Anchor‐store quality in malls: an economic analysis

Abstract

Purpose The aim of this study is to develop and empirically test a theoretical model of competition between anchor and non‐anchor stores in a shopping mall. In doing so, the goals are to extend the literature on retail co‐location to account for effects of anchor stores' quality levels, and to explain an observed pattern of choices of anchor‐store quality levels made by mall developers. Design/methodology/approach This study uses a game‐theoretic approach to model the actions of mall developers, stores, and consumers in a competitive framework, then verifies the equilibrium predictions of this model using an empirical approach and a data set including all major malls in the US and Canada. Findings The key finding of both the analytical and empirical models is that there exists a positive and concave (i.e. reverse U‐shaped) relationship between anchor quality and mall size, i.e. that the highest‐quality malls are typically found in the middle range of mall sizes. Research limitations/implications This study introduces a relatively basic framework that could be expanded to incorporate a more flexible variety of contract types between mall developers and tenants, as well as additional sources of consumer utility associated with a single visit to a mall. Practical implications This study provides mall developers with a basis for understanding the impact of anchor quality on competition between stores in a mall. Originality/value This study addresses a gap in both the analytical and empirical literature on determinants of mall traffic and profit, specifically pertaining to how these variables are affected by anchor stores and their quality levels.

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