T his research investigates the value of category captainship (a management practice in which a retailer relies on a manufacturer for recommendations regarding strategic category management decisions) in retail supply chains. We consider a setting where the scope of category management is limited to assortment decisions and demand enhancing activities. We assume that the retailer selects a category captain among multiple competing manufacturers with privately known capabilities for driving category traffic. First, we consider a benchmark scenario where the retailer is responsible for category management. Then, we consider the category captainship scenario where the retailer selects one of the manufacturers as a captain to manage the category. We find that captainship is more likely to emerge in categories where the cost of managing variety, the retail margins, and the competition for captainship are moderate and the captain is more capable of driving traffic compared to the retailer. In such categories the collaboration between the retailer and the captain ensures sufficient surplus for both parties. Finally, we show that captainship can also benefit the non-captain manufacturers.

Retail assortment planning can have a tremendous impact on a retailer's bottom-line performance. Over the past years, retailers have increasingly relied on their leading manufacturers for recommendations regarding the assortment to be offered to the consumers in a particular category, a practice often referred to as category captainship. Our research investigates the consequences of using category captains for assortment selection decisions. We develop a game-theoretic model where multiple manufacturers sell their products to consumers through a single retailer. We compare a model where the retailer selects the assortment in the category with a model where the retailer relies on a category captain for assortment decisions in return for a target category profit. We show that category captainship can, in some circumstances, benefit not only the retailer and the category captain, but also the noncaptain manufacturers. Our results have implications regarding the implementation of category captainship practices.retail supply chains, category management, category captainship, assortment planning, game theory

No abstract

Category captainship (CC) is a supply chain practice in which a retailer collaborates with a manufacturer to develop and implement a category management strategy. We examine the role of retail competition in CC implementations by analyzing a game‐theoretic setting with two competing retailers. We first consider a benchmark model in which both retailers adopt traditional category management. Then, we consider a CC model in which the focal retailer implements CC. Comparing the equilibrium outcomes of these two models leads to the following insights: First, despite preventing the emergence of CC in some cases, retail competition increases the upside potential of CC for the focal retailer. Second, the focal retailer’s CC implementation can increase the competing retailer’s market share and profit. Third, a manufacturer may agree to serve as a captain even though CC decreases the profit it generates through the focal retailer channel because retail competition enables it to recoup its losses through the competing retailer channel. Last, retail competition alleviates concerns about the potential negative impact of CC on consumers. We discuss the implications of the study for retailers, manufacturers, and policymakers.

No abstract