New thesis examines competitive pressure in the grocery sector

On Friday 6 November Emil Mathias Strøm Halseth will hold a trial lecture on a prescribed topic and defend his thesis for the PhD degree at NHH.

Title of the thesis:

«Essays in the Industrial Organization of Grocery Retail Markets»

Summary:

When consumers are dissatisfied with prices or what a store offers, they can switch stores, shop across the border, or wait for products to go on sale. Such choices put pressure on grocery retailers. Emil Mathias S. Halse examines different aspects of this competitive pressure through three studies of changes in store formats following an acquisition, cross-border shopping, and consumers’ price knowledge.

The first study examines Coop’s acquisition of ICA in 2015, which reduced the number of major grocery groups from four to three. When acquired stores were converted to Extra, sales fell at nearby Kiwi stores. This implies that the Extra stores were tougher competitors for Kiwi than the stores they replaced. The findings suggest that competition can strengthen even as the number of owners falls. Merger assessments should therefore also consider how the combination of different store formats and resources may affect competition.

The second study uses border closures during the COVID-19 pandemic to examine how cross-border shopping affects Norwegian grocery stores and government tax revenue. The effects are strongest near Sweden but extend to areas around two hours’ drive from the border. Using 2019 as a benchmark, cross-border shopping is estimated to reduce annual Norwegian revenue from value-added and excise taxes on goods sold in grocery stores by approximately NOK 2.3 billion. The study shows how consumers’ ability to shop in a neighbouring country limits revenue from domestic taxes.

The third study links a survey of price knowledge among more than 2,000 households to 18 months of purchase records. Consumers with better price knowledge pay lower prices by buying products when they are on sale. This relationship persists after accounting for shopping habits, household characteristics, and how price-conscious they say they are. The findings suggest that easier access to price information could help more consumers take advantage of sales and thereby strengthen competition.