The Research Of Effect Of Slotting Allowance On Retailer Services

In the 1990s, the supermarket chain is introduced to our country in a highly efficient business model, and the retail market structure change dramatically. Vendors must apply slotting allowance to retailers in order to develop sales channels, occupy a more favorable store space and get more support services. Slotting allowance is the cost of the manufacturer to pay in order to use the retailer limited shelf resources. However, since the date of slotting allowance charged to manufacturers from retailers, the conflict triggered by the slotting allowance and retailer-supplier situation for tensions have been continued. This also leads to widespread concern about whether the slotting allowance is reasonable.In previous studies, people always access slotting allowance as a one-time fee prior to treatment. Although this is indeed an important mechanism for charging, in real life, except for a one-time slotting allowance, retailers often charge linear slotting allowance associated with sales size. In general, to some extent sales of the product is affected by retailer’s services. Compared with manufacturers, retailers is more closer to the market, has a better understanding of consumer behavior, their services more directly affect consumers’choices. Therefore, the influence of slotting allowance on retailers has a certain significance.Basing on summarizing the role of slotting allowance at home and abroad, this paper from a different perspective of the downstream market environment, studys the market structure of downstream presence of large retailer and local retailer, large retailer and competitive fringe retailers. In both cases, we study the effect of slotting allowance on the wholesale prices, retail prices, every participant’s gross profit margins and supply chain profit, and focus on the influence of channel service fees on retailers. We conclude that when large retailer and local retailer present in the downstream channel, linear slotting allowance motivates large retailer charged to provide more services, and the service level of local retailer without slotting allowance reduces. However, the total number of retailers offer the service has not changed, that play a role in the channel between retailers charge transfer services; when large retailer present and competitive fringe retailer in the downstream market,linear slotting allowance incentives large retailer to provide more service, due to the competitive fringe retailers do not have any bargaining power manufacturers, manufacturers squeeze all the profit fringe retailers, so there is no incentive to provide any services, retailers increase the total number of services. Therefore, Slotting allowance can motivate retailer to provide more services.