Do Private Labels Increase Retailer Bargaining Power?

Meza, Sergio; Sudhir, K.

doi:10.2139/ssrn.1550419

Cited by 18 publications

(25 citation statements)

References 38 publications

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“…28 See the online appendix for more details on the model and the estimation results when a market is defined to be a zone. 29 Meza and Sudhir (2010) find that the national brands' wholesale costs are assumed to increase by 1.29% when store brands are removed. 30 In Case 1, the Ralston flake brand has the highest price drops because it has the lowest market share when the store brands are sold.…”

Section: Resultsmentioning

confidence: 99%

Store brands and retail grocery competition

Luo

2018

Economics Manag Strategy

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Grocery retailers rank store brands as the most important factor that differentiates them from their competitors. Retailer competition should have a stronger impact on the more substitutable national brands than the more differentiated store brands. However, the literature has not studied the impacts empirically. In this paper, I quantify the different impacts of retailer competition on national brands and store brands using the scanner data of a U.S. chain retailer. I estimate a structural demand and supply model that incorporates the differentiation effect and retailer competition. The results show that national brand consumers are more likely to switch stores than store brands consumers. By analyzing two counterfactual cases, I find that 1) if the retailer did not sell store brands, its profit would decrease, and the loss would be greater in markets with more competitors; and 2) if the retailer competition had increased, then the national brands' retail prices would decrease more than the store brands' prices.

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Section: Resultsmentioning

confidence: 99%

Store brands and retail grocery competition

Luo

2018

Economics Manag Strategy

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“…5 One direct implication of SB introduction is that it makes the retailer a competitor of the manufacturer (Amrouche and Zaccour 2007). Consequently, SB introduction benefits the retailer not only by reaching a larger set of consumers through a larger assortment (Soberman and Parker 2004) but also by engendering better NB supply terms from the manufacturer, e.g., lower wholesale prices (Meza andSudhir 2010, Mills 1995). In this context, SB positioning is critical due to its role in the degree of price competition between the brands (Du et al 2005, Morton and Zettelmeyer 2004, Sayman et al 2002.…”

Section: Related Literaturementioning

confidence: 99%

Brand positioning and consumer taste information

Nalça

Boyacı

Ray

2018

European Journal of Operational Research

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In this paper, we study how a retailer can benefit from acquiring consumer taste information in the presence of competition between the retailers store brand (SB) and a manufacturers national brand (NB). In our model, there is ex-ante uncertainty about consumer preferences for distinct product features, and the retailer has an advantage in resolving this uncertainty because of his close proximity to consumers. Our focus is on the impact of the retailers information acquisition and disclosure strategy on the positioning of the brands. Our analysis reveals that acquiring taste information allows the retailer to make better SB positioning decisions.Information disclosure, however, enables the manufacturer to make better NB positioning decisions -which in return may benefit or hurt the retailer. For instance, if a particular product feature is quite popular, then it is beneficial for the retailer to incorporate that feature into the SB, and inform the manufacturer so that the NB also includes this feature. Information sharing, in these circumstances, benefits both the retailer and the manufacturer, even though it increases the intensity of competition between the brands. But, there are situations in which the retailer refrains from information sharing so that a potentially poor positioning decision by the NB makes the SB the only provider of the popular feature. The retailer always benefits from acquiring information. However, it is beneficial to the manufacturer only if the retailer does not introduce an SB due to the associated high fixed cost.

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“…Third, the PLs that are imitations of NBs enable the retailer to obtain better terms in negotiations of prices (Bontemps et al, 2008 andMeza andSudhir, 2010). This is because the imitating PLs strengthen the retailer's bargaining power against manufacturers selling the imitated NB products.…”

Section: Introductionmentioning

confidence: 99%

“…The ability of the retailer to affect wholesale prices and to set its retail prices in the presence of PLs, however, have not been widely discussed in the empirical analyses cited above. To my knowledge, Meza and Sudhir (2010) is the only empirical study on these two issues. They find that when PL products are introduced by the retailer, NB manufacturers lower their prices for their imitated products.…”

Section: Introductionmentioning

confidence: 99%

“…In particular, I test the two hypotheses inserting a term into the associated profit maximization problems. This term measures the departure of the observed margins from the predicted levels (Chintagunta, 2002;Villas-Boas andZhao, 2005 andMeza andSudhir, 2010). Meza and Sudhir (2010) and Villas-Boas and Zhao (2005) refer to this term as a deviation of the observed margins from their predicted counterparts.…”

Section: Introductionmentioning

confidence: 99%

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Three Essays on Private Labels, Product Quality and The Retailer's Bargaining Power

Xu¹

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The first chapter of this thesis studies the motivations of a retailer to launch a private label product in an environment where consumers do not know the quality of the product before consumption. I show that the launch of the private label product can be a form of brand stretching with the sales of a national brand acting as a bond to ensure that the retailer sells a private label product of high quality. Consequently, the retailer would carry and sell the national brand product even in situations where it would not have done so under perfect information. In addition, I demonstrate that other motivations for launching a private label product, namely to strengthen the retailer's bargaining position and to engage in market segmentation, are not fundamentally affected by the presence of asymmetric information. First, I am grateful to my thesis supervisors, Dr. Zhiqi Chen and Dr. Konstantinos Metaxoglou, for their patient guidance, encouragement and advice in this process. I appreciate all their contributions of time and ideas to make my Ph.D. experience productive and stimulating.I would like to thank my

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Do Private Labels Increase Retailer Bargaining Power?

Cited by 18 publications

References 38 publications

Store brands and retail grocery competition

Store brands and retail grocery competition

Brand positioning and consumer taste information

Three Essays on Private Labels, Product Quality and The Retailer's Bargaining Power

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