Slotting Fee

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PART ONE- ETHICAL DILEMMA

INTRODUCTION
Marketing ethics can be described as the moral values that guide behavior within the field of marketing and cover issues such as product safety, truthfulness in marketing communication, honesty in relationships with customers and distributors, Pricing issues and the impact of marketing decisions on the environment and society. (Jobber, 2007).

ANSWER TO QUESTION ONE

Ethical dilemma has increased in goods as DISTRIBUTION is now seen as a means of competitive advantage because most large retailers seek to expand its operations.

Slotting allowance is the payment made by manufacturers to RETAILERS in other to secure a space on store shelves

Andrews, 2000 noted that it is very observable to see some items like Kellogg’s, Colgate, Doritos placed at the top eye level in a supermarket or at end of aisle. This is not by accident. Manufacturers pay big money for one of those slots.

These fees can range from $5,000 to $250,000 often paid cash advance and un-uniform. It is also unclear where the payments are reported. Several cases of bribery before allocation on the part of retail executives have been reported. Slotting fees can be seen as a profit by the grocery industry at their supplier’s expense. (Brandon 2002).

ANALYSIS OF SLOTTING FEES

Slotting fees limit competition. It is often the case when a large competitor offers more than a small competitor, its products was preferred irrespective of customers demand. In such cases where only the Big manufacturers products are displayed because of the prohibitive slotting fees, the customers loses because of lack of competition in the supermarket and limited choice of products to choose from. Hence the small manufacturers are denied the opportunity to succeed. This fee turns the retailer to a REAL ESTATE dealer selling space to the highest bidder.

However most retailers have argued that slotting fees would help them to cover some cost example Stocking cost and storage cost.

According to Wyatt 2001, most retailers justify slotting fees as the charge of the competitive store admission and discourage of DUMPING from most company.

The retailer profits twice as a result of receiving slotting fee. Once from the fee and second from sale of the product. In addition, retailers typically require advertising promotion (often with the retailer thus shifting a great portion of their own advertising cost to the manufacturer) along with products entry and volume discounts. A FAILURE FEE is also charged once the product does not meet sales expectations.

Boatrights, 2007 argued that most retailers have HIGHER POWER in deciding which products or not to display and slotting fees may suppress INNOVATION from smaller manufacturer as most of them cannot afford it.

Slotting fee affect consumers as manufacturer pass on the cost by PRICE INCREASE of the product.

In United Kingdom, Government is currently looking into the matter as most retail outlet are always reluctant to talk about it which makes it ETHICALLY QUESTIONABLE.

Product availability is now controlled by the ability to pay Slotting fees not by consumer demand or product quality. Some critics have compared the secretiveness and nature of this fee similar to that of the drug trade atmosphere. (Robert and Mamane 2001).

I think slotting fees is UNETHICAL as it creates a BARRIER TO ENTRY to manufacturers that cannot afford it. However small companies can start with few stores or niche retailers in order to reduce the cost of the slotting.

Big companies can embark on extensive market research on their products and advertise to support their products in other to avoid paying slotting fee.

Collaboration can also exist between the manufacturers to resist this fee by refusing to market their products with any retailer that charges this fee thus creating scarcity of demand of shelf spaces that attract a charge. This would force the retailers to reduce or abandon this...
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