Accounting faculty study economic impact of retail strategy
Published: 2013-01-29
The economic impact of manufacturers that utilize dual distribution channels—such as athletic outfitter Nike, which sells products in major retailers as well as its own brick and mortar and online stores—is the research focus of two Fisher accounting professors.
Anil Arya, the John J. Gerlach Chair in Accounting, and Brian Mittendorf, associate professor of accounting, are co-authoring research, funded by the National Center for the Middle Market, that examines how companies like Nike and Apple with dual distribution channels impact competition, investment, and disclosure decisions.
“While dual distribution has been a niche industrial structure for years, the expansion of e-commerce has brought it to the forefront,” Mittendorf said. “Now, many traditional manufacturers have their own online stores to complement more traditional means of reaching consumers.”
The professors’ research on disclosure issues, which is forthcoming in the Journal of Accounting and Economics, indicates dual distribution can increase voluntary disclosure and overall transparency, further strengthening economic growth. The usual view is that firms may wish to be more transparent for the sake of capital market participants, but are reluctant to do so fearing that potential competitors will take advantage of the proprietary nature of disclosures.
“We show that dual distribution can alter the voluntary disclosure practices of firms facing potential competition from entrants,” Mittendorf said. “Under dual distribution, the pressure to withhold information is much less pronounced and sometimes reversed. When a firm discloses information that encourages entry, the firm is hurt by the added competition, but is boosted by more favorable terms it may obtain in its partnership with suppliers. “
In a second research paper, forthcoming in the Production and Operations Management journal, Arya and Mittendorf demonstrate that the advertising and investment behavior of retail participants is notably altered by the introduction of dual distribution.
"We show that the once adversarial relationship between retail competitors that is manifest in comparative advertising and other predatory behavior is softened under dual distribution,” Arya said. "Much of retail posturing in advertising focuses more on promoting the product category broadly rather than attacking competitors. As a consequence, dual distribution can improve the overall economic environment in which firms operate, benefiting even those retail firms facing new competition from their suppliers."
