THE VARIATION OF RETAIL PASS-THROUGH WITH STORE-BRAND ENTRY AND ITS DETERMINANTS – EVIDENCE FROM SCANNER DATA

Abstract

Issues related to retail pass-through receives much attention of both academics and business practitioners. Both analytical and empirical works have been done to characterize and documents the retail pass-through rates. However, little attention has been paid to the change of retail pass-through when a retailer introduces a store brand. Using evidence from scanner data, we investigate empirically the effects of store brand entry on retail passâ€through. We show that the entry of store brand is generally accompanied by reductions in retail passâ€through and that there are substantial variations in the reductions. We then examine the determinants of the magnitude of fall in pass-through, and we find evidence that the variations in pass-through changes are related to brand-specific and manufacturer-specific characteristics. In particular, retail pass-through reduces by a smaller magnitude for brands offering larger product varieties, belonging to a dominant manufacturer, having a greater margin against the retailer, and positioning at the higher-tier of market.