Financial Crisis or Crisis in Relationships: A Clash Between Chain Stores and Their Suppliers in Russian Retail Market
Sociology State University - Higher School of Economics Moscow, Radaev
Financial crisis led to severe conflicts between retailers and suppliers since in 2008. Payments were delayed up to 90 days and 10-30 percent discounts were required for immediate payments. In that way retail companies tried to resolve the problem of increasing liquidity shortage at the expense of suppliers. In turn, suppliers withheld their deliveries to some of the chain stores.
However, it is not the financial crisis that starts continuous wars in supply chains. It just reveals and aggravates tensions which emerged long before. According to a stereotypical vision, this crisis in relationships is produced by excessive contract requirements of the retail companies regarding reduced prices of supplied goods, slotting allowances and fees that should be made by the suppliers to see their goods on the store shelves. It reflects power asymmetry among chain members and greater resource dependence of the suppliers in buyer-driven commodity chains. The widespread idea of ?unfair exchange? is used to resolve the disputed issues by means of state intervention. For example, the Russian Federation Federal Anti-Trust Service has published a list of 27 retailers? demands which should be eliminated from the contract relationships. Retailers try to resist these pressures by applying to the Civil Code.
To test stereotypical explanations and investigate actual sources of the conflict we brought the opponents together in our study. Survey data were collected from 500 managers of retailing chains and their suppliers as two sides of the conflict in five Russia?s cities including Moscow, S.-Petersburg, Yekaterinburg, Novosibirsk, and Tyumen. The sample includes firms of different size operating in food and electronic sectors of the consumer market. Quantitative data was supplemented by a series of 30 in-depth interviews with retailers and suppliers.
After detailed analysis of all major elements of contract requirements as estimated by two sides of the market exchange, I build up a binary logistic regression model to evaluate the sources of relational conflicts. A major hypothesis is that these conflicts originate largely not from additional contract demands of retailers but from the frequent failures of both parties of exchange to fulfill their contract obligations.