The Strategic Role of Private Labels on Retail Competition (original) (raw)
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Analyzing the intensity of private label competition across retailers
Journal of Business Research
Examining how buyers of one private label (PL) in a product category also cross-purchase the private labels of competing retailers in the same category is the focus of this study. Understanding consumer cross-purchasing of PLs is important to retailers, who use PLs as one tactic to differentiate from other retailers; and important to manufacturers, who compete against PLs. A higher level of PL cross-purchasing indicates heightened competitive intensity among the PLs of rival retailers. Results across 27 categories indicate that PLs compete against national brands (NBs) within-store, but also compete against the PLs of other retailers across stores. Heightened competition among the PLs of different retailers occurs in categories with higher purchase frequency; in which the average PL price is well below the average NB price; and in categories with higher levels of manufacturer brand price promotions.
2019
In this paper, we study the competition between national brands and private labels (or store brands) by analyzing the impacts of their presence on strategies, sales, and profits in a vertical channel structure. We use a differential game, where the channel members control price and non–price marketing variables, and investigate two scenarios. The first is used as a benchmark. It considers an exclusive retailer that distributes only a national brand provided by a manufacturer, who invests in national advertising to build its brand’s goodwill. In the second scenario, the retailer owns a private label that competes with the national brand. By computing the results under both scenarios, we provide answers to the following research questions: (i) What should the price and the non–price marketing strategies be, with and without the private label? (ii) How do they compare? (iii) Is the presence of a private label always profitable for the retailer and harmful to the manufacturer, as the li...
An Empirical Investigation of Private Label Supply by National Label Producers
Marketing Science, 2010
Private labels (PLs) are ubiquitous in several categories, including groceries, apparel, and appliances. However, existing empirical work has not examined the differential impact of various upstream supply arrangements for PL products or the strategic motives for PL supply. To do so requires one to model the interaction between private and national label (NL) products both upstream and downstream while accounting for strategic behavior on the part of manufacturers and retailers and retaining essential differences between NL and PL products. We build a model that satisfies these requirements and lets us answer our two research questions: First, can an NL firm profit from being an outsourced PL supplier? Second, what are the upstream and downstream impacts of different PL supply arrangements? We answer these questions by modeling private labels as homogenous products at wholesale, but as differentiated products at retail. In contrast, national label products are differentiated at both...
Do private labels increase retailer bargaining power
Qme-quantitative Marketing and Economics, 2010
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?
Private Labeling and Competition between Retailers
Journal of Agricultural & Food Industrial Organization, 2000
This paper studies the effect of private labeling on retailer competition-an issue neglected in literature until now. Once implemented, private labeling may well be less favorable to society than previously thought because it can encourage consolidation of the retail industry. Either with linear pricing (when goods are not loose substitutes) or with wholesale price discrimination (when goods are not loose substitutes), the vertical channel is inclined to promote a retail monopoly while consumers prefer some retail competition. This conflict of interest would not arise in the absence of private labeling.
Retailer-manufacturer Competition, the Role of Private Labels, and the Weather Effect∗
Private labels are known to provide retailers with higher retail margins and bargaining power over the manufacturers of national brands. Do these advantages change if the external environment, such as weather, changes? This study examines how a change in temperature influences the competition between a retailer and the upstream manufacturers of national brands. Our study focuses on the strategic role of private labels in the vertical interaction between the two players. By estimating a structural model accounting for both the demand and supply-side decisions, we find that with a rise in temperature, the retailer earns both share and margin advantages, compared to the upstream manufacturers. As temperature increases, the increase in consumer demand for private labels is more significant than national brands. This may give the retailer a bargaining advantage for a better contract from the manufacturers of national brands. Our results show that private labels and national brands of dif...
Competition between Private Labels and National Brands in a Multichannel Retailer
Advancing Insights on Brand Management
This chapter analyzes private label and national brand competition across online and offline channels. We analyze competition using three measures: market share, a loyalty index, and what is called in the literature conquesting power (a measure of the ability of a brand to capture nonloyal consumers). We first provide a brief theoretical introduction and literature research about the topic. We also do an empirical analysis using data of a multichannel grocery retailer that sells both its own private label and national brands, through physical stores and an online store. The data include the purchases made by a sample of multichannel consumers. We find that the private label increases, in general, its competitive position in the online channel, compared to the offline channel. However, this result does not hold for all the product categories. We discuss some drivers of this general improvement, as well as potential causes for the differences between categories. We conclude with some recommendations for multichannel retailers and manufacturers.
Collusive conduct in private label markets
This paper considers retailers' pricing strategies when they sell both nationally-advertised brands and quality-equivalent Ž . private-label brands a form of store, house or own-label branding . We investigate the impact of advertising on the ability of Ž . retailers to increase profitability across all brands. Supporting recent theoretical arguments though contradicting others , our industry study reveals that retailers can react to the heavy advertising amongst national brands by increasing prices, revenues, and economic profits generated from both national brands and private-label brands. For the category studied, retailers' strategies may include setting collusive prices for both national brands and private-label brands. We use a structural test to support this conclusion. Management interviews further support this finding. q
European Journal of …, 2002
In recent years, the quality of private label products and their market shares have grown to such an extent that most consumer goods manufacturers, brand leaders included, can not afford to ignore them. Private labels are, however, not just another generic competitor. The retailer that sells them is also an important account, and the issue includes the question: to produce private label or not? Several authors have recently suggested a number of effective strategies for leading national brand manufacturers against private labels. However, the empirical evidence for the strategies identified is scarce. Using a sample of 101 Dutch national brand manufacturers, we get a better understanding of the sets of strategies companies use. Using an inductive approach, we find four dominant profiles that are linked to performance and are discussed.