Why Store Brand Penetration Varies by Retailer Sanjay K. Dhar and Stephen J. Hoch, 1997 Group 3 Ananya Sunayana(905) Gokulnath Subramanian(912) Gourav Shrivastava(914) Jasmine Kaur Narula(917) Sushant Sagar(952) Tanwi Shrivastava(953)

National Brand VS Private Labels National Brand SourcingWarehousingMerchandising Private Label DevelopmentSourcingWarehousingMerchandisingMarketingAfter Sales

Research Design Formulation After controlling for category differences, what are the key determinants of store brand market share for a specific retailer?

Data Collection Detailed annual demographic data for each retailer Two published secondary data sources provide additional information on characteristics of the retail chains and the markets served Category based sales data from 106 major US grocery retail chains. This includes all retailers with average annual store sales of $2 million+. These retail chains account for 60% of total supermarket sales in the markets they serve

Research Methodology Postulate a regression relationship between private label share and these measures. Individual category level regressions were estimated across the 93 retail-market accounts for which we had information on all measures. Retailers are included only if they stock a store brand in that category. We use the time series nature of the data to address possible endogeneity problems

Factors influencing Private labels Broad Classification Consumer Factors Manufacturer Factors Retailer Factors

Consumer Factors Wealthy People in Customer Base Elderly People in Customer Base Ethnic Composition of Customer Base Higher Education Level in Customer Base

Retailer Factors Retail Competition Economies of Scope Others Number of Retailers Heterogeneity in Market Shares Private Label SKU's as Fraction of Total Quality Commitment (In-House Quality Assurance) Chain Name for Private Label Premium Store Brand Program EDLP Strategy Depth of Assortment Category Expertise National Brand-Private Label Price Gap Promotion Intensity for Private Label Economies of Scale (Chain Size)

Manufacturer Factors Brand Competition Number of Brands Heterogeneity in Market Shares Pull Promotion Higher the pull strategies from national brands, lower the private label sales Push Promotion Higher the push strategies from national brands, lower the private label sales

Key Findings Retailers often use national brands to draw customers to their stores When retailers obtain more than their fair share of a category (high category development index), they also do much better with private labels From the national brand's perspective, encouraging the retailer to carry more brands and deeper assortments may be the most effective way to keep store brands in check Premium store brands offer the retailer an avenue for responding to the national brand's ability to cater to heterogeneous preferences

Key Findings Contd. Overall chain strategy in the use of everyday low pricing (EDLP), commitment to quality, breadth of private label offerings, use of own name for private label, a premium brand offering, and greater number of stores consistently enhance the retailer's private label share performance in all categories Across-retailer analysis shows that the national brand-private label price differential exerts an important positive influence on store brand performance