Quantitatively, for personal benefits, store managers at Best Buy have the incentive to resell on Amazon (as a grey marketplace) below Best Buy's retailer price.

Assumptions: The manufacturer's list price is $100. Best Buy gets a 45% discount, so its cost is $55 per unit. This is because we use: Per unit cost = list price x (1-discount in %).

1. Calculate Best Buy's retail price if it marks up by 30%. Hint: use the formula: mark-up = (retail price - cost) / retail price.
2. Suppose the store manager gets a 20% discount off of Best Buy's retail price. Calculate the store manager's cost if he buys the product from his employer and resells it on Amazon as a grey marketplace.
3. Suppose Amazon charges 10% of the resell price posted on its website and the reseller also has to pay a $5 shipping fee. Calculate the breakeven reseller price to be posted on Amazon for the store manager.
4. From your calculations, explain the effect on the store manager's resale behavior on the retail price in the authorized channel at Best Buy.
5. 
   
6. What additional incentives there are for the store manager to engage in this resale behavior?

Answer rating: 100% (QA)

Lets go through each part of the question step by step 1 Calculate Best Buys retail price if it marks up by 30 Retail price Cost Markup Given that the ... View the full answer