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Manufacturer-owned retail stores

Author: Wang, Yusong ; Bell, David R. ; Padmanabhan, PaddyINSEAD Area: MarketingIn: Marketing Letters, vol. 20, no. 2, June 2009 Language: EnglishDescription: p. 107-124.Type of document: INSEAD ArticleNote: Please ask us for this itemAbstract: 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.
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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.

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