How Retailers Change Ordering Strategies When Suppliers Go Direct

Abstract

This study empirically investigates whether and to what extent suppliers’ decisions to start selling directly to end consumers provoke reactions in the ordering strategy of downstream channel partners, such as independent multibrand retailers. Using a multimethod approach that combines transactional data, survey data, and a scenario-based experiment, the authors demonstrate that retailers tend to exit these relationships after a direct channel introduction, as exhibited by their strategic decisions to order fewer distinct stockkeeping units (SKUs), accompanied by higher wholesale prices per unit. On average, retailers decrease the number of distinct SKUs ordered by 15 (or 18.75%) and pay a higher average wholesale price by €.79 (or 20.84%). Yet the responses also differ across retailers, reflecting moderating impacts of retailer power, expertise, and relationship quality. Retailer power emerges as a robust moderating factor, with more powerful retailers indicating a lower propensity to exit the relationship. Expertise and relationship quality have more nuanced influences on retailers’ ordering strategies. The multimethod approach serves to reveal the underlying mechanisms of these moderating effects, such that both rational (coercive power and switching costs) and emotional (conflict and confidence) considerations are in play.