Changing retail power and performance in distribution channels

Purpose – The purpose of this paper is to examine the relationship between manufacturer profit rate and large retailer market share for five matched retailer‐manufacturer groupings. Design/methodology/approach – Basic structure‐performance modeling is used to relate manufacturer return on assets to large retail market share and a group of control variables. Internal Revenue Service (IRS) Corporate Statistics of Income size class data provide a sample that covers the full range of firm sizes from the smallest to largest firms in the USA. Findings – Large retail share negatively impacts small manufacturer rate of return for shopping goods, while in convenience good markets large retail share has no impact on manufacturer return. Practical implications – Shopping goods retailers have opportunities to gain market power from expertise in merchandising, sales assistance, and product expertise. Strong private brands may offer leverage for convenience good retailers in negotiations with national brand manufacturers. Originality/value – The paper examines the impact of retail channel power on small, medium, and large size manufacturing firms in five retailer/manufacturer categories over a period of extensive change in retail concentration.