Staying small, staying strong? Retail store underexpansion and retailer profitability

Scott Fay, Cong Feng, Pankaj C. Patel

Research output: Contribution to journalArticlepeer-review

Abstract

Drawing upon the literatures on threat rigidity, the resource-based view of the firm, and investment efficiency, we study the relationship between store underexpansion and retailer profitability. We conceptualize underexpansion as a strategy that can encourage a retailer to operate consistently fewer and smaller stores compared to those expected based on sales. Developing a novel metric that operationalizes this conceptualization and counter to our expectations, we find that underexpansion has a non-negative effect on retailer profitability in the presence of moderators. Specifically, our marginal effect analysis suggests that a better corporate culture, higher selling, general, and administrative (SG&A) capital, and higher intangibility can outweigh the negative direct effect of underexpansion, leading to a positive marginal effect of underexpansion on profitability. These results imply that retailers could benefit from adopting an underexpansion strategy if they have adequate corporate culture, sufficient SG&A capital, or a significant amount of intangible assets.

Original languageEnglish (US)
Pages (from-to)663-678
Number of pages16
JournalJournal of Business Research
Volume144
DOIs
StatePublished - May 2022
Externally publishedYes

Keywords

  • Corporate culture
  • Intangibility
  • Profitability
  • SG&A capital
  • Store underexpansion

ASJC Scopus subject areas

  • Marketing

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