On the Competitive and Collaborative Implications of Category Captainship

Abstract

Category captainship (CC) is a retailing practice wherein a retailer collaborates with one of the manufacturers in a product category (referred to as the captain) to develop and implement a category management strategy. Although CC has been studied using both theoretical models and surveys, empirical evidence on the benefits and drawbacks of CC is scarce. The authors use a unique data set collected during a CC implementation to empirically examine the impact of CC on the retailer, the captain, and the other manufacturers in the category. The authors find that both the retailer's private label and the captain benefit from CC because of pricing and assortment changes. They also find that some competing manufacturers benefit from CC while others suffer. Specifically, the manufacturers that closely compete with the captain benefit, whereas the manufacturers that are in close competition with the private label suffer because the retailer protects its private label. The authors show that category sales would have been higher if the retailer had not protected its private label. This study sheds light on how joint consideration of assortment and pricing, the presence of a private label, and product characteristics may influence the outcomes of CC implementations.

Category Captainship in the Presence of Retail Competition

“…For example, Alan et al. () empirically examine a CC implementation in which the captain makes assortment decisions on behalf of a retailer without covering the retailer’s assortment‐related costs (e.g., inventory, replenishment, shelf management). In our setting, captures such costs.…”

“…Splitting category management costs between R 1 and the captain is consistent with practice wherein captains incur merchandising-related costs and retailers incur assortment-related costs despite delegating assortment decisions to captains. For example, Alan et al (2017) empirically examine a CC implementation in which the captain makes assortment decisions on behalf of a retailer without covering the retailer's assortment-related costs (e.g., inventory, replenishment, shelf management). In our setting, an 1 captures such costs.…”

“…The CC literature has relied on surveys (e.g., Gooner et al 2011), empirical analyses (e.g., Alan et al 2017, Nijs et al 2014, and analytical models (e.g., Kurtulus ß and Toktay 2011, Kurtulus ß et al 2014b, Subramanian et al 2010) to examine the impact of CC on various category stakeholders. In particular, the analytical CC literature has mainly focused on settings in which multiple manufacturers, including the captain, sell their products through a monopolistic retailer.…”

The Role of Store Brand Spillover in a Retailer’s Category Management Strategy

“…Using a similar structural model, Meza and Sudhir (2010) show that the retailer deviates from the category profit-maximizing prices to increase its SB's market share. Finally, Alan et al (2017) empirically show that the retailer's desire to increase its SB's market share prevents the retailer from maximizing category sales.…”

“…Retailers want to grow their SBs because they typically have higher retail margins (e.g., Ailawadi and Harlam 2004), increase retailers' leverage in their negotiations with NB manufacturers (e.g., Chintagunta et al 2002, Scott Morton andZettelmeyer 2004), increase consumer loyalty (e.g., Corstjens andLal 2000, Seenivasan et al 2016), and enable retailers to build brand equity by offering the same SB across different categories (e.g., Erdem and Chang 2012). Given these benefits, SBs play an important role in retailers' category management strategies (Alan et al 2017).…”