Research On The Rationality Of Slotting Allowance In Transitional China

Since the retailer’s slotting allowance has risen in the latest twenty years, a lot ofattention from home and abroad has been attracted and different points are proposedfollowed. Treating the supermarket chains as main study target, by the comprehensiveuse of theoretical analysis and empirical test, this paper attempts to explain: theproblem of slotting allowance in China is more complex to analysis compared withdeveloped counties, what is more, it is a outcome of national market process, and hasits rationality to some extent.The theoretical analysis of this article spread out by three aspects. First of all, theformation and development of retailer’s slotting allowance is driven by a combinationof several factors, which are related to the particular environment during the transitionperiod. These factors include changes in the market structure of the retail industry aswell as consumption goods production industry as well as changes in earning pattern ofretailer also have a strong effect. Hence slotting allowance was born in necessity andgrown up with rationality.Secondly, by sorting out the understanding of developed countries, this articlecollects four main points on the role of an efficiency promoter, and explains theimportant use for retailer’s regular operation.Finally, this article analyses effects of slotting allowance on social welfare bydesigning games between suppliers and retailers. The static game model proves thatslotting allowance generally will not harm consumers’ surplus, while the dynamicgame model proves that a leading retailer can hardly worsen the interest of fringedfirms. Under certain assumptions, the slotting allowance tend not to reduce the levelof social welfare, the common equilibrium outcomes shows a distribution betweensuppliers and retailers more than a damage on competition or efficiency.At the beginning of the empirical study, this paper presents a descriptive analysison panel data of ten listed company, then selects appropriate financial indicators tosimulate the driven factors of slotting allowance. All analyses on panel data prove thatslotting allowance can be remarkably utilized to meet the needs of retailer’s operatingactivities by retailers.The last Chapter comes to conclusions of this paper: firstly, slotting allowanceshould be regarded as an ever-changing economic phenomenon, traced back to itsgeneration and grasped the trend under specific background as well as certain period; secondly, subject to several factors related to transition period, slotting allowance inChina has a high degree of rationality, a considerable scale of slotting allowance isneutral to market efficiency. At the same time, this article conserves there is arationality boundary existed, the boundary differentiates fairy matters from efficiencymatters. Hence, the regulator has to clarify regulation target aimed to slottingallowance related to efficiency matters and impose restriction on those related toefficiency matters.Based on the conclusions above, this article comes up with several pertinentpolicy suggestions: the government should try to optimize the economic environment,encourage the assemble of manufacturers in order to promote their bargaining power,offer appropriate regulations to regulate retailer conducts, and help retailer transformits earning pattern towards a more effective direction.