A Positive Theory of Private Label: A Strategic Role of Private Label in a Duopoly National-Brand Market

This article offers an economic rationale for national brands to provide private labels to their retailers. We build a game-theoretic model that analyzes the interactions among two national brand manufacturers and one common retailer. In an interesting strategic role, the private label mitigates the promotion competition between the two national brands and provides benefits for all three members in the channel. Our analysis shows that offering a private label can be a credible commitment from a national brand manufacturer that it will not engage in promotions and decrease the incentive of the national brand rival to engage in promotions. In this way, we attempt to provide a reason for why national brand manufacturers provide retailers with private labels in practice. In addition, we discuss the optimal quality level of private labels.     

Defensive strategy against a private label: Building brand premium for retailer cooperation

We build a game-theoretic model of price competition between a national brand manufacturer and a retailer that also sells its private label. In particular, we examine a national brand's strategy of building brand premium in the context of channel coordination. The importance of national brand's brand equity has been well-documented in many empirical and behavioral studies. We reinforce the argument that building brand premium should be the first line of defense for a national brand instead of aggressively cutting wholesale price. Not only does the national brand manufacturer benefit from it, but also the retailer who sells both the national brand and its own private label has less incentive to promote the latter. Therefore, it can induce retailer cooperation, which is essential for a successful strategy in a distribution channel.     

Private label brands: major perspective of two customer-based brand equity models

In recent years the retail industry has been characterized by the fast growth of private labels, with an increase of the offer of private labels and the enhancement of their value in the marketplace. This research focuses in private label brand equity to deepen the understanding of its origins, by analyzing two alternative customer-based conceptual models. The present study was developed in the large retailing industry, comprising different retailing formats that offer private labels to consumers. Our findings suggest a conceptual private label brand equity model, which is slightly different from the Aaker's brand equity model, considering store image as an antecedent and stressing its importance in building and enhancing private labels' brand equity. Additionally, retailers searching for successful ways to compete in the retail market need to examine in more detail the customer-based brand equity related to their private labels.     

The Retailer's Perspective on the Link Between Logistical Resources and Perceived Customer Loyalty to Manufacturer Brands

The objective of this study was to investigate the relationships between logistics and brand‐related resources, and assess their impact on the retailer's perceptions of customer loyalty to manufacturer brands. On the basis of theoretical underpinnings of the resource‐based view, this study explores the relationships among four main variables: (1) variety of collaborative logistics technologies shared between retailers and manufacturers, (2) manufacturer's logistics operations quality provided to retailers, (3) retailer's brand differentiation orientation, and (4) retailer's perceptions of customers loyalty to manufacturer brands. An online survey was conducted on 313 senior marketing and supply chain managers from retailer firms. The results of the structural equation analysis support a mediated relationship between logistical resources and perceived loyalty to manufacturer brands. The retailers believe that shared logistics technologies enable manufacturers and retailers to offer higher levels of availability and visibility of preferred brands to their end‐user customers. In turn, the end‐users become more confident with their decisions to repurchase the same brand offerings.     

Coupons and private labels: A cross-category analysis of grocery products

This article examines the influence of coupons on private label shares of grocery products. The impact of national brand and private label coupons, distributed by manufacturers and retailers, is examined. A consumer framework and a typology of coupon effects are developed to explain different types of coupon usage behavior. Aggregate scanner panel data on 480 product categories are used in the analysis. Both the type of coupon and the method of distribution (by manufacturer or by retailer) are found to be important determinants of private label share response. Couponing activities by the national brand manufacturer are negatively related to private label share, thus indicating that they may be effective deterrents of private label penetration. However, couponing activities related to private labels do not help increase private label shares. The surprising finding is that national brand store couponing activity is positively related to private label share.     

A longitudinal examination of the effects of retailer–manufacturer brand alliances: The role of perceived fit

Abstract

One resource that has been identified as a valuable source of competitive advantage is the equity associated with an organisation's brands. Organisations devote considerable resources to developing strategies that allow them to build and/or maintain strong brand names. This study investigates brand alliances between retailers and manufacturers. The role of perceived fit between the partnering brands is explored. In addition, the study examines the influence that retailer–manufacturer brand alliances have on: retailer equity; manufacturer brand equity; the intention of consumers to frequent the stores of the retailer involved in the brand alliance (shopping intention); and the intention of consumers to purchase products from the manufacturer involved in the brand alliance (purchase intention).     

Store Brand Quality and Retailer’s Product Line Design

This study analyzes a retailer’s store brand quality decision in vertically differentiated product categories. We analyze a game theoretic model composed of one or two national brand manufacturers and a retailer, who strategically chooses the quality level(s) of its store brand(s) relative to the well-established national brand position(s) to maximize its category profit. Our analysis reveals that the nature of a retailer’s store brand quality positioning is quite different from the manufacturer’s national brand positioning decision, and that the best position for a store brand is not “as close to a national brand as possible” as previous studies suggest. Instead, the optimal quality position of each store brand is remarkably sensitive to the distribution of consumers’ willingness-to-pay. In particular, the relative proportions of quality sensitive consumers and price sensitive consumers determine the balance of three key strategic forces — the market expansion force, the retail margin force, and the consumer profitability force, leading to different optimal product line designs for store brands across different category environments. Interestingly, against multiple incumbent national brands, the retailer’s optimal product line design includes a store brand positioned at the highest quality level in the category only if most consumers are moderately quality conscious. We also analyze the implications of national brands’ brand equity for retailers’ store brand strategy.     

How to brand your private labels

Private labels have become ever-more important and are slowly turning into brands of their own. Retailers increasingly offer three-level ‘good, better, best’ private-label programs that include economy, standard, and premium private-label tier goods. For each of these tiers, retailers must decide under what name to brand their private label. They can either assign their store banner name to a private-label tier or go for a unique brand name that is separate from the retailer banner. The purpose of this article is to outline the advantages and limitations of these two branding strategies: store-banner branding versus stand-alone branding. Herein, we also provide a series of recommendations regarding when to use each brand strategy, based on characteristics of the retailer and the environment in which it operates.     

The effects of store brand loyalty on store loyalty: evidence from the Spanish market

This article studies the impact of retailers' store brands on store performance. Specifically, we analyze the extent to which store brands contribute to store loyalty. On the one hand, a positive relationship between customers' familiarity with and loyalty to the retailer's own brand and customers' loyalty to the retailer should result from the potential of the store brand to differentiate the retailer. On the other hand, an negative relationship between customers' familiarity with and loyalty to the retailer's own brand and customers' loyalty to the retailer may result from store brands' association with more price-sensitive customers, who have a higher propensity to buy at different stores that offer the best bargain. The empirical analysis, conducted with a sample of customers of leading retailers in the Spanish detergent market, shows no relationship between store brand loyalty and loyalty to the retailer. Although the purchase of store brands relates positively to higher loyalty to the retailer, this relationship deteriorates with the degree of exclusivity of store brands within the customer's shopping basket.     

Do private labels increase retailer bargaining power?

Like any new product, private label entry increases competition within a category leading to downward pressure on both wholesale and retail prices. But, given the higher margins for private labels and potential bargaining benefits for retailers, they have incentives to help private labels gain market share. The paper addresses two questions: First, do private labels enhance a retailer’s bargaining power with respect to manufacturers? Second, given the higher profitability and potential increase in bargaining power, does the retailer strategically set retail prices to favor and strengthen the private label? We find support for the “bargaining power” hypothesis, but qualified support for the “strategic retailer pricing” hypothesis. Retailers gain bargaining power through lower wholesale prices on imitated national brands. But the gain is greater in niche categories than in mass categories, suggesting that niche national brands with limited “pull” power lose greater bargaining power. In terms of strategic pricing, the retailer, on initially introducing the private label, strategically sets prices to help private labels gain market share in high volume mass market categories. But retail prices revert to the category profit maximizing price after a year when the private label gains a stable market share.     

Interplays between manufacturer advertising and retailer store brand introduction: Agency vs. wholesale contracts

In retail supply chains, manufacturers' advertising for national brands and retailers' store brand introduction may relate to each other, and two types of contracts, i.e., agency contract and wholesale contract, are widely used. This paper uses game-theoretic models to investigate the strategic interaction between a manufacturer's advertising strategy and a retailer's store brand introduction strategy. We derive the equilibrium outcomes, including wholesale price, retail price, market demand, retailer's and manufacturer's profits under different contract forms. We find that when the product cost is small relative to the perceived value of the store brand, the introduction of a store brand will benefit the retailer. The retailer is more likely to introduce store brands under the wholesale contract than under the agency contract. In addition, compared with the wholesale contract, the agency contract may increase both the manufacturer's and the retailer's profits and lead to Pareto improvement for them.     

Relational Resources in Interorganizational Exchange: The Effects of Trade Equity and Brand Equity

This research examines the effects of two key relational resources in relationships between retailers and national brand manufacturers. We introduce the new concept of trade equity, defined here as the value that accrues to a firm from being known in a trading network as a trustworthy trading partner, to explore the relational resources that are inherent in a firm’s ties with trading partners. We consider brand equity to represent relational resources that are located in a firm’s relational ties with end consumers. Based on data collected in a survey of 797 home appliance retailers, results show that a manufacturer’s trade equity and brand equity have differential effects on the retailer’s dependence and commitment to the manufacturer. Findings show that a manufacturer’s brand equity strengthens the effect of its trade equity on the retailer’s dependence and weakens the effect on the retailer’s commitment.     

The Impact of Category Captainship on the Breadth and Appeal of a Retailer's Assortment

Category captainship is a collaborative channel arrangement wherein a retailer cedes control of category management decisions, such as developing a marketing strategy to grow the category and assortment selection, to one of the category's leading manufacturers. This paper studies the consequences of captainship practices on the breadth and appeal of a retailer's assortment. We consider a model where multiple manufacturers sell a product to consumers through a common retailer. In the benchmark, the retailer decides on effort to drive traffic into the category and assortment. Under captainship, the retailer delegates both of these decisions to a captain in return for target sales. The capability of the captain to stimulate demand is unknown to the retailer. We find that the breadth and/or appeal of the assortment at the retailer can increase or decrease under captainship relative to the benchmark. We identify three factors that play a role on the impact of captainship on the breadth and appeal of retailer's assortment: (i) the retailer's beliefs about the captain's capability, (ii) the captain's true capability, and (iii) product set heterogeneity. We find that the benefit to the captain sometimes comes at the expense of the non-captain manufacturers, but we also identify conditions where captainship can be beneficial for not only the retailer and the captain but also the non-captain manufacturers.     

Antecedents of private label attitude and national brand promotion attitude: similarities and differences

A model that addresses the similarities and differences in conceptual antecedents of attitudes toward private label grocery products and national brand promotions is proposed and tested. The proposed model is tested using a sample of 300 consumers who were recruited from grocery stores, provided behavioral data from sales receipts of their shopping trip, and responded to a survey that contained multi-item construct measures. We predict and find in the study that both price and nonprice related constructs impact both private label attitude and national brand promotion attitude, but the directionality and strength of several of these relationships differ. Implications of these findings for retailers and national manufacturers are discussed.     

Brand and quality effects on introduction of store brand products

This paper considers a supply chain with a single manufacturer selling a national brand product via a single retailer. The retailer has the option to introduce a product under his own brand into the market with the same functionality as the national brand product. We simultaneously consider the consumer bases of the national brand and store brand along with consumers' willingness to pay for quality and the supply chain control (centralized vs. decentralized). By analyzing the game-theoretic models, we offer managerial insights about the influences of brands' consumer bases on the quality and pricing decisions of the retailer, and on the manufacturer's willingness-to-collaborate when the retailer introduces the store brand product. We find that, although it is usually easier for the retailer to introduce a product under a store brand with a large consumer base, doing so with manufacturers of well established national brands can be difficult, when the retailer often has to greatly mark down his store brand product's quality and price. We also find that a store brand product with a small consumer base shall be launched only when the supply chain is switched to a centralized control and when the manufacturer's national brand has a large consumer base. These important findings offer guidance to both national brand manufacturers and retail store managers regarding the launch of store brand products.     

The Impact of Brand Delisting on Store Switching and Brand Switching Intentions

A tool retailers often use to improve their negotiating position with brand manufacturers is to delist - or threaten to delist - the manufacturers’ brand. Because brand manufacturers rely mainly on retailers to sell their products to consumers, a brand delisting will cause a sales loss for the brand manufacturer. Therefore, many brand manufacturers feel enormous pressure to give in and improve buying conditions to favor the retailer. The question thus emerges: Can a brand manufacturer resist a retailer's threat to delist its brand(s)? If a brand delisting severely hurts retail sales, it is easier for a brand manufacturer to resist. The authors study the impact of brand delistings on store switching and brand switching using a controlled online experiment and in-store shopper survey. They develop and test a conceptual model with several antecedents of consumers’ reactions to a brand delisting and conclude that brand equity, market share, and the products’ hedonic level drive store and brand switching.     

THE IMPACT OF ORDER FULFILLMENT SERVICE ON RETAILER MERCHANDISING DECISIONS IN THE CONSUMER DURABLES INDUSTRY

Historically, manufacturers held the upper hand in consumer goods supply chain relationships. There has been a pervasive shift of power to retailers over the past 20 years, however, ushering in an era of waning consumer loyalty to manufacturers' brands and increasing loyalty to retailers. While there is extensive research focusing on the manufacturer‐consumer relationship, retailers' increased ability to influence consumer purchases suggests that manufacturers should understand not only consumer perceptions of delivery service, but also retailer perceptions. We incorporate social network theory to examine the manufacturer‐retailer‐consumer linkages in the consumer durables industry, with the emphasis on the retailer in the role of the “broker” (Burt 1992). Specifically, we examine whether retailer perceptions of a manufacturer's order fulfillment service (OFS) positively impacts retailer perceptions of the manufacturer's brand, the importance of the product, and the likelihood of the retailers' salespeople to recommend the product to consumers. The research bridges OFS and retailer purchase behavior in a consumer durables industry characterized by high levels of consumer involvement, brand presence, and personal selling.     

Do Negative Consumption Experiences Hurt Manufacturers or Retailers? The Influence of Reasoning Style on Consumer Blame Attributions and Purchase Intention

Negative consumption experiences adversely influence consumer perceptions of manufacturers and retailers. The author theorizes and finds that analytical thinkers are more likely than holistic thinkers to attribute the cause of the negative consumption experience to the manufacturer, resulting in lower repurchase intention of the manufacturer brand. In contrast, holistic thinkers are more likely than analytical thinkers to attribute the cause of the negative consumption experience to the retailer, resulting in lower repurchase intention at the retailer. These findings are important to marketing managers at both ends of the marketing supply chain—manufacturers and retailers—who deal with consumers with diverse cultural backgrounds.     

Do CSR actions in retailing really matter for young consumers? A study in France and Norway

This research explores how young consumers perceive Corporate Social Responsibility (CSR) actions of French and Norwegian food retailers, and how these actions affect brand image, brand associations (adjectives, verbs, and names) and consumer–retailer relationships. It uses a qualitative methodology with in-depth interviews. This exploratory study shows that French and Norwegian young consumers have problems linking CSR with food retailing, and they question retailers' true commitment to CSR. Young French consumers had stronger brand associations than young Norwegians. Therefore, we argue that, CSR commitment among retailers in both countries is likely to positively affect retailer brand image. Nevertheless, CSR related products could also be associated with higher prices and may exclude low-income consumers.     

An integrated retailer image and brand equity framework: Re-examining,extending, and restructuring retailer brand equity

Retailers are amongst the world's strongest brands, but little is known about retailer brand equity. In spite of their extensive use, we argue that current operational models are too abstract for understanding the uniqueness of the retail industry and too simplistic to understand the interrelationships among the dimensions in the retailer brand equity building process. This study contributes to the existing and largely generic retailer equity frameworks in three ways: first, by incorporating retail specific dimensions from the retailer image literature; second, by re-examining and developing the structures and relationships between the dimensions of retailer equity by testing alternative structures commonly used in the more general brand equity literature; and finally by creating a short and parsimonious scale for assessing retailer brandequity in different contexts. Three alternative models are compared and tested on six brands in both convenience and shopping goods categories, ranging from discount to middle range price levels. The outcome is an operational framework supporting the main building blocks of the conceptual brand resonance model presented in Keller (2001) with seven dimensions structured in a four-step sequence as awareness → pricing policy, customer service, product quality, physical store → retailer trust → retailer loyalty, thereby describing retailer brand equity as a four-step process. The extended, although parsimonious, 17-item retailer equity scale can be used by academics as well as practitioners to examine the underlying values of retailer brands and has the potential to incorporate additional dimensions and attributes to investigate specific retail contexts without creating lengthy questionnaires.