The Role of Slotting Fees and Introductory Allowances in Retail Buyers' New-Product Acceptance Decisions

Abstract

Although slotting fees and introductory allowances have become well established in the grocery and other industries, they remain a source of controversy among channel members. Retailers claim that these fees and allowances help mitigate the risks associated with new-product acceptance. Manufacturers counter that retailers are abusing slotting fees and allowances by using them as a source of profit. The authors investigate this controversy by empirically examining the role of slotting fees and allowances in the retail buyers’ product acceptance decision process. Results provide evidence to suggest that introductory allowances are indeed being used by retailers in the sample to offset perceived risks and costs of carrying new products. However, findings regarding slotting fees are much less supportive of retailers’ claims.