Who Benefits from Store Brand Entry?

Store brand entry has become a key issue in marketing as it may structurally change the performance of and the interactions among all market players. Based on their multivariate time-series analysis, the authors demonstrate permanent performance effects of store brand entry, typically benefiting the...

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Bibliographic Details
Published in:	Marketing science (Providence, R.I.) R.I.), 2004-07, Vol.23 (3), p.364-390
Main Authors:	Pauwels, Koen, Srinivasan, Shuba
Format:	Article
Language:	eng
Subjects:	Average prices Brands Business Category management Cereal foods Competition Competitive advantage Consumers Datasets Equilibrium House brands long-term price elasticity Manufacturers manufacturers versus retailers Manufacturing Market entry Marketing Mathematical models Multivariate analysis National brands Price elasticity Prices Product introduction Product variety Retail prices Retail stores Retail trade Retailing industry store brand entry structural change Studies unit root tests vector-autoregressive models Wholesale prices
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Summary:	Store brand entry has become a key issue in marketing as it may structurally change the performance of and the interactions among all market players. Based on their multivariate time-series analysis, the authors demonstrate permanent performance effects of store brand entry, typically benefiting the retailer, the consumers, and premium-brand manufacturers, while harming second-tier brand manufacturers. For the retailer , they consistently find two beneficial effects of store brand entry: high unit margins on the store brand itself and higher unit margins on the national brands . This increase in unit margins implies that the retailer strengthens its bargaining position vis-à-vis national brand manufacturers. However, store brand entry only rarely yields category expansion and does not create store traffic or revenue benefits. Second, consumers do not obtain lower prices on all national brands, only on some second-tier brands. However, they benefit from enlarged product assortment and intensified promotional activity that lowers average price paid for two out of four categories. For the manufacturers , store brand entry is typically beneficial for premium-price national brands, but not for second-tier national brands. Often, premium brands experience lower long-term price sensitivity and higher revenues, whereas second-tier brands experience higher long-term price sensitivity and lower revenues.
ISSN:	0732-2399 1526-548X