Retail Productivity: The Effects of Market Size and Regional Hierarchy

How important is regional hierarchy for retailers’ productivity? This paper investigates the determinants of independent retailers’ productivity in Sweden between 2002 and 2008 with respect to market size and regional hierarchy. Using an accessible market potential approach, the impact of the potential demand in close proximity, and in the region is investigated separately for stores in central and peripheral retail markets. The findings suggest that the market size in close proximity has a higher impact on the productivity of stores located in central markets, whereas the market potential in the region has similar productivity returns for both stores in central markets and stores in non-central markets.