Wal Mart and other multinational retailers vis-a-vis domestic chains: who offer lower prices?

What is it about?

Currently, there is no systematic evidence showing that, 15 years or more after entry, all multinational retailers provide lower prices than domestic buying groups. In the short term, some multinational retailers may lower prices to deter local competitors and attract consumers but we don't know in the long-run. Domestic competitors can integrate buying groups to share the benefit of economies of scale with multinational retailers, while holding lower profitability requirements and overhead costs than multinational retailers. We compared multinational retailers to domestic buying groups in a jurisdiction that had one of the highest proportions of Walgreens and Walmart stores in the world. Despite their market power, in our representative samples of goods, there is no evidence that the prices of multinational retailers in the sectors of pharmacies, supermarkets and hardware stores are lower than domestic chains.

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Why is it important?

Our findings debunk the conventional wisdom that multinational retailers always have lower prices and are, therefore, benefiting consumers. It calls for a long-term evaluation of the impact of multinational retailers. So far the literature evaluates short-term effects with little attention to the long-term effects. At the same time, this research points out the relevance of buying groups in enhancing entrepreneurship in the retail sector.

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