Trade Promotion Mode Choice and Information Sharing in Fashion Retail Supply Chains

Trade promotion has a significant impact on the fashion retail business. Manufacturers have traditionally been concerned with the inefficient trade promotion due to the low pass-through rate of the trade deals from retailers to customers. The scan-back (SB) trade deal, which monitors a retailer’s sales via an IT system, benefits the manufacturer, but may or may not benefit the retailer. We provide insight into when a retailer has incentive to accept the SB trade deal. We show that (1) the manufacturer and the entire supply chain can always benefit from the SB trade deal while the retailer benefits only under some conditions, and that (2) both the retailer and the manufacturer can benefit from the SB trade deal if the SB deal is accompanied by a buyback contract. We examine the effect of a retailer’s confidential pass-through rate on a firm’s incentive to use the SB trade deal.