Does Sutton apply to supermarkets?

I present empirical evidence that endogenous fixed costs play a central role in determining the equilibrium structure of the supermarket industry. Using the framework developed in Sutton (1991), I construct a model of supermarket competition where escalating investment in firm-level distribution systems is driven by the incentive to produce a greater variety of products in every store. Employing a store-level census and 51 distinct geographic markets, I demonstrate that the supermarket industry is a natural oligopoly in which a small number of firms (between four and six) capture the majority of sales, regardless of market size.