- Aside from consumer demand, backroom deals between manufacturers and retailers also shape the product selection, placement and marketing in U.S. grocery stores, according to a new report by the Center for Science in the Public Interest.
- Deals can range from slotting fees retailers charge manufacturers to introduce new products to annual rent manufacturers must pay for shelf or freezer space, also known as "pay-to-stay."
- Manufacturers also pay fees for positioning on an endcap or cardboard display, also known as a shipper, and placement in a retailer's weekly circular.
Consumers may believe that their demand drives retailers' product selection and placement decisions, because ultimately their purchasing power and preferences should tell retailers what will sell most and fastest. While that may be true to a point, retailers' deals with manufacturers may consequently drive consumer demand because consumers often gravitate to the most apparent and accessible products.
One of the most concerning consequences of these deals is that exorbitant fees can push out smaller manufacturers and startups that can't afford them in favor of multinational corporations that can. This too can influence consumer demand. If a startup can't afford a retailer's fees for shelf space, consumers might never know they would want that product in the first place.
If they have the capital, manufacturers can use their own purchasing power to influence retailers' product selection and placement throughout the store. Prime real estate comes at a cost, but if increased visibility also boosts sales now and builds brand loyalty for the future, the investment could be well worth it. If sales are stagnant or in decline, a manufacturer may consider working out a new deal with one or several retailers to adjust shelf placement to improve accessibility.