Selling Your Product Through Competitors' Retail Outlets




This paper analyzes the incentives for a manufacturer to distribute its products through a competitor’s retail outlets in preference to its own outlets. While the competitor’s retail outlets would favor its own brands, and lead to double markups, it may still be worthwhile to distribute through those outlets. Our models show that the advantages of doing so are: substitution of retail price coordination for retail price competition, access to consumers who are store-loyal to the competitor’s outlets, economies of scope in multi-brand retailing, and consumers’ preference for one-stop shopping. Together, the advantages may outweigh the disadvantages, and support a decision that may seem hard to justify at the outset.

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Dr. S. Puntoni