A Fresh Look at an Old Problem: Saturation in the Retail Market and How it Affects Both Retailers and Consumers

Fernando Yanine; Felisa M  Cordova; Lionel Valenzuela  and Pablo Isla

doi:10.17485/ijst/2019/v12i18/144604

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A Fresh Look at an Old Problem: Saturation in the Retail Market and How it Affects Both Retailers and Consumers

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Indian Journal of Science and Technology

DOI: 10.17485/ijst/2019/v12i18/144604

Year: 2019, Volume: 12, Issue: 18, Pages: 1-10

Original Article

A Fresh Look at an Old Problem: Saturation in the Retail Market and How it Affects Both Retailers and Consumers

Fernando Yanine^1*,Felisa M. Cordova¹, Lionel Valenzuela² and Pablo Isla²

¹Universidad Finis Terrae, Faculty of Engineering, School of Engineering, Av. Pedro de Valdivia 1509, Providencia; Santiago, Chile; [email protected], [email protected]
²Universidad Tecnica Federico Santa Maria (UTFSM), Department of Commercial Engineering, Av. Santa Maria 6400, Vitacura; Santiago, Chile; [email protected], [email protected]

*Author for correspondence
Fernando Yanine
Universidad Finis Terrae, Faculty of Engineering, School of Engineering, Av. Pedro de Valdivia 1509, Providencia; Santiago, Chile.
Email: [email protected]

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

Objective: Traditional saturation analysis on competitive location decision science focuses on diminishing returns for incumbents and newcomers in a specific spatial location pertaining to commercial retail potential past a certain point of market saturation. Methods/Findings: This study looks at this problem but employs a different approach to the subject altogether, wherein saturation is no longer a variable affecting only retailers but one that affects both: the marginal utility of consumers and the revenue of retailers albeit differently. A new mathematical model is proposed based on selected papers, contributing new insight into an already widely discussed subject. Application: Analysis shows that it is important for competitive location decision-making to address saturation from both sides of the overall competitive location decision issue, not just from the retailers’ standpoint.

Keywords: Clustering, Competitive Location, Market Share, Retail Industry, Retail Saturation Index