In recent years, online retailers (e-tailers) have started allowing manufacturers direct access to their customers while charging a fee for providing this access, a format commonly referred to as agency selling. In this paper, we use a stylized theoretical model to answer a key question that e-tailers are facing: When should they use an agency selling format instead of using the more conventional reselling format? We find that agency selling is more efficient than reselling and leads to lower retail prices; however, the e-tailers end up giving control over retail prices to the manufacturer. Therefore, the reaction by the manufacturer, who makes electronic channel pricing decisions based on their impact on demand in the traditional channel (brick-and-mortar retailing), is an important factor for e-tailers to consider. We find that when sales in the electronic channel lead to a negative effect on demand in the traditional channel, e-tailers prefer agency selling, whereas when sales in the electronic channel lead to substantial stimulation of demand in the traditional channel, e-tailers prefer reselling. This preference is mediated by competition between e-tailers -as competition between them increases, e-tailers prefer to use agency selling. We also find that when e-tailers benefit from positive externalities from the sales of the focal product (such as additional profits from sales of associated products), retail prices may be lower under reselling than under agency selling, and the e-tailers prefer reselling under some conditions for which they would prefer agency selling without the positive externalities.

In a store-within-a-store arrangement, retailers essentially rent out retail space to manufacturers and give them complete autonomy over retail decisions, such as pricing and in-store service. This intriguing retailing format appears in an increasing number of large department stores worldwide. The authors use a theoretical model to investigate the economic incentives a retailer faces when deciding on this arrangement. The retailer's trade-off is between channel efficiency and interbrand competition, moderated by returns to in-store service and increased store traffic. The retailer cannot credibly commit to the retail prices and service levels that the manufacturers effect in an integrated channel, so it decides instead to allow them to set up stores within its store. Thus, the stores-within-a-store phenomenon emerges when a powerful retailer, ironically, gives manufacturers autonomy in its retail space. An extension of the model to the case of competing retailers shows that the store-within-a-store arrangement can moderate interstore competition.

The Interrelationships between Brand and Channel ChoiceWe propose a framework for the joint study of the consumer's decision of where to buy and what to buy. The framework is rooted in utility theory where the utility is for a particular channel/brand combination. The framework contains firm actions, the consumer search process, the choice process, and consumer learning. We develop research questions within each of these areas. We then discuss methodological issues pertaining to the use of experimentation and econometrics. Our framework suggests that brand and channel choices are closely intertwined, and therefore studying them jointly will reveal a deeper understanding of consumer decisionmaking in the modern marketing environment.Keywords: brand choice, channel choice, learning, utility theory 3 The Interrelationships between Brand and Channel ChoiceThroughout the post-industrial era, consumers have been faced with the decision of choosing brands. Levi's or Wrangler? Apple or Samsung? The last decade has seen a proliferation of channels through which firms interact with customers. Levi's, Wrangler, as well as Apple and Samsung can be purchased online, in bricks-and-mortar stores, or through catalogs. Platform retailing arrangements that give brands direct access to consumers are also becoming increasingly popular, both offline, such as "stores within a store" (Jerath and Zhang 2010), and online, such as Amazon Marketplace. Thus, today's consumer must choose both a brand and a channel. The question is how brand and channel choices are interrelated. We advocate that this question presents an opportunity to learn in more depth how consumers make decisions in the modern marketing environment.There has been much research on brand choice, dating at least to Kuehn and Rohloff (1967), continuing through Guadagni and Little (1983). See Russell (2014) for a history of the development of this field. Recently there has been a growing literature on channel choice (Thomas and Sullivan 2005;Valentini et al. 2011). However, to our knowledge there is little research that integrates brand and channel choice.One might argue that channel and brand choice could just be studied separately. Yet, researchers have found that consumers make different choices depending on which channel they use (Danaher et al. 2003), that marketing induces consumers to switch channels (Ansari et al. 2008) and that brand and channel perceptions together determine purchase intentions (Dodds et al. 1991). This suggests that the two processes are intertwined. Certainly managers are concerned with how to manage their brands across channels. Therefore, while the field is not well-4 developed, we believe there is significant academic and managerial motivation for studying the interrelationships between brand and channel choice. In particular, our objectives are to: § develop a framework for studying the interrelationships between channel and brand choice, § utilize the framework to generate research topics, and § discuss methodological challenges i...

Many established industries, such as the online service industry, the telecommunication industry, or the fitness club industry, are access service industries. When using services in these industries, consumers pay for the privilege of accessing the firm's facilities but do not acquire any right to the facility itself. A firm's pricing decisions in access industries frequently come down to a simple choice among pricing, pricing, or pricing. However, it is not so simple for firms in those industries to make this choice. Access service firms typically face a mix of consumers who have intrinsically different usage rates. A key characteristic of access service firms, however, is that the cost of providing an additional minute of usage is typically negligible, as long as the firm has the necessary capacity to serve its customers. Service capacity, which corresponds to the total available time on a firm's system, is often limited. In this paper, we show that service capacity and consumer usage heterogeneity are two important factors that determine a firm's optimal choice. We develop a model that incorporates these two salient characteristics shared by access industries and study what determines a firm's choice among the three alternative pricing structures ( pricing, pricing, or pricing). Our analysis shows that, in the presence of consumer usage heterogeneity, service capacity mediates a firm's optimal choice in a complex, yet predictable way. A firm's choice also hinges on whether heavy or light users are more valuable in terms of their willingness-to-pay on a per-unit-capacity basis. The presence of both consumer usage heterogeneity and capacity constraints prompts a firm to choose its pricing structure to attract a desired customer mix and to price discriminate. As a result, two-part tariff pricing is not always optimal in access industries, and a firm's pricing structure can vary in a complex way with the interaction of those two factors. Specifically, we show that when light users are more valuable, a firm may use a two-part tariff or a flat fee, depending on whether the firm is constrained by its service capacity, but never charge a usage price alone or offer any signing bonus (a negative flat fee or a flat payment to customers). When heavy users are more valuable, a firm may choose to set a usage price, a signing bonus plus a usage price, or flat fee. Interestingly, regardless of whether heavy or light users are more valuable in an access service industry, only flat rate pricing is a sustainable pricing structure once the industry has developed sufficient excess capacity. We also show that the optimal pricing strategy in access industries can have some intriguing, nonintuitive implications that have not been explored elsewhere. For instance, when the industry capacity is unevenly distributed between competing firms, the large-capacity firm may well be advised to increase, rather than to decrease, its price to accommodate the small firm. It would be too costly and too tactless for the large firm to do otherwise. ...

In the last two decades, organized retailing has transformed the retailing landscape in emerging economies, where unorganized retailing has traditionally been dominant. In this paper, we build a theoretical model of unorganized and organized retailing in emerging economies by carefully modeling key characteristics of the retailing environment, the retailers, the consumers, and product categories. The primary insight that we obtain is that in a competitive market comprising of only unorganized retailers, the advent of organized retailing injects efficiency into the market leading to a reduction in the number of unorganized retailers. This, in turn, makes the market less competitive. Building on this basic insight, we obtain a number of counterintuitive results. For instance, (i) the presence of organized retailing may increase the prices charged by unorganized retailers; (ii) as the consumers’ transportation cost to the unorganized retailers increases, the market share of the unorganized retailing sector may increase; (iii) as the probability of bulk consumption increases and consumers prefer to purchase more from the organized retailer, prices and profits at the organized retailer may decrease; and (iv) the presence of organized retailing can lead to both consumer and social surplus being lower because consumers face higher prices at unorganized retailers and there is wastage in the economy due to bulk purchasing at organized retailers. Our model offers an explanation for certain surprising empirical observations related to retailing in emerging markets, such as why in the last few years in the Indian market the unorganized retailers who have survived the advent of organized retailing seem to be doing better. Implications from our research can provide guidance to policy makers grappling with issues related to the balanced growth of unorganized and organized retailing in emerging markets.