Survival of The Fittest: How Competitive Service Overlap and Retail Format Impact Incumbents’ Vulnerability to New Entrants

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Many retailers invest in ancillary services to provide shoppers with additional reasons to come to their stores. However, it is unclear whether these services insulate incumbents from new entrants. We address this question by examining how the size and uniqueness of an incumbent's service portfolio protects its sales after a new competitor enters. We study uniqueness by introducing the notion of “competitive service overlap” (CSO) that operationalizes service similarity, and show both that retailers are best served by offering many services and that particularly successful retailers have more unique service portfolios. Furthermore, the impact of uniqueness is most prominent when a grocery incumbent faces a discounter entrant (e.g., Kroger facing a Wal-Mart entry).

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