Retail Power Research Articles

Price competition and store competition: Store brands vs. national brand

This paper studies pricing strategies in a market channel composed of one national brand manufacturer and two retailers who, each, carry their own store brand and a national brand products. The model accounts for product competition between store brands and the national brand products, as well as for store competition between retailers.We use a game-theoretic model to examine a variety of channel leadership structures that consider strategic interactions both at the vertical level (between manufacturer and retailers) and at the horizontal level (between retailers). This extends the existing literature in main three directions: (a) accounting for both store competition and product competition in the same model, (b) considering a more comprehensive study including all possible interactions between channel members in this context, and (c) introducing horizontal price leadership between the retailers.Our results suggest that to be more successful and reap higher profits every retailer should pursue greater store differentiation relative to other competing retailers and less brand differentiation relative to the national brand to provide relatively homogeneous brands in a well differentiated store. On the other hand, the manufacturer should differentiate his national brand more from the retailers’ store brands and deal with as many and less strategically powerful retailers as possible. From the consumers’ perspective, the manufacturer’s leadership represents the worst scenario as it leads to the highest retail prices for all brands. The lowest prices for the store brand are reached when the retailers have vertical price leadership and for the national brand when there is no leadership.

An Architecture Using Lighter-Than-Air Platforms for Retail Power Beaming and Communications

An Architecture Using Lighter-Than-Air Platforms for Retail Power Beaming and Communications

스마트 그리드 환경의 전력소매시장을 위한 최적의 실시간 가격결정 모형에 대한 연구

최근 지구 온난화와 에너지 고갈 및 환경파괴로 인한 환경 문제에 대하여 세계 각국에서 심각하게 고민하고 있으며, 전기자동차의 상용화를 앞두고 이산화탄소 배출의 저감 및 효율적인 에너지 사용이 중요시 되고 있다. 또한, IT 기술의 발달과 함께 독점적인 전력공급에서 수요자가 참여하는 양방향 커뮤니케이션의 스마트 그리드의 개념이 도입되었다. 주요 국가들에서는 스마트 미터의 보급과 함께 에너지 사용의 효율성 개선을 위하여, 전력 경쟁시장에서 소비자의 수요반응의 활성화를 위한 인센티브의 지급 등의 정책도입이 요구되고 있다. 이에, 본 연구에서는 머지않아 등장할 소매전력시장에서 소비자의 수요반응을 증진하여 소비자의 전기 사용 비용을 절감하며 소매사업자의 이익을 최대화하는 전력 가격결정 모델을 제시하였다. 소비자 수요반응 참여율과 가격 탄성률에 따른 시뮬레이션을 시행하여 수요 반응을 나타내는 소비자 별 탄성률을 모든 소비자가 시간대별 고정 값을 사용하는 것과 소비자 별 탄성률을 예측하는 것을 비교하였다. 이를 통하여 전력 소매 시장에서 소비자의 에너지 사용을 줄이고 소매업자의 이익을 최대화할 수 있음을 밝혔다. Recently, global warming, energy shortage, and environmental disruption have been serious problems in every nation. It became more and more important to reduce the emission of CO2 and to use of energy efficiently. Smart grid was also introduced using the rapidly developing information technology. It deployed the mutual communication concept between customers and the suppliers in the electricity supply. There were increasing demands to adopt the smart meter and to present incentive for efficient energy usage in many developed countries. The objective of this research was to develop the optimal real time pricing model which maximized the profit of the power retailer and reduced the usage of energy. The simulation study was given to show the usefulness of the model. Simulation considered the customer demand response rate and price elasticity rate. The price elasticity rate was compared in the condition of fixed value according to time and variable value according to the customers. The optimal price model could maximize the profit of the power retailer and reduce the energy usage of the consumers.

Retail power market competition with endogenous entry decision—An auction data analysis

Deregulation in the electric power industry has been aimed at promoting competition and thereby enhancing the industry’s efficiency. We use the auction data of public power procurements to study the impact of the reform on the retail power market in Japan. We quantify this impact by measuring a decline in power charges, controlling for the endogeneity bias caused by the entrants’ bid-submission decisions. Our results suggest that power charges would decline by about 0.48yen/kWh on average when two or more providers bid at an auction.

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

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.

An EOQ model with immediate return for imperfect items under an announced price increase

The main purpose of this article is to investigate an economic ordering quantity model with imperfect quality under an announced price increase. It is assumed that a 100% inspection process is conducted to screen out the defectives contained in the received lot, and the defectives thus screened out will be returned to the vendor immediately. In practice, the mechanism of returning defectives to the vendor immediately may result from the increasingly exerted power of retailers, the need of satisfying strict quality requirement of customers, or the limitation of the storage space of retailers. Besides, the mechanism of immediate return usually indicates a promise of the vendor to his/her customers and is used to highlight the vendor's confidence in his/her products. The optimal ordering policies associated with three kinds of effective times of the price increase are obtained. A numerical example is then provided to illustrate the proposed model. The results indicate that the optimal special ordering quantity and the corresponding saving cost for an increase in price are both increasing with the increment of the price. For any price increase, both of the optimal special ordering quantity and the corresponding saving cost are negatively related to the remnant stock level at the time that the price increase is effective.

Controlling Power Retailer's Gray Activities Through Contract Design

We develop a model that captures dynamic relationships of a supply chain populated by a dominant retailer and a number of fringe retailers. The two types of retailers are asymmetric in buying power, retailing cost, and the ability to service the manufacturer's product. The wholesale prices offered through a quantity discount (QD) schedule can coordinate such a supply chain, but invite channel flow diversion type of gray trading between the dominant retailer and the fringe retailers. Our analysis is focused on how such a channel can be coordinated and the gray market activities be prevented. We propose a dynamic QD contract or a revenue‐sharing contract that the manufacturer can use to fight the gray market activity. The performance of the supply chain and the manufacturer's profit under each of the two contract forms are compared and managerial guidelines are provided to help the manufacturer make a judicious choice.

Study on a user's route choice and safety consciousness in a retail power center parking lot

本研究は、地方都市の大規模店の大規模平面駐車場に着目し、歩行経路の安全性に対する利用者の意識を明らかにするとともに、歩行経路選択特性を明らかにすることによって、計画・設計時の安全性向上の必要性・重要性を示すとともに、安全性を重視する歩行者の経路選択特性を活用することで、潜在的な危険性を削減しうる経路誘導の可能性があることを明らかに使用としたものである。その結果、利用者の意識では、最短経路であることだけでなく、横断や幅員などで経路が安全であること、また安全な経路がわかりやすいことの方をより重視しており、条件によってはそういった経路の方を選択する可能性があることを明らかにした。また、歩行者は目的とする店舗入口まで距離がある場合には目的地よりもとにかく店舗建物に接近する方向の経路を選択する傾向が強く、横断歩道や誘導員を配置するなどの対策を集約的に行う場合には、こういった特性に配慮することが重要であることなどが明らかになった。

Advertising versus Sales Promotion: An Examination of the Japanese Food Industry, 1976–2008

Abstract The issue of increasing sales promotion at the expense of advertising has been examined with growing concern over the last two decades. This study provides an exploratory analysis of the issues of allocation of marketing communication budget in the Japanese food industry: advertising for the long-term versus sales promotion for the short-term. Based on data collected from Nikkei Need-FinancialQUEST (Nikkei Digital Media, 2011), an increase in marketing budget allocated to sales promotion relative to advertising was observed in a time series analysis study from 1976 to 2008. The use of sales promotion budget has a two-fold effect on financial performance: the sales promotion budget is positively related to sales volumes and negatively related to profitability. Managerial implications of these findings and areas for future research are discussed. Research shows the weakened power of traditional advertising in a diversified media environment; the growth rate differential of sales promotion relative ...

Risk-adequate pricing of retail power contracts

Risk-adequate pricing of retail power contracts

REINFORCEMENT LEARNING IN NON-MARKOV CONSERVATIVE ENVIRONMENT USING AN INDUCTIVE QUALITATIVE MODEL

The majority of real-world processes, such as power plants, banking and retail businesses, are non-Markov processes, being conservative systems with stochastic supply and demand. As an example, a retail process possesses long-term memory of the customer's experience and market price drift that deviates from the Markov property. Modeling the reward in this process is directed towards actions that have to be executed daily in order to support it. These actions are further severely distracted by the hidden periodicity of customer behavior on a monthly and weekly basis. Alternative solutions in the retail business are achieved using a retail potential market model and a pricing policy based on demography. The policy of non-Markov behavior has not been intensively studied, although the literature indicates the non-Markov nature of many real process models, such as bank rating migrations. A solution is proposed, based on day-to-day data collection from point-of-sale (POS) locations, synthesizing the reward function from separate sale component rewards using qualitative models, and indicating the most outstanding sale groups that form the reward model. The normalization of POS data has been used for the elimination of periodicities and of non-Markov features of the process data. Reinforcement learning has been additionally supported by artificial corrections of the normalized reward function, and thus the obtained models used for recognition of the most promising and most defective hidden retail product groups. Model data were analyzed for the statistical significance of the obtained results, comparing normalized and non-normalized sales data distributions. The method is simple and effective, being applicable to each POS separately, for a complex retail business network, as well as for other conservative environments. The obtained qualitative correlations of model and reward function lie between 0.72 and 0.95, even for the simple cases presented.

Skirting Regulation? Trade Liberalisation, Retailers and the Informalisation of South Africa's Clothing industry

This article explores the recent history of South Africa's clothing industry, focusing on the rapid decline of formal sector employment and parallel growth in informal work, including small, home-based producers. We show that although the changing global regulatory regime and other external factors have shaped employment patterns in the sector, it is internal factors, particularly the country's powerful domestic retail industry and related changes in domestic sourcing patterns, which are largely responsible for informalisation and the current crisis facing the sector. The article concludes by suggesting that the various ‘low-road’ strategies adopted by manufactures aimed at competing with imports based on price are unsustainable.

Market and Welfare Effects of Mandatory Country‐of‐Origin Labeling in the U.S. Specialty Crops Sector: An Application to Fresh Market Apples

This study provides a new framework of analysis of the market and welfare effects of mandatory country‐of‐origin labeling (MCOOL) for fruits and vegetables that accounts for heterogeneous consumer preferences, differences in producer agronomic characteristics, and retailer market power. The market and welfare effects of MCOOL are shown to be case‐specific and dependent on the labeling costs at the farm and retail levels, the strength of consumer preference for domestic products, the market power of retailers, the marketing margin along the supply chain, and the relative costs of imported and domestic products. Simulation results for the U.S. market of fresh apples indicate that domestic producers are the most likely beneficiaries of MCOOL, followed by domestic consumers. Being unable to exercise market power on consumers or suppliers of fresh apples, retailers will lose if the implementation of MCOOL entails fixed costs. Imports of fresh apples decline after MCOOL introduction.

Retailer brand share statistics in four developed economies from 1992 to 2005

PurposeThis paper seeks to examine long‐term trends in retailer and manufacturer brand shares in grocery product categories, and to relate these trends to retailer category strategy with regard to these two types of brand.Design/methodology/approachThe study makes use of secondary data and empirical materials from the literature to establish and explain the trends in four countries: the UK, the USA, Australia, and New Zealand. Additionally, interview data are used to develop issues.FindingsThe results indicate the existence of long‐term equilibrium points between the shares of manufacturer brands and retailer brands in grocery product categories in the USA, New Zealand and Australia. Only the UK shows strong growth of retailer brands in line with retailer consolidation and power, but this trend is arrested, reversed and brought to equilibrium in 2001.Research limitations/implicationsThe data presented are restricted to four major English‐speaking economies between 1992 and 2005. The data are also consolidated national data. Equilibria within individual categories will vary due to variations in category structure and pace of innovation.Practical implicationsThis research indicates that major retailers deploy manufacturer brands to drive the categories via innovation and retailer brands to generate additional profit for the retailers. Therefore manufacturer brands do have a long‐term future. Individual manufacturer brands are likely to be assessed by the retailer primarily on this driving capability, and on the manufacturers' ongoing investment in the capacity to innovate that supports it.Originality/valueThe paper provides a fresh perspective of looking at retailer and manufacturer strategy via brand share trends.

The Reform of European Distribution Law

This article analyses the new European Union (EU) block exemption framework for vertical restrictions in distribution agreements. The modernization of EU distribution law addresses the need for enhanced legal certainty resulting from the entry into force of the decentralized system of competition law enforcement in 2004. It also seeks to adapt to two recent major economic developments, namely the increased power of large retailers and the growing importance of Internet sales and advertising. These evolutions are reflected in the two main innovations of the new regime: the extension of the market share threshold to the buyer and the more detailed regulation of Internet sales. Furthermore, the new framework emphasizes the possible efficiencies associated with some hard-core restrictions, which represents a welcome step towards the Commission's objective of incorporating a more economic approach into competition law. However, this constitutes only limited progress since the Commission maintains its formalistic approach of blacklisting clauses that are a priori considered to undermine consumer welfare.

Private labels in Australia: A case where retailer concentration does not predicate private labels share

Researchers suggest that private label penetration is due to the degree of retailer power over suppliers and the level of retailers’ concentration (Tarzijan, 2004). While true for some countries, this is not the case in Australia, where the retailer concentration is one of the highest in the world (two retailers hold 74 per cent of the grocery market) and private labels account for only 24 per cent of supermarket sales. The aim of this article is to investigate additional factors besides retailer concentration, such as retailer strategies towards their private labels that may explain this exception. A detailed examination of the marketing activity and diversity in pricing and branding strategies in two countries, Australia (low private labels penetration) and the United Kingdom (high private labels penetration) has been undertaken. This involved in-store observations, price comparisons and a literature review. The findings show that the marketing strategy of Australian retailers is very different from British retailers. Private labels are rarely promoted, and are positioned as cheaper alternatives to national brands. This highlights the other factors, such as retailer commitment and marketing activity that may distinguish between countries with different private label penetration.

Analytical model of adoption of item level RFID in a two-echelon supply chain with shelf-space and price-dependent demand

We investigate whether it is possible for the manufacturer as well as the retailer to derive economic benefits from item-level RFID. We consider two supply chain contracts. In the first instance the manufacturer sets the wholesale price for his product and in response the retailer sets the retail price and allocates the shelf-space. We find that in this setting item-level RFID is adopted in a decentralized supply chain at the same levels of RFID costs as in an integrated supply chain with a single decision maker. The second case that we consider involves a powerful retailer setting product shelf-space prices. In this setting the manufacturer essentially rents shelf-space from the retailer. We find that in this setting, the retailer may force the adoption of RFID even if it does not maximize the chain's total profit.

Market Dynamics in Supply Chains: The Impact of Globalization and Consolidation on Food Companies’ Mark-Ups

This paper examines whether ownership and increased competitive pressure affect food retailers’ market power, analysing whether all actors involved in the food supply chain deviate from the pricing behaviour that exists under perfect competition. A method proposed by Roeger (1995) is used to estimate price-cost margins, relaxing the assumptions of perfect competition and constant returns to scale. The obtained results show that foreign investments and consolidation have a positive and significant impact on the market power of food processors and retailers. Food processors, agricultural producers and wholesalers have lower price-cost margins than retailers, which suggests that these actors price closer to marginal costs being more concerned with maximising social welfare or that the former have higher costs than retailers. The results are robust to various estimation techniques and specifications.

Market power in Austrian food retailing: the case of milk products

An increasing market concentration in food retailing has generated concerns about the market power of retailers towards consumers and input suppliers. This is especially true for countries such as Austria, which has a CR-3 in food retailing greater than 75%. Based on a New Empirical Industrial Organization model we estimate the market power of food retailers towards consumers and input suppliers with respect to three groups of dairy products (drinking milk, cheese, butter including others). Our empirical results suggest that market power of retailing exists towards consumers (in particular in the case of drinking milk) and towards input suppliers (in particular in the case of butter and other milk products). Market power is more significant (in statistical terms) downstream than upstream. However, the impact of oligopsony power on input prices is stronger than the impact of oligopoly power on consumer prices.

Collective Farmers' Marketing Initiatives in Europe: Diversity, Contextuality and Dynamics

Collective action by farmers has played an important role in the history of European agriculture. During the twentieth century, the foundation of agri- cultural marketing co-operatives contributed in many countries to better market access, increased farm incomes and rural employment. However, European agri- culture is facing a range of new challenges nowadays. Farmers have increasingly lost control over supply chains, due to globalization processes and the growing power of retailers, and they are also confronted with a general decline and reori- entation of policy support. At the same time, there is a need to respond to chang- ing demands for food safety, quality and an attractive countryside. Against this background, a range of new types of collective farmers' marketing initiatives is emerging across Europe by which farmers in coalition with other categories of so- cietal actors aim to find answers for the challenges they are currently facing. Based on the outcomes of the European COFAMI research project, this article explores the diversity of strategies that characterize these newly emerging collective mar- keting strategies and the different types of social network relations that they are generating. Also, it outlines some main methodological principles for studying the dynamics and operation of new collective marketing initiatives.