1. The Evolution of Retail Markets in Metropolitan, Micropolitan and Rural Regions
October 18, 2005
Ron Jarmin, Shawn Klimek, and Javier Miranda
Center for Economic Studies, U.S. Census Bureau

2. Disclaimer
This paper was written by Census Bureau staff. It has undergone a more limited review than official Census Bureau publications. Any views, findings or opinions expressed in this paper are those of the authors and do not necessarily reflect those of the Census Bureau.

3. Trends in the U.S. Retail Sector
Overall sector growth
Significant increase in employment
Modest changes in the number of firms and, especially, establishments
Retail activity shifting from mom-and-pop stores to large retail chains

4. Significant Employment Growth

5. Modest Growth of Establishments

6. Growing Dominance of Chains

7. Long run trend in composition of retail sales

8. What are the factors behind these trends?
Technology (especially IT)
Suburbanization
Transportation Costs
Changes in consumer preferences
Small but growing literature examining retail market structure and evolution
Recent models try to explain observed market structure (e.g., coexistence of chains and mom-and-pops)
Empirical work limited to publicly available or narrowly focused datasets.

9. A first look… Data development Analysis of “local” markets
Distinguish between different types of retail firms
Detailed retail industries

10. Features of the Longitudinal Business Database
Requirements for measuring market structure and firm entry and exit at the county level
Longitudinal establishment level data
Firm ownership information
Industry classification
Employment (measure of level of activity)
Geography (state and county – or better?)

11. Types of Counties We use counties to delineate retail markets
Core Based Statistical Areas
CBSA-Metropolitan Areas
based on urbanized areas of 50,000 or more population
CBSA-Micropolitan Areas
based on urban clusters of at least 10,000 but less than 50,000 population
Non-CBSA “Rural” Areas

12. Characteristics of County Types

13. Types of Retail Firms Single Units – “Mom-and-Pops” Local Chains
Firms that operate in one location only
Local Chains
Firms that operate two or more retail establishments within one state
Regional Chains
Firms the operate retail establishments in 2 to 10 states
National Chains
Firms that operate retail establishments in more than 10 states

14. County level measures Market Structure (in per capita terms)
Number of firms
Number of establishments
Employment
Summarizing Results
By type of firm
By type of county
Long-run changes (1976 to 2000)
Retail sector
Selected two-digit SIC industries
Eating and Drinking Places
Food Stores

22. Measures of Firm Dynamics
Entry Rate : ERfct = Efct/Nct-1
Exit Rate : XRfct = Xfct/Nct-1
Continuer Rate : CRfct = Xfct/Nct-1
Turnover : TRfct = ERfct + XRfct
Net Entry : NEfct = ERfct – XRfct
where f={single, local, regional, national}
c=county
t=time

23. Summarizing the results
Average rates within county types
Metropolitan
Micropolitan
“Rural”
Average rates for various periods
All years
The 1980’s
The 1990’s

24. Results for Retail Sector
Negative net entry for single units
except metropolitan in the 1990’s
Positive net entry for all types of chains
except local chains in the 1990’s
On average, turnover rates are higher in larger markets
Strong decline in turnover rates between the 80’s and 90’s
except national chains

25. Turnover Differences Across Market Types

26. Turnover differences over time

27. Employment Weighted Results
Net entry contributes to substantial job losses for single units, and substantial job gains in chains
ESH-XSH = for single units (metro)
ESH-XSH = .005 for national chains (metro)
Employment weighted share of continuing national chains is growing over time across all market types

28. Conclusions
Provided more basic facts on the evolution of retail markets
LBD is the first longitudinal establishment level covering all of retail in the U.S. over a long time period
Noted differences between market types and between firm types in both the cross section and dynamics

29. Future work
Refine definitions of chain types to take distance into account
Change focus from per capita numbers to entry and exit rates
Construct detailed industry measures of entry and exit and use summary regressions
Analysis by cohort
Revised paper forthcoming in October