The Value of Category Captainship in the Presence of Manufacturer Competition

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.

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“…Following Kurtuluş et al. (), we model the captain’s effort cost using a quadratic cost function,

β v^{2}

.…”

Section: Discussionmentioning

confidence: 99%

Category Captainship in the Presence of Retail Competition

Nakkaş

Alan

Kurtuluş

2020

Production and Operations Management

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“…Among the few studies related to CC, Subramanian, Raju, Dhar, and Wang (2000) find that the service efficiency effect may motivate a category captain to provide a service that benefits all brands in the category even though doing so is more costly. Kurtulus et al (2013) find that CC 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.…”

Section: Literature Reviewmentioning

confidence: 91%

“…Kurtulus et al. () find that CC 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.…”

Section: Literature Reviewmentioning

confidence: 99%

Stockout Recovery under Consignment: The Role of Inventory Ownership in Supply Chains

Yin

Dong

2016

Decision Sciences

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We examine how a supply chain firm may implement an incentive contract under inventory consignment to recover stockouts and to retain customers. Inventory consignment allows an upstream firm (e.g., a manufacturer) to own and control inventory at a downstream firm (e.g., a retailer), representing a structural change in supply chain governance. Motivated by cases in pet toy and electronics component industries, we formulate principal–agent models based on the newsvendor framework to capture the strategic interactions in a supply chain. We find that consignment can be effective in reducing stockouts because the ownership and control of the product by the manufacturer allows better prevention of stockouts, which complements stockout recovery and leads to fewer stockouts. However, the lower level of stockout under consignment does not necessarily translate into profitability—when the manufacturer is highly opportunistic, that is, readily exploring outside opportunities for its product, consignment may lead to lower profitability for both the manufacturer and the supply chain. On the other hand, consignment will improve profitability for the manufacturer and the supply chain, if both the manufacturer opportunism and the retailer opportunism are moderate.

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“…Policies such as implicit understanding (Shugan ), formation of conjectures (Jeuland and Shugan ) and category captainship (Kurtulus et al. , Subramanian et al. ) have also been studied.…”

Section: Literature Reviewmentioning

confidence: 99%

What Happens When Manufacturers Perform The Retailing Functions?

Chan

Lewis

2016

Production and Operations Management

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This study examines the effects of a relatively new channel structure on prices and sales in a large department store, which in recent years has switched the management of many of its product categories from a traditional retailer‐managed system to a manufacturer‐managed system. We find that the change caused overall retail prices to decrease. However, there was significant heterogeneity in the response across brands. In the cell phone category, brands with high market shares and inelastic demand did not change prices. In the watch category, the retail prices of relatively low‐end brands decreased while the prices of premium brands increased substantially after the switch. In addition to sales increases due to lower prices, we find that the channel structure change further caused sales to increase by 9–10% in the cell phone category and by 11–17% in the watch category. These results are consistent with previous theoretical predictions. We believe that our results provide important academic and managerial implications due to the increasing prevalence of manufacturer‐managed systems in the retail industry.

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The Value of Category Captainship in the Presence of Manufacturer Competition

Cited by 29 publications

References 22 publications

Category Captainship in the Presence of Retail Competition

Category Captainship in the Presence of Retail Competition

Stockout Recovery under Consignment: The Role of Inventory Ownership in Supply Chains

What Happens When Manufacturers Perform The Retailing Functions?

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