DP5386 Hypermarket Competition and the Diffusion of Retail Checkout Barcode Scanning

Author(s): Jonathan Beck , Michal Grajek , Christian Wey

Publication Date: November 2005

Keyword(s): IT diffusion , retail competition , hypermarkets

JEL(s): L5 , L81 , O33

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP5386.asp

This paper presents a set of panel data to study the diffusion of retail checkout barcode scanning in ten European countries over the period 1981-1996. Estimates from a standard diffusion model suggest that countries differ most in the long-run diffusion level of barcode scanning and less in timing or diffusion speed. We present evidence that the emergence of hypermarkets raises competitive intensity and use hypermarket data, among other variables, in a pooled estimation. Results suggest that hypermarket competition reduces the long-run adoption level in retailing. In particular, the emergence of hypermarkets seems to deepen retail segmentation by inducing potential adopters (e.g. supermarkets) to exit the market and/or by discouraging adoption by other retail formats. Consistent with expectations, scale and income effects spur IT diffusion and there is a classic substitution effect: when wages rise, diffusion of a labour-saving technology such as barcode-scanning is more intense. We do not find a significant impact of employment protection legislation.