Strategic Assortment Reduction by a Dominant Retailer Strategic Assortment Reduction by a Dominant Retailer

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.channels of distribution; channel power; assortment; retailing; game theory

Pricing Strategies in Dual-online Channels Based on Consumers’ Shopping Choice

AbstractBesides an official website mall (OWM), retail stores on the third party e-commerce platform(3PEP) is an another important online channel that manufacturers adopt to sell online. How to properly price products in these two channels simultaneously is a tough problem to firms and gains much attention by researchers. In this paper, we analyze their channel choice, and give demand functions of the two channels based on the consumers’ segmentation and preference. Then we design a sale model including two online channels: OWM and a retail store on 3PEP. According the Stackelberg game theory, we calculate and discuss the optimal pricing strategies of the manufacturer and retailer in three feasible regions. The result shows that manufacturers emphasizing channel sales prefer to choose pricing strategies that helps two online channels share the online market. But some manufacturers think adjusting the OWM's price and the wholesale price to control the retailer's pricing strategies is reasonable and necessary, even if nobody will prefer the OWM

Strategic integration decision under supply chain competition in the presence of online channel

This study explores the pricing decisions of substitutable products for two competing supply chains in the presence of an online channel. Each supply chain consisting of a single manufacturer and an exclusive retailer and one of the manufacturers distributes products through the online channel. We examine optimal decisions under five scenarios to explore how the strategic cooperation between two manufacturers at the upstream horizontal level or with the retailer at the vertical level affects product pricing decisions and the performance of two supply chains? The results reveal that decisions for cooperation with competing manufacturers and opening an online channel are correlated. In the absence of an online channel, cooperation with their respective retailer can lead to a higher supply chain profit. However, if a manufacturer opens an online channel, then cooperation with competing manufacturers can lead to a higher supply chain profit. Under the vertical integration, total supply chain profit might be lower compared to a scenario where members in each supply chain remain independent. Consumers also need to pay more for products

Pricing and Assortment Selection with Demand Uncertainty.

Assortment planning and pricing are among the most important strategic questions for many firms. These decisions are particularly challenging when inventory considerations need to be taken into account. Unfortunately, the trade-offs created by the assortment, pricing and inventory decisions are complicated enough to push many firms to make these decisions separately, ignoring their synergy. This dissertation targets this gap by presenting joint assortment and pricing models with inventory considerations. The first setting studied in this dissertation is a single firm selling a configurable product (e.g. a laptop computer), formed by putting together two components: one required (e.g. processor) and one optional (e.g. DVD writer). This dissertation finds that the optimal prices are such that all variants of a component share the same effective profit margin, defined as the unit gross margin net of unit inventory-related cost, which itself depends on unit underage and overage costs, service level and demand variability. As for assortment selection, the importance of a variant's surplus is shown. When variants are put together to form a product configuration, their surpluses combine to yield the attractiveness of the product configuration, whose role in selecting the assortment is highlighted in this dissertation. Furthermore, this dissertation finds that if the optional component's assortment and margin influence the customer's decision to purchase from the firm, then the component must be priced at effective cost. This is no longer true if only the required component affects the customer's decision to purchase from the firm. The second setting studied here involves a dual-channel supply chain, where a manufacturer sells substitutable products directly to the customer and also through an independent retailer. This dissertation finds that the wholesale prices in such a supply chain exhibit a structure in which the wholesale margins weighted by a function of service levels and demand variability must be common across all variants. In addition, this work characterizes scenarios where the manufacturer's and retailer's assortment preferences are in conflict. In particular, this work shows that the manufacturer may prefer the retailer to carry items with high demand variability while the retailer prefers items with low demand variability.Ph.D.Industrial & Operations EngineeringUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/75935/1/betzabe_1.pd

ESSAYS ON RETAIL ENTRY AND EXIT

The landscape of the retail industry has witnessed dramatic changes over the past decades. Both manufacturers and retailers are increasingly challenged to find innovative ways to reach and delight not only their existing customers, but also potential new customers. In this dissertation, I aim to pin down the entry effects of an innovative channel -- online marketplaces in Essay 1 and Essay 2, and the exit effects of a traditional channel – Walmart supercenter in Essay 3. In Essay 1 “The Value of Online Marketplaces to Brand Manufacturers in Emerging Markets”, I apply an event-study methodology to examine whether manufacturers’ decisions are justified by studying the net impact of adopting marketplaces on a firm’s stock market return. To further gain insight into to whom gains may arise, I use a contingency framework and relate manufacturers’ short-term abnormal returns to manufacturers’ market knowledge and marketing strengths. The findings provide comprehensive guidance for manufacturers, global or local, to assess whether and to what extent they can take advantage of online marketplaces to thrive in emerging economies. In Essay 2 “For Better or for Worse: The Halo Effects of Online Marketplaces on Entrenched Brick-and-Mortar Stores”, I evaluate the impact of online marketplaces on entrenched brick-and-mortar stores -- whether and to what extent retailers and all brands within the category stand to lose or win. To address this question, I use a seemingly unrelated regression (SUR) model to quantify the impact of online marketplaces. The study not only contributes theoretically to the scant literature on the interaction between online marketplaces and offline channels but also offers manufacturers insightful instructions on multichannel decisions. In Essay 3 “When Stores Leave: The Impact of Walmart Supercenter Closure on Retail Price”, I seek to understand how retail prices change following the exit of a local retailer by using Walmart supercenter closures in local U.S. markets as a working example. By using a difference-in-difference estimator with correction for selection bias, I find that, on average, consumers have to pay a higher price (+1.6%) after a Walmart supercenter’ exit. The study provides valuable insights into the potential impact of retail exit on price and consumer welfare.Doctor of Philosoph