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Retail-Price Drivers and Retailer Profits

Author

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  • Vincent R. Nijs

    (Kellogg School of Management, Northwestern University, Evanston, Illinois)

  • Shuba Srinivasan

    (The A. Gary Anderson Graduate School of Management, University of California, Riverside, California 92521)

  • Koen Pauwels

    (Tuck School of Business at Dartmouth, Hanover, New Hampshire 03755)

Abstract

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.

Suggested Citation

  • Vincent R. Nijs & Shuba Srinivasan & Koen Pauwels, 2007. "Retail-Price Drivers and Retailer Profits," Marketing Science, INFORMS, vol. 26(4), pages 473-487, 07-08.
    • Handle: RePEc:inm:ormksc:v:26:y:2007:i:4:p:473-487
    DOI: 10.1287/mksc.1060.0205
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