Journal
MARKETING SCIENCE
Volume 28, Issue 2, Pages 309-319Publisher
INFORMS
DOI: 10.1287/mksc.1080.0399
Keywords
channels of distribution; channel power; assortment; retailing
Categories
Ask authors/readers for more resources
In certain product categories, large discount retailers are known to offer shallower assortments than traditional retailers. In this paper, we investigate the competitive incentives for such assortment decisions and the implications for manufacturers' distribution strategies. Our results show that if one retailer has the channel power to determine its assortment first, then it can strategically reduce its assortment by carrying only the popular variety while simultaneously inducing the rival retailer to carry both the specialty and popular varieties. The rival retailer then bears higher assortment costs, which leads to relaxed price competition for the commonly carried popular variety. We also show that when the manufacturer has relative channel power, it chooses alternatively to distribute both product varieties through both retailers. Our analysis suggests, therefore, that when a retailer becomes dominant in the distribution channel, it facilitates retail segmentation into discount shops, carrying limited product lines, and specialty shops carrying wider assortments. We also illustrate how retailer power leading to strategic assortment reduction can lead to lower consumer surplus.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available