Category Captainship vs. Retailer Category Management under Limited Retail Shelf Space
Version of Record online: 29 MAR 2010
© 2010 Production and Operations Management Society
Production and Operations Management
Volume 20, Issue 1, pages 47–56, January/February 2011
How to Cite
Kurtuluş, M. and Toktay, L. B. (2011), Category Captainship vs. Retailer Category Management under Limited Retail Shelf Space. Production and Operations Management, 20: 47–56. doi: 10.1111/j.1937-5956.2010.01141.x
- Issue online: 11 JAN 2011
- Version of Record online: 29 MAR 2010
- History: Received: January 2006; Accepted: June 2008 by Jayashankar Swaminathan; after 2 revisions.
- category management;
- category captainship;
- limited shelf space;
- supply chain collaboration
Shelf-space scarcity is a predominant aspect of the consumer goods industry. This paper analyzes its implications for category management. We consider a model where two competing manufacturers sell their differentiated products through a single retailer who determines the shelf space allocated to the category. The scope of category management is pricing. We consider two category management mechanisms: retailer category management (RCM), where the retailer determines product prices and category captainship (CC), where a manufacturer in the category determines them. Our analysis reveals that the retailer can use the form of category management and the category shelf space to control the intensity of competition between manufacturers to his benefit. We also show that the emergence of CC depends on the degree of product differentiation, the opportunity cost of shelf space, and the profit sharing arrangement in the alliance. The equilibrium category shelf space under CC may be higher than under RCM if the value to the retailer of eliminating double marginalization and putting price pressure on the non-captain manufacturer dominates the loss from sharing the profit with the category captain. CC has been criticized for disadvantaging non-captain manufacturers. While we provide some support for this claim, we also find that CC may benefit non-captain manufacturers when implemented by a powerful retailer in categories with sufficiently differentiated products, because the shelf space allocated to the category increases in this case.