The Power of Private Brands

Abstract

National brands are well-known and popular brands of manufacturers, such as Coca Cola, McDonald's, Milka, Maggi, Colgate, Toblerone, Evian, Knorr, etc. These brands usually are well accepted and favorites of consumers. They associate with high quality, availability, feelings, experiences, promotions, and events. However, their popularity is increasingly threatened by private brands. Private brands are brands of retailers and distributors, that starting from the 14th century, and especially today, have conquered lots of consumers. Initially, private brands appeared among consumer goods (food products) and were without name, style, design, with relatively low quality and with much lower prices than national brands.Economic crises, low living standard, poverty that existed in several countries in the middle of the XIX-th century caused the consumers to become more sensitive to prices, and they began to show interest in private brands. The greater demand for these products the richer became the retailers. Retailers had a great advantage: they knew the needs and wants of consumers. With time, retailers have invested more in quality, taste, packaging, design, style, and colors of their brands that have attracted more customers. Today, private brands represent a severe competitive threat to national brands. Some recent research shows that private brands are more popular and more required than national brands. This paper aims to reveal the future of national and private brands with the help of empirical research. JEL Classification Numbers: D40, M31, L81; DOI: http://dx.doi.org/10.12955/cbup.v5.911

Determining the Influence of Private Labels on Sales of National Brands: A Qualitative Approach

“…Understanding the effect of private label introduction in product assortment mix is a prerequisite to make vital decisions regarding their development, distribution and sale (Gázquez-Abad & Sánchez-Pérez, 2010). The need for low-cost products, the opportunity to make greater profits and the continuous change in the shopping habits of consumers are some fundamental reasons for the emergence of PLBs (Dimitrieska et al, 2017). The engagement of distributors in the distribution of PLBs is viewed as a strategic move of brand extension and increasing competition through their being the clients and competitors of NBs simultaneously (Gázquez-Abad & Sánchez-Pérez, 2010; Sayman & Raju, 2004; Tarziján, 2004).…”

“…From consumers’ perspective, perceived value, changed economic and demographic factors, quality-and-price relationship, brand trustworthiness, word of mouth, store image, variety of alternatives and better propensity of discounts are strong influencers that induce them to purchase PLBs (Bao et al, 2011; Kumar & Kothari, 2015; Kumar et al, 2015; Sardana et al, 2019). On the other hand, through the traders’ lens, gross category margin, high product turnover, control over pricing, increased differentiation and generation of store loyalty are perceived as significant benefits and determinants of private-label success (Ailawadi et al, 2008; Dimitrieska et al, 2017; Hoch & Banerji, 1993; Sebri & Zaccour, 2017). Some of the primary drivers of the market penetration and growth of PLBs from a broader economic perspective include economic recession, retail landscape consolidation, enhanced retailer capabilities and renewed strategic approach that bring into market equally competitive alternatives against manufacturer brands at a still lower price (Houlihan, 2017; Dimitrieska et al, 2017).…”

“…PLBs have experienced impressive growth over the last decade. They have marked a more substantial presence in Europe and other international retail markets, with Switzerland on top, having a 45 per cent private label share, and Spain and UK having 41 per cent shares each (Dimitrieska et al, 2017; Nielsen, 2014; Pangriya & Kumar, 2016; Tarziján, 2004). The competitive advantage of private brands is mainly rooted in their lower prices and less promotional expenses in comparison with NBs (Baltras, 1997; Putsis & Dhār, 2001).…”

“…In India, PLBs are being introduced via day-to-day item categories like grains, peas, bread and confectionery, frozen foods, bread, dry fruits and sanitation items, which were previously bought in loose, unhygienic commodity packaging (Gupta, 2015). The growth of PLBs is signalling heightened competitive threats to the popularity of manufacturer brands across the globe (Dimitrieska et al, 2017; Nielsen, 2018a).…”

“…On the other hand, through the traders’ lens, gross category margin, high product turnover, control over pricing, increased differentiation and generation of store loyalty are perceived as significant benefits and determinants of private-label success (Ailawadi et al, 2008; Dimitrieska et al, 2017; Hoch & Banerji, 1993; Sebri & Zaccour, 2017). Some of the primary drivers of the market penetration and growth of PLBs from a broader economic perspective include economic recession, retail landscape consolidation, enhanced retailer capabilities and renewed strategic approach that bring into market equally competitive alternatives against manufacturer brands at a still lower price (Houlihan, 2017; Dimitrieska et al, 2017).…”