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Fred K.T KU

Abstract

Issues related to retail pass-through receives much attention of both academics and business practitioners. Both analytical and empirical works have been done to characterize and documents the retail pass-through rates. However, little attention has been paid to the change of retail pass-through when a retailer introduces a store brand. Using evidence from scanner data, we investigate empirically the effects of store brand entry on retail pass‐through. We show that the entry of store brand is generally accompanied by reductions in retail pass‐through and that there are substantial variations in the reductions. We then examine the determinants of the magnitude of fall in pass-through, and we find evidence that the variations in pass-through changes are related to brand-specific and manufacturer-specific characteristics. In particular, retail pass-through reduces by a smaller magnitude for brands offering larger product varieties, belonging to a dominant manufacturer, having a greater margin against the retailer, and positioning at the higher-tier of market.

Abstract

Issues related to retail pass-through receives much attention of both academics and business practitioners. Both analytical and empirical works have been done to characterize and documents the retail pass-through rates. However, little attention has been paid to the change of retail pass-through when a retailer introduces a store brand. Using evidence from scanner data, we investigate empirically the effects of store brand entry on retail pass‐through. We show that the entry of store brand is generally accompanied by reductions in retail pass‐through and that there are substantial variations in the reductions. We then examine the determinants of the magnitude of fall in pass-through, and we find evidence that the variations in pass-through changes are related to brand-specific and manufacturer-specific characteristics. In particular, retail pass-through reduces by a smaller magnitude for brands offering larger product varieties, belonging to a dominant manufacturer, having a greater margin against the retailer, and positioning at the higher-tier of market.

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