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.

[1]  Mark E. Parry,et al.  Manufacturer-Optimal Wholesale Pricing When Retailers Compete , 1998 .

[2]  Sunil Gupta,et al.  Note on Self-Restraint as an Online Entry-Deterrence Strategy , 2006, Manag. Sci..

[3]  Jehoshua Eliashberg,et al.  Multiple Business Goals Sets as Determinants of Marketing Channel Conflict: An Empirical Study , 1984 .

[4]  R. Lal.  Improving Channel Coordination Through Franchising , 1990 .

[5]  A. Coughlan.  Competition and Cooperation in Marketing Channel Choice: Theory and Application , 1985 .

[6]  Preyas S. Desai,et al.  Strategic Decentralization and Channel Coordination , 2004 .

[7]  Jagmohan S. Raju,et al.  The introduction and performance of store brands , 1995 .

[8]  D. Simester,et al.  Customer Satisfaction Incentives , 1994 .

[9]  Ralph A. Winter.  Vertical Control and Price Versus Nonprice Competition , 1993 .

[10]  P. Bhardwaj.  Delegating Pricing Decisions , 2001 .

[11]  Thomas T. Nagle.  The Strategy and Tactics of Pricing: A Guide to Profitable Decision-Making , 1987 .

[12]  David Simchi-Levi,et al.  Handbook of Quantitative Supply Chain Analysis , 2004 .

[13]  Vineet Padmanabhan,et al.  An Explanation for Partial Forward Integration: Why Manufacturers Become Marketers , 2002 .

[14]  Jeffrey L. Bradach.  Using the Plural Form in the Management of Restaurant Chains , 1997 .

[15]  Erin Anderson,et al.  The Salesperson as Outside Agent or Employee: A Transaction Cost Analysis , 2008, Mark. Sci..

[16]  James A. Brickley,et al.  An Agency Perspective on Franchising , 1991 .

[17]  K. Moorthy.  Strategic Decentralization in Channels , 1988 .

[18]  John F. Sherry,et al.  Themed flagship brand stores in the new millennium: theory, practice, prospects , 2002 .

[19]  Richard Staelin,et al.  An Industry Equilibrium Analysis of Downstream Vertical Integration , 2008, Mark. Sci..

[20]  Minakshi Trivedi,et al.  Distribution Channels: An Extension of Exclusive Retailership , 1998 .

[21]  M. Parry,et al.  Channel Coordination When Retailers Compete , 1995 .

[22]  Peter R. Dickson,et al.  The Price Knowledge and Search of Supermarket Shoppers , 1990 .

[23]  S. C. Choi,et al.  Price Competition in a Channel Structure with a Common Retailer , 1991 .

[24]  A. Tsay,et al.  Modeling Conflict and Coordination in Multi-Channel Distribution Systems: A Review , 2004 .

[25]  Wujin Chu,et al.  Channel Coordination Mechanisms for Customer Satisfaction , 1995 .