This paper provides theoretical reasoning and empirical verification regarding why retail markets are often characterized by either homogeneous or heterogenous composition of merchandise, and how retail stores change in homogeneous merchandise markets...
This paper provides theoretical reasoning and empirical verification regarding why retail markets are often characterized by either homogeneous or heterogenous composition of merchandise, and how retail stores change in homogeneous merchandise markets (HOMO) and heterogenous merchandise markets (HETERO) respectively. Theoretically, it argues that HOMO is justified by localization economies and comparison shopping and HETERO by
urbanization economies and multi-purpose shopping in terms of agglomeration economies of urban economic theory and consumers’ behavior. Empirically, regression analyses based on 201 retail markets in Seoul demonstrate that the proportion of both store opening and closing is relatively low in HOMO and high in HETERO, while there is little difference in the change in total number of stores between the two during the 2011-2014 period. As the
result, the portfolio strategy is suggested in order to seek optimal mix between ‘low-risk, low-vitality’ HOMO and ‘high-risk, high-vitality’ HETERO.