Why are convenience stores clustered? The reasons behind the clustering of similar shops and the effect of increased competition

Abstract

Similar stores, when clustered in urban locations, often close down; many scholars have explained this phenomenon using Hotelling’s theory. However, empirically, several studies have found that competition between rivals causes stores to move away from each other, exhibiting a repulsive force. By contrast, other studies insist that customers strongly drive the agglomeration of retail rivals. This study chooses convenience stores as an experimental subject to investigate why similar shops cluster in an area and to assess the results of increasing levels of competition. By combining various types of big-data sources including convenience stores’ revenues, diverse consumer factors, and built environments, this study found that retail shops cluster to earn revenue by exploiting the consumer purchasing capacity in an area. This benefit, however, disappears when the competition increases beyond a certain threshold. By controlling for the numbers of pedestrians, residents, and employees, this study is the first to explain why similar shops cluster in urban districts and to show the limitations of retail rivals’ clustering.