A Decision on the Store-within-a-Store Strategy Based on the Uncertainty Model

Abstract

The store-within-a-store (SWS) arrangement is one of the most important channel structures. Taking the perspective of manufacturers, this paper extends the literature by examining the role of manufacturers' prediction accuracy, moderated by demand uncertainty and inventory-related parameters, in determining the adoption of the SWS strategy. This study constructs a theoretical model to investigate manufacturers' decision based on the uncertainty model. The result shows that, first, as a manufacturer's demand forecast accuracy increases, it would be more likely to choose the SWS mode, and demand uncertainty and inventory-related parameters further strengthen this effect. Second, if the manufacturer and retailer can reach an agreement on a proper percentage of the revenues that the manufacturer pays to the retailer, the SWS mode would be a better choice for both of them. This research provides new insights for the adoption of the SWS strategy.