Microsoft dipped its toe into retail waters this month by opening its first company store -- a shop situated in an Arizona mall that's meant to showcase the latest and greatest in PCs, Zunes and Xbox consoles. The Microsoft move was widely seen as a bit of catch-up with rival Apple, which at the end of 2008 operated some 247 retail stores around the world. But computer companies aren't the only manufacturers moving into the retail space, says David Bell, a professor of marketing at the Wharton School.
Whether it's handbags from Coach, shoes from Nike or suits from Ralph Lauren, consumers increasingly have the choice to buy products either at stores operated by manufacturers or from independent retailers. The motivation for these manufacturers might be more obvious if they set up shop in markets where their products otherwise lacked any sort of retail presence. But most company stores, Bell says, are landing in close proximity to independent retailers who already offer many of the manufacturer's products.
As such, the phenomenon of the company store next door raises a number of intriguing questions. Isn't it inefficient for Nike to operate a shop when a nearby Foot Locker is ready and willing to handle demand? Doesn't Ralph Lauren run the risk of antagonizing other retailers that sell his suits by opening a shop in the same mall? Might computer manufacturers remove incentives for independents to properly promote Microsoft and Apple products if their retail stores do the heavy lifting of educating the market?
Bell and two colleagues -- Yusong Wang from Fudan University and Paddy Padmanabhan from INSEAD -- set out to address these questions in a paper titled, "Manufacturer-owned Retail Stores" (PDF), recently published in the journal Marketing Letters.
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