Robert Krider, Arieh Goldman, and Ramaswami S.

The recent expansion of global food retailers into emerging economies has made the study of food retail modernization especially relevant at this time. It has renewed interest in the rationale for the displacement of traditional food retailers by supermarkets and the challenges that global and local supermarket companies face in these economies. While supermarkets quickly succeeded in penetrating emerging-economy retail systems, a central question is whether their market share may stall at levels below Western standards. The question holds even in economies characterized by relatively high standards of living and where supermarkets have been present for decades.

Supermarket-retailers have used a number of approaches to continue share expansion, including the introduction of larger formats and formats that are more adapted to local conditions. In this article, we look at food retail modernization generally, but focus on the basis for supermarket expansion of market share.

To accomplish these ends, we develop a theoretical framework based on a review and integration of previous studies of the process of supermarket adoption. Two classes of market share change are identified: diffusion of supermarket use across consumer segments and diffusion of supermarket use by product categories. We then propose a measurement approach based on a survey of consumers' food shopping behavior that enables us to quantify the impact of each of these processes on the state of supermarkets' market share at a point in time in any specific retail system.

The approach can be used for diagnostic purposes and as a monitoring tool: a follow-up survey, to be conducted a few years after the benchmark survey, enables management and public policy makers to evaluate the impact of strategic moves (e.g., the introduction of new supermarket formats) and of consumer and environmental developments.

We demonstrate the theory and measurement approach by analyzing the state of modernization of the food retail system of Hong Kong at two points in time. In our 1995 diagnostic study, we find that product category-dependent diffusion (the perishables category specifically) is the major restriction to continued supermarket market share gain. We find the geographical and economic supermarket diffusion to be complete.

In 1999, we designed a second study to measure the effect of two strategic moves by Hong Kong's supermarket companies: bolstering the competitive position of the conventional supermarket and the introduction of a larger format, the superstore, specifically adapted to local conditions. In addition, we wanted to determine if changes in the consumer side of the market had affected the supermarkets' share.

Shopping behavior stability over the four and a half-year period between our two studies confirms that segment diffusion of conventional supermarkets is complete, and that while the new superstore format enjoys better perceptions than the conventional supermarket, the dominant constraint on both modern formats' market share growth continues to be limited penetration of the perishables category. The supermarket companies' two strategic moves have, thus far, failed to achieve the expected impact.

We discuss the use of our framework and measurement approach for diagnosing and monitoring competition between retail formats, and specifically competition in a food retail modernization setting.

Limitations and future research directions include the need to identify general relationships between conditions in a retail system and barriers to modernization, a need that can be addressed by applying our approach in many different economies and integrating the results. The goal is to develop a set of guidelines, contingent on the retail context, for managers and policymakers who have a stake in the modernization process. Finally, we suggest how the approach could be generalized to study other retail systems where formats compete for market share through overlapping assortments.