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Retail-Price Drivers and Retailer Profits

Vincent R. Nijs¹; Shuba Srinivasan²; Koen Pauwels³

¹ Kellogg School of Management Northwestern University Evanston Illinois · ² The A. Gary Anderson Graduate School of Management, University of California, Riverside, California 92521 · ³ Tuck School of Business at Dartmouth, Hanover, New Hampshire 03755

What are the drivers of retailer pricing tactics over time? Based on multivariate time-series analysis of two rich data sets, we quantify the relative importance of competitive retailer prices, pricing history, brand demand, wholesale prices, and retailer category-management considerations as drivers of retail prices. Interestingly, competitive retailer prices account for less than 10% of the over-time variation in retail prices. Instead, pricing history, wholesale price, and brand demand are the main drivers of retail-price variation over time. Moreover, the influence of these price drivers on retailer pricing tactics is linked to retailer category margin. We find that demand-based pricing and category-management considerations are associated with higher retailer margins. In contrast, dependence on pricing history and pricing based on store traffic considerations imply lower retailer margins.

DOI

10.1287/mksc.1060.0205

Volume

26 (4)

Pages

473-487

Language

en

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Sources

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