Shopping in the omnichannel supply chain under price competition and product return

In recent years, omnichannel retailing has created value for prospective consumers. The rise of omnichannel retailing has changed consumers' buying habits, and manufacturers are facing stiff competition from retailers. To reduce this competition effect, manufacturers and retailers often work together to reduce showroom display costs. Despite this practice, there is little understanding of how omnichannel retailing impacts supply chain (SC) profit under competitive conditions. We investigate the test-in-store-and-buy-online (TSBO) retailing strategy and its impact on SC profit and price competition between manufacturers. The retailer sells products of both manufacturers through its website but displays products of only one manufacturer in the showroom, which bears the displaying cost. The retailer adopts a return policy for the other manufacturer. Stackelberg game was used to examine how members of the chain interact, and Nash equilibrium was used to find optimal strategies for players under decentralized and integrated channels. The results show that the TSBO strategy in retailing benefits all supply chain players under the integrated channel. A further interesting finding is that omnichannel SC profits are highest when retailers adopt a return policy. When two manufacturers compete and adopt different sales models, the manufacturer who uses the TSBO retail model reaps the most profit. Several other managerial insights are drawn from sensitivity analyses.     

Manufacturer-owned retail stores

Increasingly, manufacturers sell their products in their own retail stores, and many of these stores appear to be in direct competition with independent retailers; i.e., both types of retail stores are physically co-located. We analyze one way this practice affects the retail market. We find that, when independent retailers compete against company stores (instead of just against other independent retailers), they (1) charge higher prices and (2) are more willing to engage in marketing efforts on behalf of the manufacturer’s brand. Furthermore, when company stores and independent retailers compete in the same market, the company store charges higher prices and provides more marketing effort. Anecdotal data are consistent with these model predictions.

自有品牌对连锁商业品牌战略的影响分析

零售商实施品牌战略是制造商和零售商之间垂直竞争加剧的产物,也是应对零售商之间水平竞争的需要.零售商品牌战略包括企业品牌和商品及服务品牌两个层次.作为零售商商品品牌的重要内容,自有品牌通过企业品牌和制造商品牌两个路径对零售企业的品牌战略产生影响.为保证品牌战略的有效实施,零售企业必须处理好业态选择、品类管理、品牌策略的管理等.     

Using word of mouth data from social media to identify asymmetric competition in food retailing

Competition between food retailers is often assumed to be asymmetrical, whereby one retailer may compete with another retailer but not vice versa. Little is known about how (a)symmetric competition among retailers currently is. One way to investigate this is to use word of mouth data. A mixed methods analysis of customer comments on social media confirms the existence of asymmetric competition among German food retailers, mainly between supermarkets and discounters. Overall, consumers compare competitors frequently on the basis of their assortments, the price-performance ratio as well as quality and freshness. The results have implications for competition policy and strategic management.     

Empirical models of manufacturer-retailer interaction: A review and agenda for future research

The nature of the interaction between manufacturers and retailers has received a great deal of empirical attention in the last 15 years. One major line of empirical research examines the balance of power between them and ranges from reduced form models quantifying aggregate profit and other related trends for manufacturers and retailers to structural models that test alternative forms of manufacturer-retailer pricing interaction. A second line of research addresses the sources of leverage for each party, e.g., trade promotions and their pass-through, customer information from loyalty programs, manufacturer advertising, product assortment in general, and private label assortment in particular. The purpose of this article is to synthesize what has been learnt about the nature of the interaction between manufacturers and retailers and the effectiveness of each party’s sources of leverage and to highlight gaps in our knowledge that future research should attempt to fill.     

An evolutionary game theoretic model for analyzing retailers’ behavior when introducing economy and premium private labels

The significant growth of Private Labels (PLs) has led to a growing competition between National Brand (NB) manufacturers, on the one hand, and retailers, on the other; while manufacturers strive to achieve enhanced customer loyalty through such measures as innovation and advertising, retailers focus their efforts on offering high-quality products. This paper considers for the first time a supply chain consisting of one NB manufacturer and a population of retailers under two scenarios. In the first, each retailer sells NB and chooses either to introduce an Economy Private Label (EPL) or not. In the second scenario, each retailer chooses either to introduce a Premium Private Label (PPL) or not. To solve the problem, an evolutionary game is introduced and the retailers’ behavior is analyzed. Using two numerical examples, parametric analysis and managerial insights are also provided. It is found that the entire population chooses the strategy of introducing a private label (EPL or PPL) and that this strategy yields greater profits for both the manufacturer and the retailers than other strategy profiles might do. In addition, it is shown that both the retailers and the manufacturer gain more profits by introducing a PPL rather than an EPL.     

Empirical investigation of channel reactions to brand introductions

We investigate how incumbent manufacturers and retailers alter their pricing behavior in response to new product introduction. In performing our analysis, we need to be cognizant of the fact that the observed price changes can be due to entry-induced changes in a) demand conditions or b) costs or, on the other hand, to the competitive behavior of c) manufacturers and/or d) the retailer. In order to separate these four changes, we posit that manufacturer and retailer pricing is an outcome of maximizing a combination of shares and profits. This enhanced objective function allows us to measure competitive conduct benchmarked as less or more competitive than under the Bertrand-Nash framework. Our empirical analysis is based on the toothpaste category for the time period January 1993–February 1995. During this period, there were three brand introductions in two rounds of entry. Using the estimates from the demand and the supply model, we compute the changes in the retail and wholesale prices that are attributable to changes in demand conditions, manufacturer and retailer competitive conduct, and cost changes. These results support our conjecture that inferring the change in conduct solely based on a change in observed prices is likely to be erroneous. For the first new brand entry, we find that the brand introduction did not significantly increase competition between manufacturers. As a result, the balance of channel power between the manufacturers and the retailers remained unaltered. Both retailer and manufacturer profit margins increased after the first entry. However, subsequent to the second entry, retailer share of channel profits increased at the expense of the manufacturers; manufacturers even saw a decline in their absolute profit margins. We believe that this research will provide insight for manufacturers and retailers regarding how the various channel participants are likely to react to new product introduction. Furthermore, policymakers interested in understanding competitive reactions to new product introduction should find this research useful.     

Distorted competition: Below-cost legislation, ‘marges arrière’ and prices in French retailing

Abstract

The aim of this article is to demonstrate that the French Galland Act, outlawing below-cost resale via new and more severe invoicing regulation, has reduced the intensity of price competition among retailers in relation to branded goods. Moreover, the reduced intensity of price competition in the retail industry has encouraged a lessening of competition among the manufacturers of major industrial brands. Together, these two effects have sown the seeds of a sustained increase in the price of major brands, accentuating retail competition based more on differentiation than on price. These sustained policies have favoured the development of retailer brands and of hard discount stores and finally encouraged new types of reactions from major retailers and leading manufacturers, such as new types of promotions circumventing the Galland Act and a more intense lobbying activity in order to reform it.     

品牌权益影响下的双渠道供应链定价决策及协调研究

针对一个制造商开通直销渠道销售产品与零售商的价格竞争问题,文章基于制造商与零售商共享品牌权益的视角,研究在制造商双渠道供应链结构中,价格和品牌权益同时作用下的双渠道供应链定价决策,分别分析在集中决策下和分散决策下,品牌权益对两种渠道价格和利润的影响。研究发现：在集中决策下,两种渠道的价格、利润与品牌权益成正相关;在分散决策下,当品牌权益超过一定临界值时,其对制造商直销渠道的价格和制造商总利润的影响大于零售商。鉴于品牌权益对供应链定价决策的重要影响,文章建立制造商和零售商之间的品牌权益成本共担机制,并通过数值仿真分析发现,当实施品牌权益成本共担机制时,制造商和零售商的销售价格和利润均是最优的。因此,零售商应加强与制造商的互动,共同创造高品牌权益的同时,也应共同分享高品牌权益。     

Tie-in contracts with downstream competition

A tie-in contract has frequently come under scrutiny for its role as an exclusionary device. A firm that is a monopolist in a primary market can utilize such contracts to exclude a more efficient rival in a secondary market. When the firms sell through competing retailers, the leveraging firm may offer tie-in contracts to the retailers inducing them to purchase both primary and secondary products entirely from it such that the rival is excluded. We examine whether such tie-in contracts are profitable for an incumbent firm under different conditions of (i) the ability to commit to prices by the upstream firms and (ii) downstream competition among the retailers. We show that when retailers compete in prices, then regardless of whether the entrant is able to commit to its own prices, an exclusionary tie-in strategy is profitable (not profitable) for the incumbent when it is able (unable) to commit to prices. However, when retailers compete in quantities, the entrant’s commitment ability does matter. Specifically, an exclusionary tie-in strategy (i) may be unprofitable for an incumbent when both upstream firms are able to commit to their prices, depending on the degree of cost advantage of the entrant; (ii) is always profitable when it alone can commit to its price; and (iii) is unprofitable when both upstream firms cannot commit to their prices. Our results extend to situations where the products are complementary or substitutes and where the retailers may be asymmetric in nature.     

Challenges to Retailing Systems—Lessons from the People's Republic of China

Abstract

Based on an investigation of market leader manufacturers and consumers, this pilot study focuses on an analysis of the phenomena of “squeezing” retailing activities in China as a result of the double pressures from both producer and consumer. Based on this study, and in the context of the fierce international competition in the market place in China, the conclusion has been reached that (a) “In the market place, the manufacturers and consumers are one-step-ahead of retailers; (b) The large-scale production-retailing-consumption system is important to China's market economy and its future development; and (c) Marketing is the key for manufacturers and retailers to succeed in China today and in the future.”.     

Competitive effects of informative advertising in distribution channels

Informative advertising and persuasive advertising play quite different roles in the efficiency of distribution channels. A recent study observes that a direct channel structure outperforms an indirect one in the presence of advertising competition between manufacturers, assuming that advertising is persuasive. On the contrary, taking the informative view of advertising, this paper demonstrates an opposite result: Disintegration does make competing manufacturers better off for highly substitutable goods. We further discuss the optimum control of informative advertising under the indirect channel scenario, showing that retailers are more effective than manufacturers as advertisers.     

A Positive Theory of Private Label: A Strategic Role of Private Label in a Duopoly National-Brand Market

This article offers an economic rationale for national brands to provide private labels to their retailers. We build a game-theoretic model that analyzes the interactions among two national brand manufacturers and one common retailer. In an interesting strategic role, the private label mitigates the promotion competition between the two national brands and provides benefits for all three members in the channel. Our analysis shows that offering a private label can be a credible commitment from a national brand manufacturer that it will not engage in promotions and decrease the incentive of the national brand rival to engage in promotions. In this way, we attempt to provide a reason for why national brand manufacturers provide retailers with private labels in practice. In addition, we discuss the optimal quality level of private labels.     

Retail environment and manufacturer competitive intensity

We study how the intensity of competition and the degree to which manufacturers enjoy market power depends on the retail environment in a given market. Past research has discussed the growing importance of retailers and the power they enjoy over manufacturers. Yet, the empirical literature to date has not determined which retail characteristics have the largest impact on competitive behavior.Our starting point is the estimation of a structural demand-and-supply model, where both consumers’ decisions and the strategic interactions between manufacturers and retailers are explicitly modeled. We identify the type of competitive behavior of manufacturers by measuring the deviation from a Bertrand-Nash equilibrium. This measure of competitive conduct is expressed as a function of key retail characteristics such as size of the retailer, its assortment depth, and category expertise.We illustrate the proposed approach using data for the ground coffee category in Germany. Our findings indicate that retail characteristics have indeed a significant effect on competitive intensity among upstream firms and on their ability to exercise market power. Hence, a manufacturer considering entry into a new market should not only take into account its competitors but also the specifics of the retail environment in this market.     

Equilibrium in supply chain network with competition and service level between channels considering consumers' channel preferences

This paper considers a dual-channel supply chain network consisting of multiple competing manufacturers, multiple competing retailers and multiple demand markets. Each manufacturer produces and distributes his products via direct e-commerce channel along with traditional physical channel. The manufacturers also provide services for the consumers in both channels, while the retailers only offer offline services to the consumers. On this basis, a dual-channel supply chain network equilibrium model with pricing and service decisions are established based on variational inequality theory. Nash equilibrium solutions are obtained by modified projection and contraction method. Combined with numerical examples, we analyze the impact of three critical factors on the equilibrium states and profits. Some interesting managerial insights are derived. We find that the profits of the manufacturers decrease (increase) in the raw material conversion ratio under single channel case (dual-channel case), while the increase of the raw material conversion ratio always benefits the retailers and the whole dual-channel supply chain network; the service level in each channel is positively correlated with its transaction volume. There are significant inconsistencies among the best combinations of cross-channel price coefficients between two channels for the manufacturers, the retailers and the whole dual-channel supply chain network. The same equilibrium decision (service level, price) or profit may exhibit the opposite changing trend with respect to cross-channel price coefficients under two cases of active e-commerce transaction and inactive e-commerce transaction. When the introduction of e-commerce channel can bring more profits for the whole dual-channel supply chain network, the manufacturers should provide reasonable allocation schemes of profit increment for the retailers to satisfy their participation constraints.     

The Power of Innovativeness in Manufacturer–Retailer Relationships

ABSTRACT

Purpose: Retailers often challenge manufacturers through aggressive store brand policies and severe listing constraints. This study investigates manufacturer innovativeness as a managerial lever to shift the power balance between manufacturers and retailers.

Methodology/approach: Using data from 277 senior managers of Swiss and German consumer goods manufacturers and analyzing these data with structural equation modelling, the authors test hypotheses about the impact of manufacturer innovativeness on manufacturer–retailer relationship characteristics (i.e., retailer dependency, store brand aggressiveness, and listing constraints).

Findings: The study demonstrates that manufacturer innovativeness enhances retailer dependency, which in turn positively affects overall manufacturer performance. This relationship can be explained further: By increasing retailer dependency, manufacturers suppress retailers’ store brand aggressiveness and attenuate retailers’ listing constraints. Store brand aggressiveness affects overall manufacturer performance through listing constraints.

Research implications: Identifying levers such as innovativeness that assist manufacturers in fostering their power over retailers provides a new mode for understanding how manufacturers can influence the balance of power between manufacturers and retailers. The study provides support for the approach/inhibition theory of power on the inter-organizational level. Organizations with increased power are assumed to have approach-related tendencies and act in goal-consistent manner, whereas organizations with reduced power are assumed to develop the tendency to pursue inhibition-related actions, e.g., attending to threats. Furthermore, this study identifies channel relationship characteristics such as retailer dependency as a mediating path between manufacturer innovativeness and performance.

Practical implications: Managers need to strengthen the firm’s innovative capacity to enhance the performance of their companies. By developing the capability to provide radical innovations, manufacturers are able to enhance their performance not only directly but also indirectly by strengthening the manufacturer’s position with regard to retailers. This study underscores the relevance of innovativeness for strengthening the manufacturer’s position in its relationship with retailers that avoids problems with aggressive store brands and constrained listing conditions.

Originality/value/contribution: This study proposes manufacturer innovativeness as a managerial lever to shift the power balance between manufacturers and retailers.     

Consumer and Retailer Promotions: Who is Better Off?

The long-term effects of promotions on sales are increasingly linked to the supposed shift of economic power within channels from manufacturers to retailers. However, formal knowledge about how they influence channel decisions under different promotional arrangements and the distribution of channel profits remains very sparse. In this paper, I develop two 2-period models to investigate the impact on channel decisions and profits of manufacturer-controlled and retailer-controlled promotions targeted at consumers. My findings indicate that retailers always invest in retailer promotions, while manufacturers may find it optimal to not invest in consumer promotions. Economic power shifts from manufacturers to retailers when consumer promotions significantly expand the baseline demand in the long-term. Otherwise, manufacturers remain more powerful. Trade promotions or other profit-transfer mechanisms may be indispensable in easing conflicts over who should undertake promotions, especially when these promotions substantially increase future sales.     

Interactive Technologies and Retailing Strategy: A Review,Conceptual Framework and Future Research Directions

During the past decade, a number of interactive technologies, including the Internet, have fundamentally transformed how retailers compete in the marketplace. In a similar vein, emerging interactive technologies can be expected to significantly alter the retailing landscape through their impact on retailing strategy and operations. Furthermore, it is conceivable that certain emerging interactive technologies will be perceived by some retailers as enablers (tools to more effectively compete in the marketplace) and by other retailers as disruptors of the present ways of doing business. Interactive technologies can either be generic, a technology that is readily available from an information technology (IT) vendor and is widely adopted by retailers, or proprietary. An interactive technology that is proprietary can enable a firm to generate economic rents from the innovation for an extended duration of time. Investing in a generic interactive technology, however, may be perceived as a cost of doing business for a retailer, and not a potential source of sustainable competitive advantage. However, a retailer's complementary resource endowments may enable the retailer to more effectively leverage a generic technology relative to its competitors and thereby achieve a sustainable competitive advantage. In this paper, we review the related literature, develop a process model delineating the mechanisms by which an interactive technology can affect and necessitate changes in retailers' strategies and identify directions for future research.     

风险喜好型零售商主导的双渠道定价策略研究

一个由生产商和零售商组成的供应链中决策的顺序为:零售商率先根据自己掌握的市场信息公布最大潜在订单数量,生产商根据最大订单数量来调整其批发价格和直销渠道价格,最后零售商才确定其最优订货数量。研究表明,在一个由风险喜好型的零售商和一个风险规避型的供应商组成的供应链中,零售商风险偏好系数超过某一特定值时,随着需求方差的增加,零售渠道最优定价会越来越高;而对于风险规避型供应商,则是随着需求方差和(或)供应商风险规避程度的增加,会选择较低的产品售价以期获得稳定的收入。