Determinants of Channel Profitability: Retailers' Control over Product Selections as Contracting Leverage

37 Pages Posted: 7 Jul 2020 Last revised: 3 Mar 2021

See all articles by Sylvia Hristakeva

Sylvia Hristakeva

University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: September 12, 2019

Abstract

Retailers control what products are offered on shelves, which may allow them to capture preferential contracts from their suppliers. I analyze the determinants of retail profitability through the lens of 'replacement threats,' in which a buyer may obtain favorable pricing by threatening to source an input from a competitor. A theoretical analysis shows that retailers are less likely to benefit from replacement threats if they are better positioned to use other negotiation levers. An empirical analysis of the U.S. yogurt market confirms that 'larger' buyers, regional retailers with many stores in the market, benefit relatively less from replacement threats.

Suggested Citation

Hristakeva, Sylvia, Determinants of Channel Profitability: Retailers' Control over Product Selections as Contracting Leverage (September 12, 2019). Available at SSRN: https://ssrn.com/abstract=3625706 or http://dx.doi.org/10.2139/ssrn.3625706

Sylvia Hristakeva (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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