Optimal Guaranteed Profit Margins for Both Vendors and Retailers in the Fashion Apparel Industry

Chang Hwan Lee and Byong-Duk Rhee

Journal of Retailing, 2008, vol. 84, issue 3, 325-333

Abstract: Guaranteed profit margin (GPM) is one of the chargebacks that retailers frequently employ in the fashion industry. With this stipulation, the store demands a vendor's guarantee of its target mark-up rate, even in a markdown operation. This makes the retailer order too much and later liquidate a greater amount of leftovers. We propose a new GPM scheme for supply chain coordination. Specifically, if the retailer compensates the vendor for the same fraction of the joint costs as the guaranteed mark-up rate, the retailer's quantity choice results in profit maximization for the entire supply chain. Thus, the supply chain becomes fully coordinated and provides win–win outcomes for both retailer and vendor.

Keywords: Guaranteed profit margin; Fashion apparel industry; Supply chain coordination (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022435908000523
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jouret:v:84:y:2008:i:3:p:325-333

DOI: 10.1016/j.jretai.2008.07.002

Access Statistics for this article

Journal of Retailing is currently edited by A. Roggeveen

More articles in Journal of Retailing from Elsevier
Bibliographic data for series maintained by Catherine Liu ().