Slotting allowances: short‐term gains and long‐term negative effects on retailers and consumers

Abstract

Purpose

The food industry is the largest industry in the world, and when considering all of the other non‐food products (e.g. cleaning products, paper, etc.) that are sold through the food channel, it becomes even larger. There is one practice in the food channel that has a questionable impact on the efficiency and effectiveness of marketing of food and related products. The practice is called “slotting”. Slotting allowances are fees charged by food retailers to manufacturers for the right to have products in the store. While the practice is not new, it has reached a level that has everyone questioning its appropriateness. The purpose and approach of this research is to review the arguments in the literature both for and against the practice and then to estimate the most likely amounts currently spent on slotting.

Design/methodology/approach

Estimates based on a variety of reputable sources such as AC Nielsen and government estimates were used to model current levels. Ranges as well as estimates under various assumptions are made.

Findings

Slotting seems to have led to smaller regional companies being unable to gain market access because they cannot pay the high slotting charges. Meanwhile, medium and smaller‐sized global companies are having difficulty penetrating markets in which the practice of charging slotting is commonplace. Consumers are also suffering as the high slotting fees are causing manufacturers to “add on” to the prices to cover this “retail tax”.

Research limitations/implications

The primary limitation to this and all previous research in the area is that no hard estimates are available as companies do not report these figures.

Originality/value

The paper assesses the short‐term gains and long‐term negative effects on retailers and consumers in the USA.

Citation

Stanton, J.L. and Herbst, K.C. (2006), "Slotting allowances: short‐term gains and long‐term negative effects on retailers and consumers", International Journal of Retail & Distribution Management, Vol. 34 No. 3, pp. 187-197. https://doi.org/10.1108/09590550610654357