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Empirical Studies on Conflict Delistings
Book - Dissertation
The days of dominant manufacturers dictating the game to obedient retailers are long gone. Today, the two parties can be considered equal when it comes to resisting pressure during negotiations. When negotiations between retailers and manufacturers turn sour and end up in a conflict, both parties can decide to remove, or delist, the manufacturers' brand(s) from the retailers' assortment. Such conflict delistings are the subject of this dissertation. We study the consequences of a conflict delisting for the afflicted retailer, the afflicted manufacturer, and the consumer as final decision maker in the purchase process.We study a real-life conflict delisting spanning multiple brands and categories, that took place in the Belgian FMCG market between a major retailer and a major manufacturer. The retailer decided to delist all of the manufacturer's brands because of price negotiations turning sour. Once the conflict was resolved, the manufacturer's brands got reintroduced in the retailer's shelves. The conflict delisting was highly publicized and received media attention in all major and small newspapers and several TV and radio journals and documentaries. This natural experiment therefore provides a unique opportunity to answer some prominent questions resulting from such a drastic measure.In Essay 1, "The Clash of the Titans: On Retailer and Manufacturer Vulnerability in a Conflict Delisting", we seek to answer the question as to who gains the upper hand in such an openly played out spat: the retailer or the manufacturer. We study both parties' vulnerabilities by investigating the shifts in market share during versus before the conflict delisting of the retailer's involved categories and the manufacturer's involved brands. Even though the retailer as well as the manufacturer under conflict might seem to have equal bargaining power, which led to the conflict delisting in the first place, they both risk getting hurt by losing sales. In fact, the retailer loses sales when the consumer decides to switch stores, and the manufacturer loses sales when the consumer decides to switch brands (Sloot and Verhoef 2008). The magnitude of a party's sales losses reflects that party's vulnerability in the conflict, and eventually reflects the true bargaining position. We therefore investigate who is less, and who is more vulnerable in the conflict delisting. We further study whether and how antecedents related to the delisted brands (e.g., brand equity), to the afflicted retailer's assortment (e.g., assortment size) and to intrinsic category characteristics (e.g., necessity/impulse) may explain potential variation in retailer and manufacturer vulnerability across brands and categories. Finally, we assess what happened after the conflict's settlement by investigating the long-term impact of the conflict delisting for both involved parties.In Essay 2, "Who Stays and Who Goes? Testing the Boundaries of Loyalty, we study whether a consumer's prior brand and store loyalty are good predictors of his/her willingness to stay with the afflicted manufacturer and retailer (across all product categories, involved and uninvolved) in a conflict delisting. In the case of a preferred brand carried by a preferred retailer, a stable environment means that consumers can exhibit loyal behavior to both parties, devoting a high share of wallet to the brand and to the retailer. However, a disruption in this stable environment in the form of a conflict delisting causes a discontinuity in that loyal behavior as the preferred brand can no longer be bought at the preferred retailer. Three research questions get addressed in this essay. First, we study whether consumers simply follow the party to whom they are more loyal. Second, we investigate whether the conflict-induced delisting is associated with a re-evaluation of the consumer's reasons for that prior loyalty. More particularly, we study how the importance consumers attach to various retailer and brand attributes drive prior loyalty, and whether the effect of attribute importance changes in the interrupted marketplace. Third, we research whether the salience of the conflict, i.e., the extent to which the consumer is aware of or affected by it, influences the consumer's response to the conflict delisting.In Essay 3, "What Happens in a Category… Does Not Stay in That Category Only: How Uninvolved Categories Become Collateral Damage in a Conflict Delisting", we zoom in on the afflicted retailer's uninvolved categories, i.e., categories in which no brands were delisted as they were not part of the manufacturer´s category portfolio. We want to answer the question whether these uninvolved categories become collateral damage in the conflict delisting as they often land up in the same shopping basket as the involved categories, or whether they remain unaffected as multiple store shoppers may allocate only part of the purchases to other (previously visited) competitive retailers. We therefore study whether the conflict delisting affect market share of the uninvolved categories. Furthermore, we aim to explain potential variation in share impact between the different considered uninvolved categories. That is, on the one hand, retailers may be stronger in particular uninvolved categories as they offer a good value for money (e.g., because of a large assortment or a high category expertise), and hence may be more protected against negative spillover effects. On the other hand, cross-category interdependencies (i.e., complementarity, substitution, co-occurrence and similarity) between involved and uninvolved categories may also influence the extent to which spillover occurs. This essay provides insights into which strength characteristics the retailer can count on in a conflict delisting, and which cross-category interdependencies are crucial in assessing the conflict delisting's collateral damage.