The Impact of Key Retail Accounts on Supplier Performance: A Collaborative Perspective of Resource Dependency Theory

Abstract

Existing literature suggests that the increasing concentration in the retail industry is allowing powerful retailers to exploit their weaker suppliers, which causes the suppliers’ performance to suffer. This study takes a collaborative perspective of resource dependency theory and suggests that when suppliers engage in supply chain relationships with key retail account (KRA) customers, their performance may improve, depending on the varying levels of the supplier's and KRAs’ market shares. The empirical analysis of data from two large retailers, Wal-Mart and Target, and a broad cross-section of their suppliers provides ample support for most of the hypotheses set forth in this paper: Suppliers that depend on KRAs for a significant share of their total revenues relinquish some of their leverage in the marketplace, but as the KRAs gain market share, their suppliers’ performance tends to increase. Cumulatively, these results provide evidence of collaborative supplier–KRA relationships, such that a supplier's dependency on KRAs may positively affect supplier performance. This finding supports a more positive, symbiotic view of dependency, resulting in important implications for key account management, supply chain management, and retail research and practice.