Model of Vertical Marketing System in Retail Distribution

Abstract

Fierce market competition among leading retailers asserts different models of market appearance and cooperation with suppliers. Vertical integration, as a kind of cooperation could range from one-hand transactions to mutual investments in specific assets. From a theoretical point of view the stages of integration at the end of distribution channel reflect on retailer's power and his need for resources. The importance of the paper is set by contemplation on integration factors by the modeling method. The factors like costs, responsibility, risk, margin, and function performance in the channel will be examined. The position of the partner that can be settled in the model could range from conventional contracting to full vertical integration, depending on the volume of the execution of marketing activities. The contribution of descriptive model could be a kind of recommendation to leading retailers in a way to introduce more proper forms of cooperation with suppliers.distribution channel, vertical marketing system (VMS), retailer, channel power, cooperation