Question 3

The retail industry in Singapore consists of several large retailers, such as Giant, NTUC Fairprice and Metro in prominent locations, and thousands of small neighbourhood retailers scattered all over Singapore. Nowadays more internet retailers also enter the retail market to compete with brick and mortar retailers. Competition is very keen and many small retailers have ceased operations. While large retailers often seem to be able to survive better than the small retailers, large retailers have also exited the market from time to time.
(a) Describe the differences in the cost structure of larger versus small retailers in Singapore in a market for a well-defined good (or category of goods). Conduct research into the reasons for these differences in cost structure, and the role that these differences play in explaining why large retailers tend to have competitive advantages. Be sure to name specific examples of the larger and smaller retailers you discuss.  (12 marks)
(b) Explain and discuss the market structure of the industry you are examining. Is the market structure closer to that of perfect competition or to monopoly, and why?  (8 marks)
(c) From the perspective of the long run market equilibrium, what are the prospects for whether small retailers can continue to exist in the market you are examining? Explain and support your answers with suitable real life illustrations.  (10 marks)