Retail-Price Drivers and Retailer Profits

Vincent R. Nijs (), Shuba Srinivasan () and Koen Pauwels ()
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Vincent R. Nijs: Kellogg School of Management, Northwestern University, Evanston, Illinois
Shuba Srinivasan: The A. Gary Anderson Graduate School of Management, University of California, Riverside, California 92521
Koen Pauwels: Tuck School of Business at Dartmouth, Hanover, New Hampshire 03755

Marketing Science, 2007, vol. 26, issue 4, 473-487

Abstract: What are the drivers of retailer pricing tactics over time? Based on multivariate time-series analysis of two rich data sets, we quantify the relative importance of competitive retailer prices, pricing history, brand demand, wholesale prices, and retailer category-management considerations as drivers of retail prices. Interestingly, competitive retailer prices account for less than 10% of the over-time variation in retail prices. Instead, pricing history, wholesale price, and brand demand are the main drivers of retail-price variation over time. Moreover, the influence of these price drivers on retailer pricing tactics is linked to retailer category margin. We find that demand-based pricing and category-management considerations are associated with higher retailer margins. In contrast, dependence on pricing history and pricing based on store traffic considerations imply lower retailer margins.

Keywords: retail-price drivers; retailer profits; time-series models; generalized forecast error variance decomposition (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (45)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:26:y:2007:i:4:p:473-487

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