Modular Store Design and Firm Performance

Modern stores are becoming increasingly modular in design. One example of the modularstore design is a Wal-Mart Supercenter, which is a discount store-supermarket combinationunit. The success of store chains can hinge on finding a right combination “ ” of store modules:While Wal-Mart has been able to expand its store base using Supercenters, K-Mart’s newformat “Big K-Mart” has not fared well. Despite the growing importance of modular storedesign and its effect on firm performance, the extant literature does not provide any guidanceto store managers on which store modules to adopt in order to improve store revenue. In thispaper I study the effects of different store modules on firm performance. Specially, I estimatethe effects of banks, ATMs, pharmacies and gas stations on weekly sales volume of grocerystores of the two largest supermarket chains in the state of Georgia. The results show thatstore characteristics account for the majority of variation in weekly sales volume of stores,whereas local business conditions? notably demographics and competition measures?do notpossess much explanatory power. One thousand square feet of store size is equivalent toabout five thousand dollars in weekly sales volume, about forty percent of store revenue onaverage. Adding a pharmacy leads to an increase of one hundred twenty thousand dollars inweekly store sales, a gas station eighty four thousand dollars and a bank sixty eight thousanddollars. The results illustrate the importance of choosing right modules in store design on firmperformance.