Store brand

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Store brands are a line of products strategically branded by a retailer within a single brand identity. They bear a similarity to the concept of house brands, private label brands (PLBs) in the United States, own brands in the UK, and home brands in Australia and generic brands. They are distinct in that a store brand is managed solely by the retailer for sale in only a specific chain of store. The retailer will design the manufacturing, packaging and marketing of the goods in order to build on the relationship between the products and the store's customer base. Store-brand goods are generally cheaper than national-brand goods, because the retailer can optimize the production to suit consumer demand and reduce advertising costs. Goods sold under a store brand are subject to the same regulatory oversight as goods sold under a national brand. Consumer demand for store brands might be related to individual characteristics such as demographics and socioeconomic variables.[1]

How store brand relates to customers[edit]

A store brand is a way of relating to different customers. Different types of store brands can relate to a customer through the choice of branding and building a relationship with the consumer. Store brands can relate to a consumer through various characteristics such as different demographics.

Store brand vs. national brand[edit]

The store brand is the only brand in which the retailer has the full responsibility of control such as development, sourcing, warehousing, merchandising and marketing. Whereas retailers make different decisions about national brands and leave it up to the manufacturer. With a store brand it is more important for the retailer as it plays a more definite role in the achievement or failure of its own label. This information is based on data from 34 food categories at 106 major supermarket chains, which operate in the largest 50 retail markets in the U.S. (Dhar, S. K., & Hoch, S. J. 1997) Although national brands have long dominated the retail scene, retailers generally use their national brands to draw customers to their stores. Recently department stores, supermarkets, service stations, clothiers and chemists have started to increase more store brands. Studies show that consumers are buying more and more store brands and don’t plan on returning to national brands anytime soon. (Kotler et al. 2013) Store brands are generally cheaper than national brands, which, with consumers becoming more price-conscious and less brand conscious, has increased store brand sales. (Kotler st al. 2013) Some marketers have predicted that store brands will eventually knock out all the strongest national brands.( Kotler et al. 2013) Store brands have a tendency to generate higher margins than national brands. Store brands have previously been known as low-price and low quality brands, but now they are currently positioned as value brands and brands with the aim to have the quality equivalent to manufacturer brands, but with lower prices.

How store brands relate to retail branding / Improving Retailers image[edit]

Retailers in the USA and Europe have made huge investments to launch store brands with the main object of securing significant financial benefits. Retailers have developed store brands in almost every product category and their economic value is constantly increasing. Store image, store loyalty and store satisfaction have a positive impact on the acceptance of store brand extensions. Sometimes the retailer’s brand image depends on the images that the store brands set. Although the store brands have positive impacts on the retailers image. “Retailers can find a rationale for investing in their store brand range in order to differentiate themselves from their competitors.”( Kremer, F., & Viot, C. 2012). The retailers store brand image should relate to their own store brand and the price image of the store brand is positively related to the retailer price image.

Store loyalty[edit]

The relationship between store brand loyalty and store loyalty still remains unknown. Research suggests a non-monotonic relationship between store brand loyalty and store loyalty, positive up to a certain store brand loyalty level, after which it becomes negative. Current arguments recommend this relationship may relate to the competitive positioning of store brands, especially their price-quality positioning. The more Standard-oriented the store brand positioning, the more approving the effect of store brand loyalty appears to be on store loyalty. (Martos-Partal, M., & González-Benito, Ó. 2010). Price verse quality is a very important factor of the formation of store brand value and loyalty. There is a study that shows new evidence towards store brand loyalty through consumers who show different usage of these brands (heavy, medium and light buyers). The study evaluates the short and long term values of each segment of the customer, so the retailer can then recommend retail strategies for each segment (Rubio, N., Oubiña, J., & Gómez-Suárez, M. 2015). The key positioning of store brand is situated accordingly to their value for money which is a crucial part in the formation of the loyalty to these brands. The better the store brand usage, the better the direct effect of store brand value for money on store brand loyalty. This then means smaller indirect effect through smart shopping associations. (Rubio, N., Oubiña, J., & Gómez-Suárez, M. 2015).

Quality[edit]

The quality of a store brand product is not necessarily inferior to that of national brand products, it simply has lower research, development and advertising costs than what national brands incur.

The cost for a store brand product is estimated to be 25% less than national brands (Business insider. (2014). Studies indicate that testing was done on store brands and national brand products and it was found that 33 of the 57 store brand food items tasted as well or better than the national brand products. (Weisbaum, H. 2013) Todd Marks, a senior editor at consumer reports stated that products may be equal in quality but have different flavour profile based on ingredients or recipes.

Some examples of differences of taste in store brand products compared to national brand products include when Walmart’s Great Value vanilla ice cream was rated almost equal to the Breyers variant, when all seven store-brand cashews rated better than Emerald cashews, and when the national brand and Trader Joe's mixed vegetables were rated crisper and fresher than Birds Eye, among many examples. Results like this have the potential to spur a big change in the grocery shopping habits of customers and what they purchase.

Advantages of private branding[edit]

The advantages of private branding are increasingly becoming popular especially because of private brands being 30% lower in price than national brands.

  • Private labels offer retailers control over products factors such as size, package design, production and distribution.
  • Gain market share over national brands.
  • Logos and taglines can be customised to the customers shopping experience.
  • Store labels can shape shoppers in store experience.
  • Retailers have more control on decisions of store brand products
  • Category gaps that haven’t been filled by national brands can be done.
  • National brands have competition and need to be innovative.
  • Store brands have increased revenue on local and a regional level, which is contributing to an overall positive economic outlook.
  • Product images are increased due to more competition.
  • Specialised marketing plans towards a store brand.
  • Store brands quality is now increasing due to higher demand.
  • The better the store brand usage, the better the direct effect of store brand value for money on store brand loyalty.

Prevalence[edit]

Wal-Hist, store-brand antihistamine medication from Walgreens

A Food Marketing Institute study found that store brands account for an average of 14.5 percent of in store sales with some stores projecting they will soon reach as high as 20 percent of all sales.[2] Store branding is a mature industry; consequently, some store brands have been able to position themselves as premium brands. Sometimes store-branded goods mimic the shape, packaging, and labeling of national brands, or get premium display treatment from retailers. (For example, "Dr. Thunder" and "Mountain Lightning" are the names of the Sam's Choice store brand equivalents of Dr Pepper and Mountain Dew, respectively.)

Economic assessment[edit]

Research has found that some retailers[who?] believe that, while advertising by premium national brands brings shoppers to the store, the retailer typically makes more profit by selling the shopper a store brand. This assumption has led to a spurt in the academic and trade literature on the subject of positioning the store brand as compared with the national brand.[citation needed] The Fashion Institute of Technology publishes research on store branding and store positioning.[3]

In most cases, while store brands are usually cheaper than national (or even regional) brands, they remain more expensive than generic brands sold at the store. (e.g. Pittsburgh-based Giant Eagle selling their store brands for less than national brands but more than Topco's Valu Time generic brand.)

Grocery chains such as Aldi and Save-A-Lot primarily sell store brands to promote overall lower prices, compared to supermarket chains that sell several brands. Richelieu Foods, for example, is a private label company producing frozen pizza, salad dressing, sauces, marinades, condiments and deli salads for other companies, including Hy-Vee, Aldi, Save-A-Lot, Sam's Club,[4] Hannaford Brothers Co.,[5] BJ's Wholesale Club (Earth's Pride brand) and Shaw's Supermarkets (Culinary Circle brand).[5]

Advantages of private branding[edit]

Private branding means a large distribution channel member (usually a retailer) buys from a manufacturer in bulk and puts its own name on the product. This strategy is generally only practical when the retailer does very high volume of sales. The advantages to the retailer are:

  • more freedom and flexibility in pricing
  • more control over product attributes and quality
  • higher margins (or lower selling price)
  • eliminates much of the manufacturer's promotional costs
  • can fill category gaps that are not being filled by National Brands
  • can aid in differentiation for the retailer as exclusive lines that are only available at that retailer
  • can keep the National Brands competitive and innovative as they will now be fighting for shelf space with the Private Brands

The advantages to the manufacturer are:

  • reduced promotional costs
  • stability of sales volume (at least while the contract is operative)
  • increase production capacity if not currently running at 100%
  • can grow smaller local businesses as retailer would prefer using non National Branded manufacturers

References[edit]

  1. ^ Baltas, George (2003). "A combined segmentation and demand model for store brands". European Journal of Marketing. 37 (10): 1499–1513. doi:10.1108/03090560310487211. 
  2. ^ "Store Brands Drive Differentiation and Profit". StoreBrandsDecisions.com. 2009-06-09. 
  3. ^ Chevalier, Michel (2012). Luxury Brand Management. Singapore: John Wiley & Sons. ISBN 978-1-118-17176-9. 
  4. ^ "Richelieu experiences hiring boom, starts expansion". WCFcourier.com, RC Balaban, August 27, 2006. 
  5. ^ a b "There's new appetite for peddlers of cheap eats". Boston Business Journal, Feb 23, 2009, Lisa van der Pool. 2009-02-23. 

External links[edit]

Literature[edit]

  • Kumar, Nirmalya; Steenkamp, Jan-Benedict E.M., Private Label Strategy - How to Meet the Store Brand Challenge. Harvard Business Press 2007