Joint SOSC/ECON Seminar - Rising Retail Concentration: Superstar Firms and Household Demand

This paper documents an increase in household concentration in the US retail sector using micro-data from 2004-2019. Despite a growing number of stores locally, households visit fewer stores, do more one-stop shopping, and increasingly shop at different retailers from each other. We show that these trends are consistent with negligible changes in local concentration and rising national concentration. We find that the increasing availability of superstar retailers, rises in product variety, and increases in households’ opportunity cost of time contribute to these trends. We develop a model that can rationalize these results. Our calibrated model shows that household concentration is tightly linked to markups and that its rise led to a 5 percentage point increase in aggregate markups.