Abstract:

In recent years， as market competition intensifies and consumer needs become more diverse， more and more retailers are choosing to upgrade their products and services to further consolidate and expand their markets， such as enriching product offerings， improving user experience， and meeting personalized needs. One of the key strategies is to introduce store brands. Store brand reduces retailers' dependence on manufacturers， enhances their bargaining power and improves profitability. Although store brand will eat into the market share and profit margin of manufacturers' brands and cause conflicts with manufacturers， but the retailers are still important channel partners for manufacturers， so how to deal with the complex competitive partnership between products， improve channel coordination and maximize profits has become an important issue for manufacturers and retailers to focus on together. Strategic inventory can mitigate double marginalization and improve the overall supply chain profitability， which providing a new perspective for developing supply chain coordination mechanism. Based on the consideration of the retailer's ability to own store brand and hold strategic inventory， we construct a two-stage game model to obtain the optimal decisions of the retailer and the manufacturer under two contract formats： a commitment contract and dynamic contract. In a commitment contract， the manufacturer commits wholesale prices of both periods.In contrast， under the dynamic contract， the manufacturer will announce the wholesale price of each period only at the beginning of that period. The optimal contract design for the supply chain is explored under store brand introduction. The main result shows that： store brand inhibits the strategic inventory of the retailer； under the dynamic contract， as the level of store brand quality rises， the retailer's profit in equilibrium may fall. the manufacturer always prefer the dynamic pricing contract； The retailer prefer the commitment contract if and only if the quality of store brand is relatively low and inventory holding cost is moderates； the supply chain’s preference for contracts is influenced by store brand quality and holding cost； when retailer can choose the optimal pricing contract， it is not necessarily harmful to the manufacturer for the retailer to increase the quality of store brand. Numerical study indicates that under the dynamic contact inventory level and the manufacturer’s profit are decreasing in store brand quality.

Key words: store brand, strategic inventory, dynamic pricing contract, inventory holding cost