A new store opening can have a major impact on visitation behaviors in the area. In part 1, we looked at how quickly a newly opened store gained traffic, in relation to its distance from the closest location of the same brand. When there was no nearby existing location, the store saw a rapid increase in traffic, versus when there were already stores of the same brand nearby, there was a slower ramp up. With this in mind, the next step was to further understand how the opening of these stores impacted other retailers in the cities they entered.

Cities often offer incentives to businesses, such as development subsidies, tax breaks, or donated land, in exchange for attracting new visitors and stimulating the local economy. It’s not uncommon for a city to award a company $10 to $20 million in tax incentives alone. For instance, in 2022, Georgia offered Walmart $23 million to open its Fulton County fulfillment center. In exchange for these government-funded benefits, the city should expect an increase in job opportunities, tax revenues, and overall foot traffic to the area.

To test this, we started by analyzing visitation to smaller retailers in the Grocery, Dollar Store, and Pharmacy categories near 10 Big Box Store grand openings. Of these, five were opened in a city that already had a large retailer (existing market cities), while the others were opened in a city that didn’t already have a Big Box Store (new market cities). A new market city is one where a visitor must drive more than 10 minutes to reach another big box store, while an existing market city is when the driving time is less than 10 minutes.

Above, there’s a clear boost in local retail traffic – when the market condition is new. When a Big Box Store opens in a new market city, smaller, non-specialty retailers experienced visit increases for two to four months following the grand opening. On the other hand, if a Big Box Store opened in an existing market city, the nearby retailers saw a decrease in foot traffic after the grand opening.

For rural towns that haven’t had the convenience of a nearby Walmart, Target, Costco, or BJ's, a grand opening can be an exciting experience. Residents may spend more money on goods that they don’t typically purchase and choose to explore the surrounding area. This presents an opportunity for nearby businesses to benefit from as well and attract new customers who are in the area for the grand opening.

Knowing how Big Box Store openings affect nearby businesses can provide valuable insights for cities, city planners, and marketers. For a city looking to increase visitation and revenue, note the limitations of the halo effect. For marketers monitoring retail growth, take advantage of that window and advertise accordingly.

Table for background information

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