Like any new product, private label entry increases competition within a category leading to downward pressure on both wholesale and retail prices. But, given the higher margins for private labels and potential bargaining benefits for retailers, they have incentives to help private labels gain market share. The paper addresses two questions: First, do private labels enhance a retailer's bargaining power with respect to manufacturers? Second, given the higher profitability and potential increase in bargaining power, does the retailer strategically set retail prices to favor and strengthen the private label?We find support for the "bargaining power" hypothesis, but qualified support for the "strategic retailer pricing" hypothesis. Retailers gain bargaining power through lower wholesale prices on imitated national brands. But the gain is greater in niche categories than in mass categories, suggesting that niche national brands with limited "pull" power lose greater bargaining power. In terms of strategic pricing, the retailer, on initially introducing the private label, strategically sets prices to help private labels gain market share in high volume mass market categories. But retail prices revert to the category profit maximizing price after a year when the private label gains a stable market share.1

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Trade promotions are the most important promotional tool available to a manufacturer. However trade promotions can achieve their objective of increasing short-term sales only if the retailer passes through these promotions. Empirical research has documented that there is a wide variation in retail pass-through across products. However little is known about the variations in pass-through over time. This is particularly important for products with distinct seasonal patterns. We argue that extant methods of measuring pass-through are inadequate for seasonal products. We therefore introduce a measurement approach and illustrate it using two product categories. We find interesting differences in pass-through for loss-leader products versus regular products during high demand and regular demand periods. We find that retailers use a deep and narrow pass-through strategy (high pass-through on loss-leader products, but small pass-through on regular products) during periods of regular demand and broad and shallow pass-through strategy (smaller, but similar pass-through on both loss-leader and regular products) during periods of high demand. Loss leader products continue to obtain higher pass-through in high demand periods, if the category's high demand period is also a high demand period for other product categories as well. Copyright Springer Science + Business Media, LLC 2006Pass-through, Retail competition, Loss leaders, Trade promotions,

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