Manufacturer competition in the nanostore retail channel

Jiwen Ge, Dorothee Honhon, Jan C. Fransoo and Lei Zhao

European Journal of Operational Research, 2020, vol. 286, issue 1, 360-374

Abstract: In emerging markets, a significant share of the revenue of Consumer Packaged Goods (CPG) manufacturers comes from the traditional retail channel, composed of millions of independent family-owned nanostores. Nanostore owners typically have limited cash flow and are driven by the modest goal of making a living. It is common practice for manufacturers to dispatch sales representatives to visit nanostores directly in order to drive product sales. We study the sales visit and pricing decisions of manufacturers supplying to a nanostore over an infinite time horizon. We first consider the case of a single manufacturer and show that the manufacturer should price the product such that the nanostore can earn enough to pay for his subsistence spending. Such a supplier-retailer mutual reliance relationship continues to hold for the two-manufacturer model where the manufacturers compete for the nanostore’s cash resources under shelf space limitations. Further, under some conditions, the two manufacturers can mutually benefit, that is, instead of jeopardizing each other through competition, they contribute collectively to satisfy the nanostore family’s subsistence needs such that nanostores are more likely to survive; besides, each can earn more profit than in a single-supplier setting. The results can help us understand the current industry dynamics in this vital sector.

Keywords: Retailing; Nanostore; Cash competition; Subsistence retail (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221720302253
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:ejores:v:286:y:2020:i:1:p:360-374

DOI: 10.1016/j.ejor.2020.03.011

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

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