Assessing the impact of retail location on store performance: A comparison of Wal-Mart and Kmart stores in Cincinnati

This study aims to analyze and explain, from a locational perspective, differences in the performance of Wal-Mart and Kmart stores in the Greater Cincinnati Area. A modified Huff model, taking competition and agglomeration into consideration, is developed to estimate the potential sales of individual Kmart and Wal-Mart stores. Results show that the modified Huff model is capable of more accurately estimating individual store sales than traditional interaction models. This study also suggests that the selection of store locations partially explains the difference in performance between Kmart and Wal-Mart stores. The model is calibrated using data collected in 2003, and the validity of the model is supported by the latest development of the stores in Greater Cincinnati Area since 2003.

► Our spatial model explained the difference in sales between Wal-mart and Kmart.
► The model explicitly considered both competition and agglomeration effects.
► We developed a heuristic approach to calibrate our model which cannot be solved analytically.
► The validity of the model has been verified by the latest store closings.