This paper investigates household consumption and market concentration in the US retail sector. We start by documenting four main facts with store- and household-level consumption micro-data from 2004-2016: 1) rising national aggregate concentration, 2) negligible change in regional concentration, 3) rising household concentration and heterogeneity across households, and 4) increased one-stop shopping. We show that households have increasingly concentrated their spending in fewer stores despite a growing number of stores in regional markets. We explore how underlying factors from both the supply and demand side drive these trends.

We use three main empirical strategies to estimate the effect of local retailer availability, product assortments, and pricing on household retail concentration: two event studies using the entry of superstar chains and household migration respectively, and an IV that builds on uniform pricing and similar assortment within retail chains.

Our preliminary results suggest that the entry of supercentres, a greater variety of products, and lower relative store prices can boost household retail concentration. However, only a small proportion of the change in concentration during this period can be explained by movements in these supply-side factors, which implies that demand-side factors may play a potentially important role. We will further construct a structural model which incorporates both supply- and demand- side factors to highlight the implications for market power and welfare.