This paper studies the impact of retailer dominance on the product line design in a distribution channel. We revisit the elegant framework proposed by Villas-Boas (1998) in which a manufacturer sells his products through an independent retailer to heterogeneous consumers. We show that retailer dominance may completely eliminate the possibility of product line offering, irrespective of whether retailer dominance takes the form of price leadership or quality leadership. In addition, when consumers are sufficiently heterogeneous, product line offering may benefit the manufacturer without sacrificing the retailer’s profit, thereby creating Pareto improvement along the distribution channel. Given this Pareto improvement, retailer dominance may lead to an upward-distorted quality and the possibility of product line extension compared with either the integrated channel or the case with a weak retailer. Retailer competition does not necessarily restore the incen-tive to offer the product line, but may generate either quality degradation or quality enhancement. Our analysis establishes a threshold policy on the consumer composition for the retailer to pursue the price or quality leadership.