Online Channels And Store Brands: Strategic Interactions

This study examines the strategic interactions between the online channel strategies of a national brand manufacturer and the store brand strategies of a retailer. We develop a game-theoretical model in which a manufacturer makes channel choices, a retailer selects product lines, and both need to take the other's strategy into consideration. We compare the results with cases where no interactions are involved to explicate how the manufacturer's online channel choice affects the retailer's store brand strategy, and vice versa. The results suggest that the retailer executes a more defensive strategy if the threat of the online channel is severe but tends to be cooperative when the threat is less alarming. The manufacturer, however, would rather give up its efficient online channel to act cooperatively when the store brand is introduced. Our findings explain certain stylized facts regarding supply chain coordination.