The Impact of Organic Specialist Store Entry on Category Performance at Incumbent Stores

Abstract

Premium organic retailers are specialist retailers that exclusively offer organic products. Prior literature has not studied their entry, focusing instead on the impact of generalist store entry. This study examines the impact of premium organic specialist store entry on category performance at incumbent generalist stores for 47 packaged food and beverage categories. The results indicate that incumbent stores lose sales after a local organic store entry and that the impact of price on sales at generalist stores becomes stronger. The authors postulate that incumbent stores can reduce sales losses by reducing the relative distinctiveness of the entrant along three dimensions: variety, price–quality, and authenticity. Empirical results show that more variety in organic products, as well as more organic feature and display advertising, protect generalist stores from premium organic specialist store entry. Assortments composed of premium organic products are harmed less, whereas assortments in which organic products are subject to more frequent and deeper price promotions are harmed more. Furthermore, including products from an organic specialist brand in generalists’ organic assortments offers additional protection.