The importance of the retail sector for an economy is multifaceted. It is a complex and vital sector both in developed and in emerging economies, where a vast amount of production as well as employment opportunities are present. One of the most notable characteristics of the retail sector is that it is highly location sensitive. Due to the nature of the economic activities carried out in retail establishments, they are likely to be found in regional centers, or in close proximity to such centers. Also, many retail services are likely to be located close to each other. Being dependent on factors like complementarity and substitution between retail services, and time-distances from location to demand, unplanned retail service clusters are likely to emerge in urban cores specifically. We try to utilize the traditional location approaches with the contemporary sector facts to understand how, to what extent, and why retail establishments are co-located. The fundamental idea though, can be summarized through two main lines of arguments. The first one is that the question why there are retail clusters, or co-location of different and similar kind of retailing activities, should be explained (at least partially) by spatial factors, such as economic density and diversity in the surrounding environment, and potential demand . The second is that the existence and the degree of co-location between retail establishments is also dependent on the industry specific factors. In this paper, we exploit geo-coded data to analyze the co-location of retail service establishments in the Stockholm region in Sweden. Grouping the retail services based on their function, we detect co-location patterns between different retail establishments that are located within the same or in the neighboring grids. In particular, the study addresses three main questions in the following order; (1) looking at a high level of disaggregation, which services are co-located?, (2) if there is co-location, what is the degree of it?, (3) what are the spatial and sectoral determinants of different levels of co-location between retail services? Keywords: retail, retail clusters, co-location, location theory, urban agglomeration JEL: R12, L81, R14
