Postprint version. Published in Journal of Retailing, Volume 71, Issue 3, Fall October 1, 1995, pages 211-248. Copyright © 1995 Published by Elsevier Science Inc. All rights reserved. The definitive version can be found online at http://dx.doi.org/10.1016/0022-4359(95)90024-1.
Two recent studies of manufacturer and retailer profitability in the food industry have raised questions about whether the widely cited, but empirically untested, shift of power from manufacturers to retailers has really occurred. Has the marketing community been operating under a misconception or are these studies flawed? This paper uses more complete measures of exercised and potential market power and a broader sample of industries and retail classes to address this critical question. Not only do our measures have strong theoretical grounding in the industrial organization, finance and accounting literature, they incorporate in them the impact of actions that have been commonly cited as illustrations of a power shift. Our analysis of 14 consumer good industries shows that only a few of them exhibit a shift in market power towards retailers. Further this apparent shift is highly influenced by a small number of retailers within a single retail class.