Scale economies and superstore retailing: new evidence from the UK

Economies of scale related to store size have been recognised in retailing for many years. However, empirical evidence from the research literature has been patchy and focusses mainly on labour productivity. This paper describes recent investigations carried out amongst UK superstore retailers. Difficulties in quantifying economies of scale are acknowledged, and much of the evidence presented is qualitative in nature. Nevertheless, economies of scale with store size are shown to occur in two ways: through proportional reductions in retailer costs, including labour, goods delivery and store operation; and through increased store loyalty and customer expenditure per visit. Implications for further research are discussed.