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European Journal of Operational Research
Article . 2020 . Peer-reviewed
License: Elsevier TDM
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Manufacturer competition in the nanostore retail channel

Authors: Lei Zhao; Jiwen Ge; JC Jan Fransoo; JC Jan Fransoo; Dorothee Honhon;

Manufacturer competition in the nanostore retail channel

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.

Country
Netherlands
Keywords

Information Systems and Management, Nanostore, Subsistence retail, Management Science and Operations Research, Modelling and Simulation, Cash competition, Retailing, Computer Science(all)

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    This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    10
    popularity
    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
    Top 10%
    influence
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    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
    Top 10%
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citations
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
10
Top 10%
Average
Top 10%
bronze