressure on retailers, which brings about a renewal of city-centerIIretail and services, increasing their attractivity (Bergström 2010). The belief in benefits of a big box entry can be exemplified by the attractivity of IKEA, and the fact that municipalities are prepared to commit to expenses amounting up to hundreds of millions in order to attract the entry of this big-box. Borlänge municipality, for instance, agreed to expenses of about 350 million SEK in order to secure the entry of IKEA, which opened in 2013 (Blomgren 2009).Against this backdrop, the overall effects of large discount retailers become important: Are the economic benefits enough to warrant subsidies or are there, on the contrary, some very compelling grounds for regulations against these types of establishments? In other words; how is overall retail in a region where a store like IKEA enters affected? And how are local retail firms affected?In order to answer these questions, the purpose of this thesis is to study how entry of a big-box retailer affects the entry region. The object of this study is IKEA - one of the world’s largest retailers, with 345 stores, active in over 40 countries and with profits of about 3.3 billion (IKEA 2013; IKEA 2014). By studying the effects of IKEA-entry, both on an aggregated level and on firm level, this thesis intends to find indications of how large discount retail establishments in general can be expected to affect the economic development both in a region overall, but also on the local firm level, something which is of interest to both policymakers as well as the retailing industry in general.The first paper examines the effects of IKEA on retail revenues and employment in the municipalities that IKEA chose to enter between 2000 and 2011; Gothenburg, Haparanda, Kalmar and Karlstad. By means of a matching method we first identify non-entry municipalities that have a similar probability of IKEA entry as the true entry municipalities. Then, using these non-entry municipalities as a control group, the causal effects of IKEA entry can be estimated using a treatment-control approach. We also extend the analysis to examine the spatial impact of IKEA by estimating the effects on retail in neighboring municipalities. It is found that a new IKEA store increases revenues in durable goods trade with 20% in the entry municipality and the number of employees with 17%. Only small, and in most cases statistically insignificant, negative effects were found in neighboring municipalities.It appears that there is a positive net effect on durables retail sales and employment in the entry municipality. However, the analysis is based on data on an aggregated municipality level and thereby it remains unclear if and how the effects vary within the entry municipalities. In addition, the data used in the first study includes the sales and employment of IKEA itself, which could account for the majority of the increases in employment and retail. Thereby the potential spillover effects on incumbent retailers in the entry municipalities cannot be discerned in the first study.IIITo examine effects of IKEA entry on incumbent retail firms, the second paper in this thesis analyses how IKEA entry affects the revenues and employment of local retail firms in three municipalities; Haparanda, Kalmar and Karlstad, which experienced entry by IKEA between 2000 and 2010. In this second study, we exclude Gothenburg due to the fact that big-box entry appears to have weaker effects in metropolitan areas (as indicated by Artz & Stone 2006). By excluding Gothenburg we aim to reduce the geographical heterogeneity in our study. We obtain control municipalities that are as similar as possible to the three entry municipalities using the same method as in the previous study, but including a slightly different set of variables in the selection equation. Using similar retail firms in the control municipalities as our comparison group, we estimate the impact of IKEA entry on revenues and employment for retail firms located at varying distances from the IKEA entry site.The results generated in this study imply that entry by IKEA increases revenues in incumbent retail firms by, on average, 11% in the entry municipalities. In addition, we do not find any significant impact on retail revenues in the city centers of the entry municipalities. However, we do find that retail firms within 1 km of the IKEA experience increases in revenues of about 26%, which indicates large spillover effects in the area nearby the entry site. As expected, this impact decreases as we expand the buffer zone: firms located between 0-2 km experiences a 14% increase and firms in 2-5 km experiences an increase of 10%. We do not find any significant impacts on retail employment.

Strategic alliances in a town centre : Stakeholder’s perceptions of property owner’s role

In order for town centres to manage increased competition in retailing, co-operation between stakeholders in a strategic alliance has become more important. A typical set of stakeholders in a strategic alliance for strengthening retailingare retailers, local authorities and property owners. The roles of retailer’sand local authorities’ are well researched. However, the role of property owners is not. The aim of this paper seeks to unfold the role of property owners in a strategic alliance. This is a case study of a medium-sized town in which semi-structured interviews with different stakeholders were conducted. In the chosen town there is a TCM alliance co-operation at work. The above mentioned stakeholders are possible members in an alliance. The case studied shows a fragmented property owner market with no dominant property owner, as it is in many medium-sized towns. Our study shows that many stakeholders look at the role of property owners as crucial for town centre development. However, property owners do not see that they can significantly contribute to or benefit from the development.The main reasons for this opinion are that they consider themselves as not having enough resources or the capability to influence the town development.

Out-of-town shopping and its induced CO2-emissions

Planning policies in several European countries have aimed at hindering the expansion of out-of-town shopping centers. One argument for this is concern for the increase in transport and a resulting increase in environmental externalities such as CO2-emissions. This concern is weakly founded in science as few studies have attempted to measure CO2-emissions of shopping trips as a function of the location of the shopping centers. In this paper we conduct a counter-factual analysis comparing downtown, edge-of-town and out-of-town shopping. In this comparison we use GPS to track 250 consumers over a time-span of two months in a Swedish region. The GPS-data enters the Oguchi’s formula to obtain shopping trip-specific CO2-emissions. We find that consumers’ out-of-town shopping would generate an excess of 60 per cent CO2-emissions whereas downtown and edge-of-town shopping centers are comparable.

The dying town syndrome : a survey of urban development in the Western District of Victoria,1890-1930

The experience of urban settlement in the Western District of Victoria suggests that the pattern of growth and decline in small towns is tied to the pattern of land use. This, in turn, is determined by the economic and technological factors which influence farm management and practices. At times, these factors have encouraged urban development and small towns have flourished. For the most part, however, these forces have not been conducive to sustaining long-term growth and prosperity and small towns, have been trapped in a cycle of growth and decline.

Using shopping mall attributes to revitalise Australian small town retailing

As has occurred in many smaller rural communities in America, Europe and Canada much of inland Australia has experienced population decline involving both a net loss of people a disproportionate ageing of the population and low average family incomes. Some Australian country towns have ceased to function as retail and administrative centres while other rural areas are faced with the prospect of losing critically important retail outlets and service providers. Australian rural towns are under threat from residents outshopping at nearby large regional centres leading to the loss of businesses and services in small service towns. This paper explores the possibility of how and why retailers and service providers in Australian country towns can and should emulate certain attributes of shopping malls in an attempt to stem the rise of outshopping. Using data collected in one small Australian rural community the paper comments on residents' perceptions of the strengths and weaknesses of retailing and the provision of services in their local community and what respondents thought should be done to diminish retail leakage from their town. Based on their responses it is clear that to remain competitive, retailers in smaller rural towns need to learn from the experience of shopping malls with whom they must now compete to survive. In this paper, it is argued that in certain areas this is not only possible, but essential if retailing is to remain viable in Australian country towns.

Terry Matassoni : a walk into town

An exhibition held at Stonington Stables Museum of Art, Deakin University, Toorak Campus 4 March - 12 April 2003. Terry Matassoni’s peopled urban landscapes speak of diversity and disconnectedness often depicting the isolation of people who are by necessity in close physical proximity to one another.

From country town to provincial city : Albury, 1934-1949

Examines the process of urbanisation in non-metropolitan New South Wales by focusing on the transition of Albury from country town to provincial city. The study traces changes in function, form, government and society.

Metamorphosis of a gold town : Stawell 1900-1940 : a study in local history

Examines the experience of the Wimmera town of Stawell as being representative of the early settlements created by gold rushes, and then threatened with extinction as the industry declined. Attention is paid to the role of community in Stawell's struggle to survive in the period between Federation and the Second World War. Reviews the economic and social processes involved in the eventual recovery. Argues that the forces of Stawell's historical legacy can be detected in the town's reaction to adversity after the closure of the last major mine in 1920.