Using PLS-SEM for assessing negative impact and cooperation as antecedents of gray market in FMCG supply chains: An analysis on spanish wholesale distributors

Abstract

Purpose – Within the fast-moving consumer goods (FMCG) supply chain, one of the problems facing the distribution channel strategy is the presence of the gray market. The article shows two novel antecedents of the participation of official distributors in this gray channel: Negative impact on distributor performance and the relationship with their supplier. Knowledge of this background helps to preserve the strategy outlined for the official distribution channel. Design/methodology/approach – Data were collected from 172 Spanish wholesale distributors and analyzed using PLS-SEM. Findings – The authors found that the damage through negative affectation in the official distributor’s performance and the cooperation provided by the manufacturer, have different effects. While affectation is shown to be a powerful antecedent of participation in the gray market, the effect of perceived manufacturer cooperation does not show strong results. Practical implications – In business practice, these findings lead the manufacturer to keep transactions carried out in the gray market at low levels and provide cooperation to official distributors to guarantee the official channel strategy aimed at efficiency in the distribution of branded goods. Originality/value – The background of the gray market discussed in the study has not been previously analyzed in the literature. In this way, the authors contribute to the knowledge of such a common problem as the presence of the gray market in the segmentation of distribution channels of high-demand products.