Answer to Question 1
Retailers demand this fee of manufacturers supposedly to compensate them for added costs incurred when taking a new brand into distribution and placing it on the shelf. In certain respects, slotting allowances are a legitimate cost of doing business. When a store takes on a new brand, it incurs several added expenses because the chain must make space for that new brand in its distribution center, create a new entry in its computerized inventory system, possibly redesign store shelves, and notify individual stores about the new SKU. Additionally, the chain takes the risk that the new brand will fail, which is likely in the grocery industry where at least half of all new brands are failures. Retailers are able to impose expensive slotting fees on manufacturers because the balance of power has shifted away from manufacturers and toward retailers. CPG manufacturers have hurt their own cause by introducing thousands of new brands each year, most of which are trivial variants of existing products rather than distinct new offerings with meaningful profit opportunities for retailers and many of which ultimately fail.
Answer to Question 2
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