The Impact of Manufacturer Distribution Decisions on Their Interaction with Retailers
(A2021-102342)

AUTHORS

Kathleen Cleeren, KULeuven; Fahmi Grey, UNC, Kenan-Flagler Business School; Yu Ma, McGill University; Joep van der Plas, Tilburg University; Femke Gryseels, Ku Leuven

ABSTRACT

"The relationship between manufacturers and retailers is intriguing and has been subject to substantial structural changes. In the past, manufacturers clearly dominated the retailing landscape, which allowed them to enforce their prices and buying conditions on the typically small retailers. Throughout the decades, a shift in power has taken place due to the rise of store brands, availability of scanner data, scarcity in shelf space, pass-through of trade promotions, and the growing consolidation of retail chains. Because of these changes, the power balance in the retailing market has become more equal. While manufacturers can leverage their ownership of national brands that create store traffic, retailers ultimately decide which brands and products to carry in their assortment. While manufacturers and retailers are hence strongly depend on each other, their objectives often diverge. Hence, negotiations between retailers and manufacturers can become true power battles. Decisions of both parties may shift this power balance. In this special session, we focus on different manufacturer distribution decisions that may change their relationship with the retailers. In the first two papers, we delve into the brand portfolio decisions at different retailers. In paper 1 (“Using Brand Exclusivity as a Channel Management Tool”, by Fahmy Grey and Katrijn Gielens), the authors study the impact on manufacturer performance of limiting the distribution of brands to a selective set of retailers. In paper 2 (“Private Label Supply by National Brand Manufacturers: Received Wisdom and Empirical Reality” by Yu Ma, Mercedes Martos-Partal, Kusum L. Ailawadi and Óscar González-Benito), the authors investigate the decision to supply private labels to certain retailers, and asses its impact on manufacturer performance across many categories and retailers. Manufacturers not only have the power to decide on the brand portfolio of their retailers, they can also decide on which particular distribution channels to use. Paper 3 (“National brands at hard discounters: How to set the marketing mix?” by Joep van der Plas, Marnik Dekimpe and Inge Geyskens) focuses on the decision to supply to hard discounters, and its impact on the conventional retailers. While the previous distribution decision entails circumventing particular retailers, the manufacturer may even make the more extreme decision to surpass all retailers by launching their own direct channel. In paper 4 (“How Retailers Change Order Strategies When the Supplier Goes Direct”, by Femke Gryseels, Els Breugelmans, Kathleen Cleeren and Michiel Van Crombrugge), the authors investigate whether a direct channel addition changes the relationship with their retailers."