Contents
Module 1 Setting the scene ............................................................................................................................ 2
1 Retailer power in the grocery industry – Geyskens ................................................................................. 2
Module 2 Channel design ................................................................................................................................ 4
2 How to Win in an Omnichannel World – David Bell ................................................................................ 4
3 Do you really want to be on eBay? – Andrei Hagiu.................................................................................. 5
Module 4 Partnerships .................................................................................................................................... 6
4 The power of trust in manufacturer-retailer relationship – Nirmalya Kumar ......................................... 6
5 The dark side of close relationships – Erin Anderson .............................................................................. 8
Module 6 Assortment.................................................................................................................................... 10
6 When More Is Less And Less Is More: The Psychology Of Managing Product Assortments – Alexander
Chernev ..................................................................................................................................................... 10
7 Should you invest in the long tail? – Anita Elberse ................................................................................ 11
8 Category Captainship: Who Wins, Who Loses? – Mümin Kurtulus ....................................................... 13
Module 7 Private labels ................................................................................................................................. 15
9 Manufacturer and retailer strategies to impact store brand share: Global integration, local adaption
and worldwide learning – Jan-Benedict Steenkamp ................................................................................. 15
Module 9 Price and promotions.................................................................................................................... 19
10 Sales Promotion – Karen Gedenk ......................................................................................................... 19
11 Changing the Channel: a better way to do trade promotions – David Bell ......................................... 22
Module 11 Value retailers ............................................................................................................................. 24
12 Don’t be Undersold! – Jan-Benedict Steenkamp ................................................................................. 24
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,Module 1 Setting the scene
1 Retailer power in the grocery industry – Geyskens
Consequences of more powerful retailers:
• Lower pricing
• Accelerated delivery times
• Tailored promotional programs
• More sustainable products and processes
• Temporarily stop selling certain products if a manufacturer doesn’t comply with their demands
Two sources of retailer power:
1) Growing retailer scale: Reasons:
a. International operations:
i. This mainly happened in the late 1980s. European and American retailers went
to Western and some transition economies in Eastern Europe to reduce their
reliance on the stagnant markets in North America and Western Europe. They
used a store format that was new to the market, in terms of long-term sales
performance and sales per square meter. This was financed using greenfield
investment (the parent creates a subsidiary, building its operations from the
ground up).
ii. The last couple of years, numerous retailers have pruned the number of
markets, since it’s hard to be a leading player everywhere in the world.
iii. Being early in a market is critical
b. M&As:
i. After a store changes ownership, consumers still exhibit outlet loyalty.
ii. Acquisitions increase retailer power more than organic growth does, since the
traffic levels are higher when the store is acquired than when a new outlet is
opened.
iii. Larger retailers (e.g. via M&A) are better able to withstand increased
competition of another large retailers and hence, one acquisition often sparks
others in a chain reaction.
c. Entering buying groups: They are horizontal, typically cross-border collaborations
through which retailers purchase from suppliers.
i. By pooling volume and using their clout, larger buying groups can extract better
buy-in prices than might be achieved through individual negotiation. On
average, the group members’ productivity increases and COGS decreases.
ii. Retailers benefit less from buying group scale when the group is more
heterogeneous in terms of member size or when they are a relatively small
member
iii. Particularly medium-sized retailers are increasingly seeking to partner with a
buying group for sourcing PLs
iv. A wide geographic scope is better, since advantages of group participants are
also available to one’s direct competitor, and allows insights in price differentials
across many countries, which can be used to exchange information about price
differences between the members and to negotiate lower buy-in prices.
Therefore, a geographic overlap should be avoided.
v. A wide product-market scope (i.e. the number of different store formats
represented in the buying group) does not increase retailers’ power, since that
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, increases the complexity of meeting the often divergent requirements of the
various members
vi. The influence of buying groups has risen sharply over the last couple of years.
Buying group executives are frequently switching between groups, leveraging
insider knowledge of each other’s terms, and making buying groups even more
powerful
2) Growing retailer sophistication: Retailers have better access to customer data than
manufacturer and they have seized that opportunity to diversify into different channels, targeting
different consumers, and to develop their own private labels to increasing loyalty to their chains
a. Format diversification:
i. This allows retailers to target different consumers and cater to different
shopping occasions, increasing their power position
ii. Retailers are prioritizing growth channels, namely, the discount, convenience
and online channels
iii. Online channels carry less risk and provide greater flexibility for gaining
international presence than greenfield expansions or M&As. This is also less
costly than setting up a physical store
iv. Internet channels with home delivery is unprofitable, because consumers want
fast delivery but are reluctant to pay delivery fees. So retailers are now
launching a now format: click and collect (consumers have to pick up the goods
themselves
b. Private labels:
i. It has a market share of 20% to 30% percent in the CPG industry
ii. This increases bargaining power, since they can threaten to not buy the
manufacturer’s products at all and sell the private labels as alternatives
iii. Having a ‘true’ private label brand has two key elements
1. Three-tiered private label programs: They follow a good, better, best
approach: Including an economy and premium option to the stand
private label
2. Having their own brand name, so consumers can differentiate among
different PLs. This can be done by having a stand-alone brand, or having
the retailer’s name in the brand name. This provides a signal of
credibility, since false claims will be a loss of reputation of the brand
iv. Standard private labels imitate mainstream-quality manufacturer brands and are
positioned as mid-quality alternatives. Domestic standard PLs are sometimes
sold as premium PLs in other countries (e.g. premium French import)
v. Premium typically sell for a slightly lower price than premium-quality national
brands
vi. Private labels may get strong due to distribution partnerships or alliances with
retailers around the world, selling each other’s PLs. By gaining economies of
scale for sourcing private labels, retailers may further enhance their power
position
Other markets: The concentration of power (few players holding more and more of the stakes) is also
happening in other retailing areas, so the trends within the grocery retailing industry may forestall what is
in place for other industries
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