Selling your product through competitors’ outlets

What is it about?

This paper explains why it might be optimal for a manufacturer to distribute its products through a competitor’s retail outlets. Normally, we wouldn’t think of this as a smart move; after all, a competitor’s store is a hostile retail environment. However, while this might be so, there are potential gains for both parties in such an arrangement. The competitor’s store might benefit from the additional brand variety; consumers like to shop at outlets where they can compare several brands side-by-side. For the same reason, for the brand in question, competitor-outlet-distribution potentially taps into additional demand which would not materialize otherwise. As for the “hostile retail environment,’’ while it is true that the competitor’s outlet would favor its own brand, it would still rather sell a competitor’s brand than have consumers walking out empty-handed. Finally, the paper examines some strategic considerations in competitor outlet distribution. While it may be optimal for one manufacturer to undertake such distribution, it may not be optimal for its competitor to reciprocate. Within any pair of competitors, the economies of one-stop shopping are quickly exhausted.

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Why is it important?

Consumers like to shop at outlets where they can compare several brands side by side. Distributing through a competitor’s retail outlets, counter-intuitive as it may seem, actually makes sense because it increases brand variety at those outlets. Managers should, therefore, consider consumers’ shopping efficiency when designing distribution channels.

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