Abstract
Aldi, the biggest discounter in Germany, started to systematically extend shopping hours of its stores in 2016. We interpret the decision to extend opening hours of a specific Aldi store as entry into a new market. By using a novel data set containing the opening hours of nearly all German grocery retailers, we find the following interesting correlations: The probability that a given Aldi outlet extends its shopping hours past 8 p.m. (i) increases if nearby Aldi outlets already extended shopping hours and (ii) decreases if nearby stores run by Aldi’s close competitors did not expand shopping hours past 8 p.m.. These results seem surprising in conjunction with cannibalization and residual demand, but can be explained by consumer and firm learning or market expansion.
Similar content being viewed by others
Notes
Aldi has 4,195 stores and Lidl, the second largest discounter, 3,187 outlets (See Section 5).
Exceptions are some markets located in shopping centers. Systematic extensions of opening hours started in 2015, see https://goo.gl/aRG5fs
See, https://goo.gl/gWFY0U or Aldi’s online store locator (https://goo.gl/50OpWj) for detailed information.
Aldi is and always was a family-led firm and information on its policies and plans are extremely scarce. After the death of the two founders in 2010 and 2014, respectively, changes in the firm’s conduct were expected by experts (See https://goo.gl/V2kycS; https://goo.gl/h7Mz0H; https://goo.gl/Y9yJDc).
See BVE (2016); https://goo.gl/TibsZv.
Exceptions are Bavaria and the Saarland where stores are allowed to be open from 6 a.m. until 8 p.m. only.
Note that it is possible that the cost function is not continuous because of, e.g., legal restrictions on the maximum number of working hours per employee.
This framework ignores potential effects of cannibalization within the Aldi group, i.e., between different Aldi outlets. Anticipating the empirical findings, cannibalization seems to be no issue in our empirical analyses because an Aldi outlet’s probability to extend shopping hours increases in the number of nearby Aldi outlets where shopping hours have already been expanded.
Note that contrary to Toivanen and Waterson (2005), we do not consider a duopoly. In the baseline model, we consider the outlets of all four major German food retailers as explained in the introduction.
Typically, more employees are present during daytime. However, also at nighttime at least some employees have to be present if the outlet is open.
See BVE (2016); https://goo.gl/TibsZv.
See Lebensmittelzeitung, 25, 19.06.2015, https://goo.gl/8FRPST
See Lebensmittelzeitung, 40, 02.10.2015, https://goo.gl/pcToCL and ALDI Press Release, 11.05.2016, https://goo.gl/MIP4yP.
See law on shop opening hours of each federal state (Ladenöffnungsgesetz) as well as the federal law on business hours (Gesetz über den Ladenschluss).
See https://filialfinder.aldi-sued.de/, https://www.lidl.de/de/filialsuche/, https://www.edeka.de/marktsuche.jsp, https://marktsuche.rewe.de/ and https://www.rewe-dortmund.de/marktsuche/ (last accessed on 30 June, 2017)
For instance, the German Federal Cartel Office uses a range of 20-min driving time in order to define a local market in their analyses of the German retail grocery industry (Bundeskartellamt 2015).
http://project-osrm.org/ (last accessed on 30 June 2017)
This data is provided by Axciom Deutschland GmbH, Neu-Isenburg, 2016.
See Handelsblatt online, https://goo.gl/Ke9NTx (last accessed on November 7, 2016)
We conjecture that this observation can be explained by the close distance to Aldi’s headquarters located in Essen and Mühlheim, where they potentially started to extend shopping hours of its stores.
Most Edeka outlets are owned by independent retailers. See also Edeka concept http://goo.gl/rtUaEf(last accessed on December 8, 2016).
A store is weighted by inverse distances (in seconds of driving time).
Aldi and Lidl have not only have similar business policies, product ranges and prices, but Lidl is also the biggest discounter after Aldi, when focusing the turn over (see Lebensmittelzeitung online, 15.03.2018, https://bit.ly/2NysIq0, last accessed on June 13, 2019).
Indeed, the test indicates that there are is multicollinearity in the estimations. However, the results are qualitatively the same when skipping (subsets of) the variables that are potentially susceptible to multicollinearity, as stated in the Appendix.
References
Berry ST (1992) Estimation of a model of entry in the airline industry. Econometrica 60(4):889–917
Binkley JK, Connor JM (1998) Grocery market pricing and the new competitive environment. J Retail 74(2):273–294
Brandes D, Brandes N (2015) Bare essentials: the Aldi success story. Linde Corporate. Linde, Wien, oCLC: 906163625
Bundeskartellamt (2015) Beschluss im Fusionskontrollverfahren Edeka/Kaiser’s Tengelmann (B2-96/14). http://www.bundeskartellamt.de/SharedDocs/Entscheidung/DE/Entscheidungen/Fusionskontrolle/2015/B2-96-14.pdf?__blob=publicationFile&v=3
Clemenz G (1990) Non-sequential consumer search and the consequences of a deregulation of trading hours. Eur Econ Rev 34(7):1323–1337
De Meza D (1984) The fourth commandment: is it pareto efficient? Econ J 94 (374):379–383
Dixit A (1979) A model of duopoly suggesting a theory of entry barriers. Bell J Econ 10(1):20–32
Ellickson PB (2006) Quality competition in retailing: a structural analysis. Int J Ind Organ 24(3):521–540
Ellickson PB, Grieco PL (2013) Wal-mart and the geography of grocery retailing. J Urban Econ 75:1–14
Ellickson PB, Misra S (2011) Structural workshop paper - estimating discrete games. Mark Sci 30(6):997–1010
Ferris JS (1991) On the economics of regulated early closing hours: some evidence from canada. Appl Econ 23(8):1393–1400
Flores M, Wenzel T (2016) Shopping hours and price competition with loyal consumers. The BE J Econ Analysis Policy 16(1):393–407
Geroski PA (1995) What do we know about entry? Int J Ind Organ 13(4):421–440
Gradus R (1996) The economic effects of extending shop opening hours. J Econ 64(3):247–263
Hosseinipour A, Sandoh H (2013) Optimal business hours of the newsvendor problem for retailers. Int Trans Oper Res 20(6):823–836
Inderst R, Irmen A (2005) Shopping hours and price competition. Eur Econ Rev 49:1105–1124
Konishi H (2005) Concentration of competing retail stores. J Urban Econ 58 (3):488–512
Kosfeld M (2002) Why shops close again: an evolutionary perspective on the deregulation of shopping hours. Eur Econ Rev 46:51–72
Morschett D, Swoboda B, Schramm-Klein H (2006) Competitive strategies in retailing—an investigation of the applicability of porter’s framework for food retailers. J Retail Consum Serv 13(4):275–287
Sandoh H, Koide T, Kiniwa J (2015) Space-time hotelling model and its application to retail competition in a duopoly. In: Proceedings of the international multiconference of engineers and computer scientists, vol 2
Shaked A, Sutton J (1982) Relaxing price competition through product differentiation. Rev Econ Stud: 3–13
Shaked A, Sutton J (1990) Multiproduct firms and market structure. RAND J Econ: 45–62
Shy O, Stenbacka R (2006) Service hours with asymmetric distributions of ideal service time. Int J Ind Organ 24(4):764–771
Smiley R (1988) Empirical evidence on strategic entry deterrence. Int J Ind Organ 6(2):167–180
Thum M, Weichenrieder AJ (1999) Ist Ladenschlußregulierung volkswirtschaftlich effizient? https://www.researchgate.net/profile/Alfons_Weichenrieder/publication/237408138_Ist_Ladenschlussregulierung_volkswirtschaftlich_effizient/links/551a95f40cf244e9a4589ce5.pdf
Toivanen O, Waterson M (2005) Market structure and entry: where’s the beef. RAND J Econ 36(3):680–699
Wooldridge JM (2015) Introductory econometrics: a modern approach. Nelson Education
Yamada M (2019) Business hours, store quality, and social welfare. J Ind Compet Trade: 1–14
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher’s Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
We would like to thank the anonymous referees as well as Niklas Dürr, Justus Haucap, Paul Heidhues, Michael Hellwig, Georg Götz and Peter Winker for discussing earlier versions of this article.
Appendix
Appendix
As a robustness check, we run a Logit regression as stated in Eq. 2 with a different definition of a ’local market’: Instead of a maximum of 20 minutes driving time, we assume a maximum of 15 minutes driving time. Corresponding results are shown in Table 3.
The results are qualitatively the same as the ones discussed in Section 5.3.
As mentioned in Section 5.3 it is surprising that the coefficients of the variables PurchasingPower and Unemployment have the same signs. This may in part be due to multicollinearity effects. To test this, we run a Variation Inflation Factor (VIF) test. Results are stated in Table 4.
Indeed, the VIFs of the variables 2Person-Household, 1Person-Household, PurchasingPower, Households< 40 and Unemployment are problematic because they are above 10 (rule of thumb, see Wooldridge (2015)). Therefore, we run the Logit regression as stated in Eq. 2 again, but only with a subset of the problematic variables. The results are stated in Table 5.
The results are qualitatively the same as the ones discussed in Section 5.3. A corresponding VIF test shows that there are no more problems with multicollinearity, as stated in Table 6.
When skipping other subsets of variables, instead of the one skipped in the underlying regression of Table 5, the results do not change (qualitatively). Corresponding regression results are available from the authors on request.
Rights and permissions
About this article
Cite this article
de Haas, S., Herold, D. & Schäfer, J.T. Shopping Hours and Entry - an Empirical Analysis of Aldi’s Opening Hours. J Ind Compet Trade 20, 139–156 (2020). https://doi.org/10.1007/s10842-019-00316-1
Received:
Revised:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10842-019-00316-1