Channel power struggle between a manufacturer giant and a retailer giant in China: Who is the winner?

This paper aims to investigate the balance of power between a giant manufacturer in the air conditioners market (i.e. Gree) and a giant retailer in the home appliances market (anonymity preserved). Both companies are operating in the rapidly growing Chinese home appliances market. In order to access the balance of power, the paper studies their channel power conflicts and examine's which party is influenced, as a result of the inherent conflicts, to comply with the other party's marketing and channels of distribution policy.

This is an exploratory type of study which adopted a case research methodology. Since the focus was on channel power and power is a function of company strength, the biggest/strongest manufacturer of the air conditioner industry and the biggest/strongest retailer in the home appliances market were selected for the study. Primary data were collected through personal in‐depth interviews of senior sales and management personnel of both Gree and the giant retailer (fictitiously called Z‐retail).

The findings of the study suggest that the Chinese manufacturer possesses higher power over the Chinese retailer. While it cannot be denied that each of the giants is dependent on the other, the study results indicate that Z‐retail is more dependent on Gree than Gree is on Z‐retail. This lays out the groundwork to generate some tentative research propositions that are believed testable by future quantitative (conclusive) type of channels of distribution research.

Studies of how channel power and/or conflict affect the relationship between suppliers and retailers and their performance level are abundant, but studies of who possesses higher power over the other are few. The few studies of the past have been conducted in the context of the Western developed country markets. It appears that even fewer studies have been conducted in a market of an emerging economy like China. The current study attempts to investigate if the suppliers, or the retailers, in the Chinese market have a higher power over the others. It is discovered that the channel power traditionally held by the suppliers would still be retained mostly on the supplier side.