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The grocery business is one of the most competitive of all businesses, especially when it comes to getting a new product from a small manufacturer onto supermarket shelves. The typical supermarket carries about 30,000 different items, but some 15,000 new products are introduced each year. There is no way that all of these products will get on the shelves because there is limited space for such a host of new products. One method of helping the odds is for the manufacturer to pay slotting fees or pay-to-stay fees—in effect paying the retailers for the right to place the products on the retailers’ shelves. But these fees can be very high, sometimes as much as $5,000 for four feet of shelf space per store per year.
Are “slotting fees” simply a way of life in highly competitive industries where the fight for shelf space is intense? Might there be other approaches? What are its possible strengths and weaknesses? Discuss from the standpoints of the manufacturer and the grocery retailers.
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