Retailer Merchandising Decisions: Using Retailer Perceptions to Develop a Multi-Level Competitive Strategic Profit Model

The purpose of this study is to examine the role of the Strategic Profit Model and channel cooperation/competition approaches to retailer profit maximization on how retailers make merchandising decisions. The paper explores whether retailers place more importance on profit or on turnover issues, and whether retailer-controlled variables or manufacturer-retailer cooperation variables are more important in making such decisions. The paper develops a multi-level competitive strategic profit model that describes the behavior of retailers in a fractured market. Using data from furniture retailers, descriptive evidence is offered to understand the conditions and circumstances under which different strategic variables are important to retail decision making. Results indicate that the importance of prescriptive strategic merchandising variables vary with market size and competitive environment.