+1(978)310-4246 credencewriters@gmail.com
  

read these 3 articles and  summarize these articles,  write a summary of 1500 words at least.

GLOBAL OR NATIONAL BRANDS?
Reader PhD Sorina GÃŽRBOVEANU
University of Craiova
Abstract:
Today, branding is such a strong force that hardly anything goes unbranded.
Branding in global markets poses several challenges to the marketers. A key
decision is the choice between global and nationals brands. This article gives
the answers to the questions: what is, what is need for, what are the
advantages, costs and risks of global and national brands? All go to the
following conclusion: use global brands where possible and national brands
where necessary.
Keywords: global branding, strategic branding
Introduction
In essence, a brand identifies the
seller or maker. It can be a name,
trademark, logo, or other symbol. Under
trademark law, the seller is granted
exclusive rights to the use of the brand
name in perpetuity. Thus brands differ
from other assets such as patents and
copyrights. A brand is essentially a
seller’s promise to consistently deliver a
specific set of features, benefits, and
services to the buyers. The best brands
convey a warranty of quality. But a
brand is even a more complex symbol.
A brand can convey up to six
levels of meanings. Attributes: a brand
first brings to mind certain attributes.
Benefits: customers are not buying
attributes, they are buying benefits.
Attributes need to be translated into
functional and/or emotional benefits.
Values: the brand also says something
about the producer’s values. Culture:
the brand may represent a certain
culture. Personality: the brand can also
project a certain personality. User: the
brand suggests the kind of consumer
who buys or uses the product.
Marketers must decide at which level(s)
to deeply anchor the brand’s identity.
Promoting the brand solely on one or
more of its benefits can be risky. The
most enduring meanings of a brand are
its values, culture and personality. They
define the brand’s essence [4].
Increasingly, corporate and brand
image is being recognized as a major
influence on sales. In the commercial
world, where it is becoming increasingly
easy from a technical point of view to
duplicate a competitor’s offering, the
creation of a favourable or different
image may give the company a
competitive advantage.
The concept of brand management
was created in the 1930s by Procter
and Gamble, the giant Cincinnati soap
and toiletries company. It came about
as a result of the failure to launch
successfully a new soap at that time,
Camay. P&G’s original market strength
had been founded on a soap brand
called Ivory and it was felt that the sales
failure of the company was due to “too
much Ivory thinking”.
A strong brand reassures the
customer; it gives confidence in terms of
the quality and satisfaction that can be
anticipated from buying it. From all of
this comes the possibility of long-term
profits. Many brands are household
names today, but the concept of brand
management has moved beyond the
household goods categories.
People with brand-management
experience in fast moving consumer
goods companies are now in demand
by
financial
institutions,
service
organizations,
retailers
and
new
technology-based companies. Their
marketing skills are being applied to
“own label” brands. For example, the
Midland Bank has introduced new
brands of accounts, with names such as
Vector and Orchard, which have been
strongly promoted. The Halifax Building
Society is moving along similar lines
with its “Contents Xtra” insurance
scheme.
Without a doubt, the concept of
branding can fit in very well with the
idea of the corporate image [3]. Take
British Airways, for example. Once they
were organized on the basis of a
number of “marketing centers”, which
were essentially geographical areas
such as North America, Europe and
Australia. With such an organization, it
was very difficult to get a focus on
customer service and to track down the
real needs of customers. There is now
an “umbrella” or “master brand”, which
is British Airways itself. Under this are
Brand
1. Coca-Cola
(United
States)
2. Microsoft
(United
States)
3. IBM
(United
States)
4. GE
(United
States)
5. Intel
(United
States)
6. Disney
(United
States)
7.
McDonald’s
(United
States)
8. Nokia
(Finland)
seven “pillar” brands: Concorde, First
Class, Club World, Club Europe, World
Traveller, Euro-Traveller and Super
Shuttle, each run by a brand manager
and a group brand manager. Customer
service and profitability have both
improved under the new system.
Global Brands
A global brand is defined as the
worldwide use of a name, term, sign,
symbol (visual and/or auditory), design,
or combination thereof intended to
identify goods or services of one seller
and to differentiate them from those of
competitors. Much like the experience
with global products, there is no single
answer to the question of whether or not
to establish global brands. Table 1 lists
the estimated worth (equity) of the 20
top global brands.
Table 1
Top 20 Global Brands
Description
Little innovation beyond its flagship brand and poor management
has caught up with Coke as consumers’ thirst for Cola has
diminished.
It’s logo pops up on 400 million computer screens worldwide. But
virus plagues and rival Linux took some luster off Gates &Co.
A leader in defining e-business, with services making up more
than half of Big Blue’s sales.
With acquisitions in areas from bioscience to bomb detection, it’s
easier to buy GE’s new theme of “imagination at work”.
No longer just inside PCs, Intel is using its muscle to set the
agenda for everything from wireless standards to the digital home.
Long the gold seal in family entertainment, but newcomers like
Nickelodeon and Pixar are siphoning off some of its brand equity.
Big Mac has pulled out of a two-year slump but still has to battle
its reputation for supersizing the world’s kids.
Tough times for the mobile-phone giant as its market share has
slipped and younger buyers turn to rivals such as Samsung.
83
Brand
9. Toyota
(Japan)
10. Marlboro
(United
States)
11. Mercedes
(Germany)
12. HewlettPackard
(US)
13. Citibank
(United
States)
14. American
Express
(United
States)
15. Gilette
(United
States)
16. Cisco
(United
States)
17. BMW
(Germany)
18. Honda
(Japan)
19. Ford
(United
States)
20. Sony
(Japan)
Table 1
(continued from the previous page)
Description
With rock-solid quality and the edge in hybrid cars, the Japanese
auto maker is on track to overtake Ford in worldwide sales.
The no. 1 name in cigarettes has cut prices and upped marketing
to beat back the challenges of higher taxes and fewer smokers.
With wobbly profits and quality problems, the luxury car brand is
struggling to retain premium status.
Covering everything from digital cameras to service, the IT giant
wants to dominate the middle ground between Dell and IBM.
New CEO Charles Prince has spurred on global expansion and
boosted the consumer credit division.
A recent federal court ruling that allows banks to issue Amex
cards should give the brand another boost.
Despite the tougher competition from Schick, the King of Blades
still reigns new products like the battery-powered M3Power.
This networking behemoth used slick TV ads and key acquisitions
like Linksys to extend its reach.
This Bavarian auto maker is powering higher sales with raft of
new models from the sleek 6 Series sports coupe to the X3 baby
SUV.
Overtaken by Nissan at home and falling further behind rival
Toyota in the U.S. market.
Ford is trying to make quality “Job One” again after am
embarrassing run of glitches, but leery consumers haven’t yet
regained trust.
It was late to the LCD TV boom, and the PS2 video game console
is slipping. Worse, rival Samsung is in Sony’s face.
Source: Cateora, Ph., Graham, J., Bruning, E., International Marketing, McGraw-Hill
Ryerson, Toronto, 2006, pg. 323
Figure 1 dramatizes the extent of
U.S. company domination of global
branding. No other country remotely
approaches the brand values held by
American companies. U.S. companies
account for fourteen of the top twenty
global brands (70 percent) across both
consumer goods and industrial sectors.
Others countries within the top twenty
rankings are Finland (Nokia) in
telecommunications, Japan (Toyota,
Honda, and Sony) and Germany
84
(BMW). In fact, U.S. dominance is much
deeper that the rankings reflect.
A successful brand is the most
valuable resource a company has [1].
The brand name encompasses the
years of advertising, good will, quality
evaluation, product experience, and
other beneficial attributes the market
associates with the product. Brand
image is at the very core of business
identity and strategy. Customers
everywhere respond to images, myths,
and metaphors that help them define
their personal and national identities
within a global context of world culture
and product benefits. Global brand play
an important role in that process. The
value of Kodak, Sony, Coca-Cola,
McDonald’s, Toyota, and Marlboro is
indisputable. One estimate of the value
of Coca-Cola, the world’s most valuable
brand, places it over $70 billion and
growing. In fact, one authority
speculates that brands are so valuable
that companies will soon include a
“statement of value” addendum to their
balance sheets to include intangibles
such as the value of their brands.
Naturally, companies with such strong
brands strive to use those brands
globally. In fact, it appears that even
perceived
“globalness”
leads
to
increases in sales. The Internet and
other technologies are accelerating the
pace of the globalization of brands.
Even for products that must be adapted
to local market conditions, a global
brand can be successfully used with
careful consideration. Heinz produces a
multitude of products that are sold
under the Heinz brand all over the
world. Many are also adapted to local
tastes. In the United Kingdom, for
example, Heinz Beans Pizza (available
with cheese or sausage) was a runaway
hit, selling over 2.5 million pizzas in the
first six months after its introduction. In
the British market, Heinz’s brand of
baked beans is one of the more popular
products. The British consumer eats an
average of 16 cans annually, for a sales
total of $1.5 billion a year. The company
realizes that the consumers in other
countries are unlikely to rush to stores
for beans pizzas, but the idea could
lead to the creation of products more
suited to other cultures and markets.
What are the advantages [4] of a
global brand name? One main
advantage is economy of scale in
preparing standard packaging, labels,
promotions, and advertising. Advertising
economies
result
from
using
standardized ads and the fact that
media coverage increasingly overlaps
between countries. Another advantage
is that sales may increase because
travellers will see their favourite brands
advertised and distributed in other
markets. Third, trade channels are more
ready to accept a global brand that has
been advertised in their market. Finally,
a worldwide recognized brand name is
a power itself, especially when the
country-of-origin associations are highly
respected. Japanese companies have
developed a global reputation for high
technology and quality and their names
on products give buyers instant
confidence that they are getting good
value.
But there are also costs and risks
to global branding. A single brand name
may not be as appealing as locally
chosen names. If the company replaces
a well-regarded local name with a global
name, the changeover cost can be
substantial. The company will have to
inform millions of people that its brand
still exists but under another name.
Even the company’s local managers
may resist the name change ordered
from
headquarters.
The
overcentralization of brand planning and
programming may dissipate local
creativity that might have produced
even better ideas for marketing the
product.
Even when a company has
promoted its global brand name
worldwide, it is difficult to standardize its
brand associations in all countries.
Heineken beer, for example, is viewed
as a high-quality beer in Canada, as a
grocery beer in the United Kingdom,
and as a cheap beer in Belgium. Cheez
Whiz, a Kraft General Foods Cheese
spread, is viewed as a tasty snack
spread in Canada and as a coffee
flavourer in Puerto Rico.
Ideally a global brand gives a
company a uniform worldwide image
that enhance efficiency and cost
savings
when
introducing
other
products associated with the brand
name, but not all companies believe a
single global approach is the best.
85
Indeed, we know that the same brand
does not necessarily hold the same
meanings in different countries. In
addition to companies such as Kodak,
Kellogg, Coca-Cola, Caterpillar, and
Levi’s that use the same brands
worldwide, other multinationals such as
Nestlé, Mars, Procter&Gamble, and
Gillette have some brands that are
promoted worldwide and other that are
country specific. Among companies that
have faced the question of whether or
not to make all their brands global, not
all have followed the same path. For
example, despite BMW’s worldwide
successes, only recently did the
company create its first global brands
position.
Companies
with
successful
country-specific brand names must
balance the benefits of a global brand
against the risk of losing the benefits of
an established brand. And some brand
names simply do not translate. The cost
of reestablishing the same level of
brand preference and market share for
the global brand that the local brand
must be offset against the long-term
cost savings and benefits of having only
one name worldwide. In those markets
where the global brand is unknown,
many companies are buying local
brands of products that consumers want
and revamping, repacking, and finally
relaunched them with a new image.
Unilever purchased a local brand of
washing powder, Biopan, that had a 9
percent share of the market in Hungary;
after relaunching, market share rose to
about 25 percent.
When Mars, a U.S. company that
includes candy and pet food among its
product lines, adopted a global strategy,
it brought all its products under a global
brand even those with strong local
brand names. In Britain, the largest
candy market in Europe, M&Ms were
sold as Treets and Snickers candy was
sold under the name Marathon to avoid
association with knickers, the British
word for women’s underpants. To bring
the two candy products under the global
86
umbrella, Mars returned the candies to
their original names. The pet food
division adopted Whiskas and Sheba for
cat foods and Pedigree for dog food as
the global name replacing KalKan. To
support this global division that account
for over $4 billion annually, Mars also
developed a website for the pet food
brands. The site functions as a “global
infrastructure” that can be customized
locally by any Pedigree Petfoods branch
worldwide. For instance, Pedigree
offices can localize languages and
information on subjects as veterinarians
and cat-owner gatherings.
National Brands
A different strategy is followed by
the Nestlé Company, which has a stable
of global and country-specific national
brands in its product line. The Nestlé
name itself is promoted globally, but its
global brand expansion strategy is twopronged. In some markets it acquires
well-established national brands when it
can and builds on their strengths – there
are 7,000 local brands in its family of
brands. In other markets where there
are no strong brands to be local, people
to be regional, and technology to be
global. It does, however, own some of
the world’s largest global brands; Nestlé
is but one.
Unilever is another company that
follows a similar strategy of a mix of
national and global brands. In Poland,
Unilever introduced its Omo brand
detergent (sold
in
many other
countries), but it also purchased a local
brand, Pollena 2000. Despite a strong
introduction of two competing brands,
Omo by Unilever and Ariel by
Procter&Gamble, a refurbished Pollena
2000 had the largest market share a
year later. Unilever’s explanation was
that East European consumers are
leery of new brands; they want brands
that are affordable and in keeping with
their own tastes and values. Pollena
2000 is successful not just because it is
cheaper but because it chimes with
local values.
Neither Canada nor Australia is
represented in the top 100 global
brands, as their branding strategy is
predominately national. They do not
have well-developed consumer goods
and services sectors, as in the U.S.,
and most of their companies cater to
local consumer markets. Of the top ten
brands in Australia, only two are in
consumer products (Woolworth’s, in
food, and Billabong, in casual clothing).
Five of the remaining eight brands are
from firms in the financial services
sector. Commonwealth Bank, Westpac,
ANZ, National Australia Bank, and St.
George’s Bank. The other three brands
are Testra, in telecommunications,
Australian Post, government services,
and Ansell, health care supply.
Large and small companies must
also consider rises in nationalistic pride
that occur in some countries and their
impact on brands. In India, for example,
Unilever considers it critical that its
brands, such as Surf detergent and Lux
and Lifebuoy soaps, are viewed as
Indian Brands. Just as it’s the case with
products, the answer to the question of
when to go global with a brand is, “It
depends – the market dictates”.
In the past, most companies
established new brand names that
made sense in their country [4]. When
they later attempted to introduce their
brand into foreign markets, some
companies discovered that the existing
brand name was not appropriate. The
name was difficult to pronounce,
offensive, funny, meaningless, or
already co-opted by someone else. The
company would be forced to develop a
new brand name for the same product
when it was introduced in other
countries. P&G had to create a different
brand name for its Pert Plus shampoo
when it introduced it in Japan (called
Rejoy) and the United Kingdom (called
Vidal Sassoon). Using different brand
names for the same product comes at a
high cost, however. The company has
to prepare different labels, packaging,
and advertising.
The trend today is toward a
“borderless world.” In Europe, custom
duties, border delays, and other
impediments to inter-European trade
are rapidly diminishing. Companies are
eager to launch new brands as
Eurobrands.
P&G
launched
its
detergent Ariel as a Eurobrand. Mars
has replaced its Treets and Bonitas
brands names with M&M’s worldwide
and changed its third largest United
Kingdom brand – Marathon – to the
Snikers name that it uses in the United
States. Unilever is now seeking to
market its various detergent brands –
All, Omo, Persil, Presto, Skip, and Via –
under fewer labels.
Clearly some brand names have
gained worldwide acceptance. Such
companies as Kodak, McDonald’s, IBM,
Sony, and Coca-Cola would not think of
using different brand names as they
enter additional countries.
Conclusions
Branding is a major issue in
product strategy. Branding is expensive
and time-consuming, and can make or
broke a product. The most valuable
brands have a brand equity that is
considered an important company
asset. The best brand name suggest
something about the product’s benefits;
suggest products qualities; are easy to
pronounce, recognize, and remember;
are distinctive; and do not carry
negative meanings or connotations in
other countries or languages.
To
growing
globalization
of
markets
that
gives
rise
to
standardization must be balanced with
the continuing need to assess all
markets for those differences that might
require adaptation for successful
acceptance. The premise that global
communications and other worldwide
socializing
forces
have
fostered
homogenization of tastes, needs, and
values in a significant sector of the
population across all cultures is difficult
to deny. However, more than one
authority notes that in spite of the forces
87
of homogenization, consumers also see
the world of global symbols, company
images, and product choice through the
lens of their own local culture and its
stage of development and market
sophistication. Each brand must be
viewed in light of how it is perceived by
each culture with which it comes in
contact. What is acceptable and
comfortable within one group may be
radically new and resisted within others,
depending on the experiences and
perceptions of each group.
A brand is essentially a seller’s
promise to consistently deliver a specific
set of features, benefits, and services to
the buyers. The best brands convey a
warranty of quality. But a brand is even
a more complex symbol. A strong brand
reassures the customer; it gives
confidence in terms of the quality and
satisfaction that can be anticipated from
buying it. The concept of branding can
fit in very well with the idea of the
corporate
image.
Increasingly,
corporate and brand image is being
recognized as a major influence on
sales.
A successful brand is the most
valuable resource a company has. The
brand name encompasses the years of
advertising, good will, quality evaluation,
product experience, and other beneficial
attributes the market associates with the
product. Brand image is at the very core
of business identity and strategy.
A global brand is the worldwide
use of a name, term, sign, symbol
(visual and/or auditory), design, or
combination thereof intended to identify
goods or services of one seller and to
differentiate them from those of
competitors. Even when a company has
promoted its global brand name
worldwide, it is difficult to standardize its
brand associations in all countries.
Sometimes, companies are forced
to develop a new brand name for the
same product when it is introduced in
other countries, a strategy of mixing
national and global brands. Companies
with successful country-specific brand
names must balance the benefits of a
global brand against the risk of losing
the benefits of an established brand.
The major inference to draw from
all of this is that wise companies will
globalize those elements that make or
save substantial sums of money and
localize
those
that
competitive
positioning and success require.
REFERENCES
[1] Cateora, Ph., Graham, J., Bruning, E., International Marketing,
Ryerson, Toronto, 2006.
McGraw-Hill
[2] Cheverton, P., Understanding Brands, Kogan, London, 2006.
[3] Christopher, M., McDonald, M., Marketing – an Introduction, Pan Books,
London, 1991.
[4] Kotler, Ph., Turner, R., Marketing Management – Analysis, Planning,
Implementation and Control, Prentice Hall, Ontario, 1998.
[5] Lendrevie, L., Lévy, J., Lindon, D., Mercator – théorie et pratique du marketing,
Dunod, Paris, 2006.
[6] Westphalen, M-H., Comunicator – le guide de la communication d’entreprise,
Dunod, Paris, 2004.
88
Journal of Retailing 97 (1, 2021) 99–115
The Future of Private Labels: Towards a Smart Private Label Strategy
Katrijn Gielens a,1 , Yu Ma b,1 , Aidin Namin c,1 , Raj Sethuraman d,∗,1 , Ronn J. Smith e,1 ,
Robert C. Bachtel f,1 , Suzanne Jervis g,1
a University of North Carolina at Chapel Hill, United States
b McGill University, United States
c Loyola Marymount University, United States
d Southern Methodist University, United States
e University of Wyoming, United States
f Information Resources, Inc., United States
g Sam’s Club, United States
Available online 3 January 2021
Abstract
Modern day store brands (SB) or private labels (PL), now also popularly called private brands, are brands generally owned and marketed by
retailers. They have been active on the market for about 70 years. Over this time span, these brands have evolved from generic, cheap, low-quality
economy or budget private labels to lower-priced-than-national brand but acceptable-quality value or standard private labels. Over time, retailers
extended the value proposition to the consumer segment seeking higher quality by offering premium private labels. This strategy, called the tieredprivate label, comprises offering economy PL to the price-sensitive but not quality sensitive consumers, standard PL to mainstream consumers
seeking acceptable quality at lower prices, and premium PL to the quality-sensitive segment seeking value. Over the last 40 years (1980–2020),
these versions of private labels have witnessed substantial growth around the world, though the growth is said to be tapering in recent times.
As retailers chart the future strategy for their private labels in 2020 and beyond, a pertinent question they face is: Should they continue to offer
value or even tiered PL with the same formula that brought them success in the past, or should they morph and adopt new strategies in keeping with
current market trends? We support adopting a new strategy that we call the smart PL strategy. The value PL strategy and its manifestation as the
tiered PL strategy cater to different consumer segments but focus primarily on price and quality as attributes of choice. In the current marketplace,
consumers care not only about price and quality, but also about sustainability, ethics, social responsibility, image, so forth, perhaps more so than
earlier generations. They are also more tech-savvy in using digital tools for search and purchase. Retailers, on their part, are now endowed with
rich, extensive data that they can tap into to understand customers’ diverse needs, and they are able to harness technology for developing the right
product and communication. Thus, the smart PL strategy is a strategy by which retailers can leverage data and technology to market private labels
that meet diverse customer needs and achieve greater retail differentiation, store loyalty, margins, and profits. This thought piece provides a road
map for developing such a smart PL strategy and directions for future research.
© 2020 New York University. Published by Elsevier Inc. All rights reserved.
Keywords: Store brands; Private labels; Private brands; Retail strategy
∗ Corresponding author.
E-mail address: rsethura@smu.edu (R. Sethuraman).
1 All academic authors – Gielens, Ma, Namin, Sethuraman, and Smith,
contributed equally to this manuscript and their authorship is presented alphabetically. Bachtel and Jervis provided excellent, insightful comments and
inputs from a practitioner perspective. This manuscript benefited greatly from
ideas generated during the joint Academic – Practitioner Conference on ReStrategizing Retailing organized by the Journal of Retailing and University of
Arkansas in October 2019. Our special thanks to Buster Arnwine for his valuable comments at the conference. The paper was also improved significantly
thanks to comments made by the Special Issue editors Dinesh Gauri and Dhruv
Grewal, and two anonymous reviewers.
According to a recent report on private labels by Information
Resources, Inc. (IRI), store brands or private labels (PL) in the
grocery market in the USA grew by 5.8% in 2017, four times
faster than national brands (Vimari 2018). PL shares for grocery products in the USA are at a near all-time high of 18.5%
in dollar share and 22.3% in unit share. In a 2019 nationwide
survey conducted for the Private Label Manufacturers Association (PLMA Report 2020), two-thirds of the respondents agreed
that the PL products are just as good as, if not better than, the
national brand version of the same product. PL share in Europe
is even higher, reaching nearly 40% in some countries, though
marketers believe PL shares may be plateauing. PLs are also
https://doi.org/10.1016/j.jretai.2020.10.007
0022-4359/© 2020 New York University. Published by Elsevier Inc. All rights reserved.
K. Gielens et al.
beginning to take root in emerging economies in Asia and Latin
America (Nielsen Report 2019a).
Although PLs have made substantial inroads in most consumer markets, the consensus until recently was that they were
still the “poor cousins” of national brands (NBs) in consumer
packaged goods (Pauwels and Srinivasan 2009). PLs were typically positioned as offering good quality at an attractive price.
They were thought of as acceptable alternatives rather than
desirable or destination brands that consumers would use conspicuously at a party or the dining table. While NBs led the
way with new product introductions, PLs followed them once
the coast was clear. In essence, PLs did not generally possess
the status, imagery, or market power associated with a national
brand.
Nevertheless, retailers realized that by adding more
premium-oriented PLs, they could penetrate the high-end,
more quality-sensitive customer segments simultaneously and
improve overall store image (Martos-Partal, González-Benito,
and Fustinoni-Venturini 2015; Keller, Geyskens, and Dekimpe
2020). Costco’s Kirkland Signature premium PL, for example,
generated more than $39 billion in sales in 2018, making it
one of the world’s biggest brand names in consumer products
(Mullen 2019) while offering higher dollar margins (Ter Braak
et al. 2013). Retailers like Walmart offer store brands for different price-quality tiers under the umbrella name Great Value
for those who want acceptable quality at low prices and Sam’s
Choice for premium consumers. In this tiered-PL strategy, one
PL is offered for each price-quality segment.
Looking to the future, retailers have two options for crafting their PL strategy. They can continue with the status quo by
sticking exclusively to the price-quality value proposition that
they have used all along and cater to just the mainstream consumers by offering a value brand or to other niche segments
with tiered PL. Alternately, they can facilitate the emergence of
a new wave of private labels that are more consistent with current
market trends while not abandoning their original value proposition. We recommend the latter strategy, which we call smart
PL strategy. Specifically, the smart PL strategy is a strategy by
which retailers can leverage data and technology to market private labels that meet diverse customer needs and achieve greater
retail differentiation, store loyalty, margins, and profits. The key
drivers of the need for change are:
1 Changing customer attitude and behavior: The attitudes, preferences, choice process, and behavior of a new generation of
consumers that we have come to call Millennials, GenXers,
and Gen Z’s have changed dramatically (Namin et al. 2020).
2 Increased retail competition: Retail competition has increased
significantly with the entry of e-tailers and the expansion
of traditional retailers into multi-channel retailing. Savvy
retailers are beginning to recognize that the diversity and competitive forces in the marketplace require PLs that meet needs
that go beyond price and quality to differentiate their store
and increase loyalty (Keller, Geyskens, and Dekimpe 2020).
3 Rapid technological advancement: In the past, retailers typically did not have the means or capabilities to act upon these
consumer needs. However, a wide range of technology is now
Journal of Retailing 97 (1, 2021) 99–115
available to retailers that can enable retailers to offer smart
PL supported by sophisticated digital marketing campaigns
(Roggeveen and Sethuraman 2020b).
4 Availability of data: Technology also enables retailers to
collect data that are timely and rich, as well as providing
modeling, machine learning, and artificial intelligence tools
to analyze the data and come up with optimal decisions with
respect to target segment, product offering, and marketing
mix for their PL.
In essence, Stern (1966), over 50 years ago in his pioneering
article titled, The New World of Private Labels, heralded the birth
of what we now call standard or value private labels replacing
the earlier generic, economy version. In this paper, we discuss
the emergence of a new wave of private labels called smart PL,
which:
1 are multi-faceted, multi-tiered, multi-segmented, and imageoriented,
2 rely on new product (co-)development, as well as in-store and
digital communication,
3 adopt dynamic and even individualized pricing,
4 are enabled and supported by information technology, and
5 may even be offered outside the confines of their own store
environments.
Reputed, forward-looking retailers are already adapting to
these changes with product innovation, multi-tier brands, and
sophisticated marketing of their private labels. For example,
Target and Walmart have launched more than 25 new private
brands since 2016. Amazon and other online retailers also are
trying to leverage the surging differentiation opportunity in private brands by collecting a treasure trove of data. At the same
time, retailers like Sam’s Club are consolidating their private
label lines to a singular, umbrella “Members’ Mark” label while
engaging customers and innovating new PL products. By ‘opening the umbrella,’ retailers hope to revitalize their PLs and create
a more loyal following (Keller, Geyskens, and Dekimpe 2020).
In this paper, we discuss the drivers of the new wave of PL
and the characteristics of the smart PL that arise from it. Fig. 1
takes you through the PL journey and provides a framework for
our study. First, to provide comparison and contrast, we briefly
elucidate the two prior strategies – economy and value PL strategies – and their offshoot called the premium PL strategy. Then
we discuss in detail the futuristic PL strategy that we call the
smart PL – its drivers and strategy characteristics. Finally, we
provide several directions and questions for future research.
Economy PL Strategy
Modern-day PLs were introduced in the mid-20th century
in some limited items like tea by large supermarkets such as
the Atlantic & Pacific Company (A&P), primarily as economy
brands to serve as lower-priced, lower-but acceptable-quality
alternatives to NBs. Marketing of economy PLs consisted primarily of the following strategies.
100
K. Gielens et al.
Journal of Retailing 97 (1, 2021) 99–115
Fig. 1. The private label journey – conceptual framework and topics covered.
Product Strategy
Usually, economy PLs are offered in categories that are highly
commoditized with little quality differentiation (e.g., salt), or
where branded items are prohibitively expensive for a segment of
consumers (e.g., cereals, chips, nonprescription drugs). In addition, such items tend to be high-volume, high-turnover items and
cater to a non-competing price-sensitive segment (Sethuraman
2018). Packaging is kept minimal – often simple: black and
white, or 4-color.
Price Strategy
Economy brands call for economy pricing. The maxim is “the
lower the better,” subject to some minimum acceptable quality
levels. Typically, these economy PLs are priced about 50%–75%
lower than the NBs (Stern 1966).
Promotion Strategy
Economy PLs, almost by definition, do not incur any marketing or promotional spending. Retailers seldom resort to price
discounts on these items nor do they actively advertise the PLs
in store or through TV or feature advertising. At the store, PLs
are often placed on separate shelves or aisles distinct from where
NBs are displayed.
Birth of Value PL
The existence of economy PLs is perhaps a happy situation
for the NB manufacturers, price-sensitive consumers, and even
public policy makers. However, offering just a cheap PL is not an
appealing proposition to mainstream consumers or to retailers.
Mainstream consumers feel that they must compromise substantially on the lower quality of economy PLs to obtain a lower
price. Retailers feel by focusing exclusively on economy PLs,
they forgo an opportunity to make more money from mainstream
consumers. This lacunae from both demand and supply sides
gave rise to value private labels (Stern 1966).
Value PL Strategy
In this strategy, retailers offered a comparable quality private label, often equal in quality or even better than that of
national brand. But the price of the PL is always lower than
that of the competing national brand. Since perceived value for
a consumer is what you get (product quality) for what you pay
(product price), it follows that the value proposition was the primary selling point for the private labels, hence they are called
value PLs. This value proposition of PLs has been so popular
that the brands have also come to be known as standard PL. Due
to their popularity, retailers have devoted substantial attention
to the marketing of value PLs, and academics have conducted
extensive research on the marketing strategy of value PLs (see
Sethuraman and Gielens (2014) for a review). These strategies
are briefly described below.
Product Strategy
Conducive categories
In the economy strategy, PLs had a dominant presence mainly
in undifferentiated commodity products and in products with
high penetration and purchase frequency such as milk and bread.
In the value strategy, PLs expanded to categories where a retailer
can offer acceptable-quality alternatives at a lower price, either
to enhance store loyalty or gain better negotiating position with
the NB manufacturer, resulting in higher retailer profits. Such
products included health and beauty, bakery, and snack items
(Fitzell, 1992). Academics have also conducted extensive analytical, empirical, and managerial research to identify product
characteristics that are conducive for value PL introduction to
gain sales and profits (e.g., Sethuraman 1992; Hoch and Banerjee
1993; Raju, Sethuraman, and Dhar 1995; Sethuraman 2009).
These characteristics are: (i) high price substitutability between
101
K. Gielens et al.
NB and PL; (ii) low advertising sensitivity; (iii) high category
sales; (iv) high PL margin.
Product positioning and packaging
In economy PL, simple, low-end positioning with black-andwhite packaging and placement on shelves separate from the
national brands was the general practice. In value PL, the focus
is on competing head-on with NBs. Therefore, to convince consumers that their brands offer good value, retailers position their
value PL close to the NB in at least four ways: (i) increasing the
quality of store brand and reducing the perceived quality gap
between national brand and store brand, (ii) imitating national
brand packaging, (iii) placing the store brand on the shelf right
next to the national brand, and (iv) using shelf talkers with “compare and save” or similar slogans. Academic researchers have
added nuanced insights to this general strategy of close PL positioning also called copycat positioning. Sayman, Hoch, and Raju
(2002) show that if there are two NBs, it is better to position the
PL close to one of them than to stay in the middle. If the NBs
have different market shares, then it is profitable for the PL to
go after the NB with the larger share. In fact, the larger the share
of the NB, the more profitable it is for the PL to mimic the NB.
In support of their analytical results, Sayman, Hoch, and Raju
(2002) find that when PLs do target a particular NB, the targeted
brand is the leading brand in 80% of the cases. However, PLs
target an NB in only about 30% of the categories. The finding suggests that positioning the PL as a copycat to the NB is
not always profitable. Sethuraman (2004) suggests that copycat positioning can decrease a retailer’s category profit if the
NB manufacturer can significantly expand the category demand
through non-price marketing activities such as advertising. Choi
and Coughlan (2006) introduce the notion of feature (attribute)
differentiation as opposed to quality differentiation when analyzing the competition between NB and PL. They show that it
is more profitable for the retailer to differentiate its PL by providing an additional feature to consumers than by competing
head-on with NBs through copycat positioning.
Pricing Strategy
The “lower-the-better” approach to pricing of economy PLs
gave way to “lower-but-optimal” pricing to reflect both quality
and value. Practitioners and academics suggest that the price differential between NB and PL should be between a lower limit
(floor) and an upper limit (ceiling). The lower limit is set by
the Just Noticeable Difference (JND) concept, which says that
consumers would notice a price differential only if it is above a
threshold value. In the context of NB-PL competition, according
to Donegan (1989), that threshold is about fifteen percent. That
is, consumers would notice and consider buying a value PL only
if the price of PL is at least fifteen percent lower than the price of
NB. At the same time, retailers cannot charge too low a price (set
too high a price differential with NB) as in economy PL because
of unfavorable quality imputation. If the prices are too low, consumers might perceive the PL to be a cheap, low-quality brand
and refrain from purchasing it (Sethuraman 1992). Setting a low
price may also hurt PL margins and retailers’ category profits
Journal of Retailing 97 (1, 2021) 99–115
(Pauwels and Srinivasan 2009). Hoch and Lodish (1998), in a
comprehensive analysis of over-the-counter medicines, suggest
that the maximum profitable NB-PL price differential may be
around 50%. In other words, academic and practitioner insights
suggest that the NB-PL price differential to be between 15% and
50%.
Promotion Strategy
In the case of economy PL, the simple, standing mantra was
“no promotion is optimal promotion.” In essence, economy PLs
seldom engaged in any kind of price or non-price promotion.
In theory, some of those recommendations carried over to value
PLs as well.
With respect to price discounts, analytical modelers such
as Rao (1991) have concluded that PLs should not price promote in equilibrium. The logic is as follows. The incentive
for value PL to price promote stems from having to charge
a regular price to cater to its loyal customer base and occasionally make forays into the switcher segment through price
cuts. Because PLs are primarily viewed as brands with little
loyalty and which cater mainly to the price-/value-sensitive
(switcher) segment, this incentive does not arise. Supporting
this viewpoint, Blattberg and Wisniewski (1989) proposed the
asymmetric price-tier effect theory, which states that when the
higher-price-tier NBs discount, they take sales away from lowerprice-tier PLs, but not vice-versa. This theory predicts that
value PLs have less incentive to discount. There has been some
counter-evidence to these results that shows that PLs do engage
in frequent discounting at least in select product categories where
the percent of value PL sold on discount is comparable to that of
NBs (Nielsen Report 2019b). Nevertheless, the discount depth
is generally lower than that of NBs. That is, value PL discounts
are shallower.
With respect to non-price promotion, PLs generally do not
advertise through traditional media channels. The promotion
options for these brands are primarly in-store non-price promotions such as features and displays. NB displays and features
can affect PL share, and vice-versa (Cotterill, Putsis, and Dhar
2000). Value PL displays and features are prevalent especially in
categories where value PLs can attract store traffic. In addition,
managers can increase familiarity with value PLs by inducing
trial through free samples, quality guarantee, and a liberal return
policy (Sethuraman 2006).
Extending PL Portfolio with Premium PL
With growing awareness of the profit potential of higherpriced PLs through enhancing store image (Akcura, Sinapuelas,
and Wang 2019) and generating store loyalty (Nies and Natter
2012), retailers have started adding premium PLs to their portfolio. Essentially, the premium PL can be deemed as an active
strategy on the part of the retailer to increase their share and profitability of their PL portfolio (Keller, Geyskens, and Dekimpe
2020). The premium PLs are targeted at less price-sensitive
consumer segments with scope for gaining higher margins (Ter
Braak et al. 2013). They sell at prices comparable to, or even
102
K. Gielens et al.
Journal of Retailing 97 (1, 2021) 99–115
above, those of standard NBs but below that of premium (higherpriced) NBs (Pauwels and Srinivasan 2009). Premium PLs are
mainly introduced in variety-enhancing or fill-in categories with
higher functional but lower social risk and that are characterized by longer interpurchase times and lower price sensitivity
(Ter Braak et al. 2013). With this positioning, premium PLs
do not seem to hurt high-margin premium NBs, but do attract
share from lower priced items, so overall category profitability
increases (Geyskens, Gielens, and Gijsbrechts 2010).
The market is replete with many examples of successful
launches of premium PLs. Kroger’s Private Selection premium
PL, for example, was purchased by more than 30 million households, and grew at over seven percent in 2019 (Aylwad 2019).
BJ’s Wholesale Club has introduced three new spirits under
their brand, Albertsons rolled out Signature Reserve vodka and
whiskies, and discounter Aldis introduced a premium gin, showing that premium PLs can thrive in niche subcategories (Ochwat
2020).
From a strategy viewpoint, the growing width of PL portfolios poses some interesting branding challenges, specifically
with respect to umbrella branding. Premium PLs are being added
to already existing economy and standard PLs to form tiered private labels catering to consumers with differing price and quality
sensitivities. Should all three PL types be sold under a common
brand name associated with the retailer (umbrella branding), or
should each type of PL have a different name (distinct branding)? Target, for one, believes in the former umbrella branding
strategy, so it is rolling out all its PL under the Good & Gather
brand and phasing out other PL names. Archer Farms, Simply
Balanced, and Market Pantry retailers are also adopting similar strategy (Kumar 2019). Whereas significant economies of
scale and scope could be anticipated of such an umbrella strategy, it is not without risk. Indeed, with a common brand name,
economy PLs may end up cannibalizing the higher-priced (and
higher-margin) standard and premium lines as well as hurting
their brand image (Geyskens, Gielens, and Gijsbrechts 2010).
Not surprisingly, economy PLs more often feature an unrelated
brand name, whereas value and premium lines tend to share
a common, store-banner name. We refer to Keller, Geyskens,
and Dekimpe (2020) for a recent and in-depth discussion on the
main strategies used to support the premium PL and umbrella
branding.
Overall, with the emergence of premium PL lines and more
diversified PL portfolios, retailers learned that PLs can be used to
serve multiple consumer segments, in more product categories,
and at higher price points. This experience and knowledge combined with changing marketplace behavior paves the way for the
emergence of smart PL strategy.
Smart PL Strategy – Drivers
When moving from value PL, premium PL, and tiered-PLs
to smart PLs, two questions arise: (i) Should a PL aspire to
be another NB? and (ii) Even if it wants to, does the retailer
have the resources or marketing acumen to make that happen?
As to the first question, we believe there are many consumer
and competitor transformations that are occurring in the mar-
ketplace, enabled by technology, which suggest that PLs must
evolve to keep pace with those changes. At the same time, the
smart PL strategy should continue to adhere to the retailer’s
core value proposition that has made them successful, instead of
becoming another NB. As to the second question, going beyond
value proposition and gaining status as a brand may require
substantial investment in advertising, promotion, and R&D that
are typically the forte of the NBs and well beyond retailers’
budgets. How do retailers, with limited budgets, enhance the status of their brands without impairing their value proposition, as
well as leverage new technologies and behavioral changes? We
describe four types of factors that drive smart PLs: (i) Consumer,
ii) Competition, (iii) Technology, and (iv) Data drivers, and we
then discuss the marketing mix strategies that are appropriate
for those smart PLs along with several real examples.
Consumer Drivers
Consumer fragmentation
Retailers have primarily adopted the one-size-fits-all
approach when individually marketing their economy, value,
and premium PLs to their respective segments to maximize
economies of scale and scope and minimize costs. Even when
they followed the multi-tier PL strategy of offering all three PL
versions at the same time, the focus was primarily on consumers’
tradeoff between price and quality as the core criteria for assessing value. But consumers in the current market are becoming
more fragmented. New generations of consumers (called Gen
Z’s) are entering the marketplace and older consumers (Gen X’s
and Millennials) are practicing new norms. These consumers are
reformulating their own expectations of what value truly means.
Gen Z consumers tend to be less brand loyal and are more
inclined to buy the product that best suits their needs rather
than be influenced or dictated by the brand name (Sharma
2019). Gen Z shoppers also care more about whether a product aligns with their belief systems than previous generations.
As part of their more holistic approach to life, these shoppers
are more likely to engage in responsible purchasing and conscious consumption. Concepts such as inclusivity, transparency,
environmental friendliness, sustainability, ethical practices, and
fair-trade goods resonate with this consumer segment.
Many demographic and behavioral changes also are happening with respect to older consumers in the world, including Gen
X’s, Millennials, and Baby Boomers, which may impact consumer grocery shopping choices (Namin and Dehdashti 2019).
Many of these consumers are growing older and less wealthy.
The big-middle is shrinking, with the rich getting richer and poor
getting poorer. People live in smaller households, both in terms
of area and family size, and have restricted mobility. In the future,
these older and poorer consumers will be forced to refocus on
the basics of life, with health and convenience as their main priorities. As such, their need for convenience and proximity may
lead to further boosts in online ordering, even in the grocery
space, particularly accelerated by the present COVID-19 crisis. This rise in online shopping may once again fundamentally
change consumers’ expectations with respect to private brands as
ease of navigation (through search engines and personalized fil103
K. Gielens et al.
ters), individual-tailored suggestions (through recommendation
systems), and easy price comparisons (through comparison algorithms) will increase the need for more fine-grained PL portfolios
at multiple price points.
In sum, as the consumer base fragments, more retailers
will move out of the mid-market price-tier space to sharpen
their private branding positioning. As consumer attitudes toward
spending are shifting beyond price to include multiple dimensions of value, such as transparency, health, and alignment with
personal beliefs, retailers need to address these attitudes by
rebalancing their PL portfolios beyond price tiers.
Changing mindset
In general, shoppers no longer want just acceptable quality
products at affordable prices. They desire products that are both
affordable and experiential, affordable and sustainable, affordable and health conscious, while requiring convenience at the
same time. Retailers will have to address this increasingly complex array of needs with a broader set of private brand products
and lines. Whereas many retailers have built experience with
PL portfolios by extending their SB program into new, high
price-quality tiers (Amaldoss, Desai, and Shin 2015; Geyskens,
Gielens, and Gijsbrechts 2010), the question arises whether this
experience translates well to portfolios that venture into new
benefits and claims outside the pure price-quality spectrum. Can
private brands address these needs in an authentic, transparent,
and trustworthy manner, while pursuing commercial objectives
at the same time? More insights are needed to see to what extent
these lines can be added to the PL portfolio while maintaining,
and even improving, both private brand and category profitability.
Competition Drivers
Whereas traditionally the main competitor of the PL was the
NB, available on the retailer’ shelves next to the PL, new value
propositions offered online as well as in the brick-and-mortar
arena are further reshaping consumer mindsets regarding value.
Online, new direct-to-consumer (D2C) initiatives are breaking the price-quality boundaries by systematically cutting out
middlemen. In the physical world, hard discount retailers are
also reshaping consumers’ beliefs on the price-quality trade-off.
These evolutions have implications for private branding.
Journal of Retailing 97 (1, 2021) 99–115
prices (Kahn, Inman, and Verhoef 2018). Moreover, not only
are these de novo D2C models disrupting the traditional distinctions between brands and retailers, but they are also empowering
consumers to directly engage with the manufacturer-sellers, providing rich data for those sellers from their most loyal shoppers
that they can then exploit for future innovation and new product
development – a data advantage hitherto held by onsite retailers.
Not only do these new business models for retailers up the ante
in the quality department of their PL portfolios, they also force
retailers to work harder on assortment curation and own-label
development. To do so successfully will require retailers to build
capabilities in client engagement online, through social media
and data analytics.
Hard discount competitors
Hard discount (HD) retailers such as ALDI, WinCo, Trader
Joe’s, and even wholesale clubs like Costco and Sam’s Club, in
many ways aim at offering basic goods of daily need at the lowest
possible prices – up to 30%–50% below traditional retailers’
prices – while maintaining high-quality standards. PLs feature
prominently in the assortment. Around 90% of German grocer
Lidl’s SKUs are PL. The relative emphasis of PLs is the key
differentiator between these discounters and other deep-discount
retail stores, such as Dollar General and Dollar Tree. The former
has deep expertise in how their products are produced, who can
produce them, and what trade-offs they need to make. The large
revenues combined with their small number of SKUs mean that
the volume per SKU is very large. Aldi and Lidl, for example,
are the biggest sellers of PL grocery products worldwide. As
a result, they can drive out every cent of excess cost without
compromising on quality and can outcompete other retailers on
price (Steenkamp 2018).
The presence of HD competitors not only poses substantial
threats to NB manufacturers (Deleersnyder et al. 2007), but it
may also have significant implications for retailers who want to
transform their PLs into smart PLs. If a HD retailer truly manages
to offer quality store brands at such low prices unattainable by
regular retailer PLs, then the competitive scenario may limit
regular retailers’ ambitions to upgrade their PLs. The extant
literature has so far mainly investigated the implications of the
HD business model for NBs. Very little is known about how this
model affects PLs at regular mass retailers such as supermarkets.
Technology Driver
Digital D2C competitors
A wave of de novo companies is trying to build premium
brands at discount prices by cutting out intermediaries and going
straight to consumers digitally. Pop-up shops are also becoming a popular format to supplement an online-only experience
and alleviate the needs to maintain a physical store. This typically results in cheaper products for consumers and higher profit
margins for the company. As with PLs, these new digital and
pop-up retailer brands break the price-quality relationship, creating yet another layer of competition for private labels. An
eyewear brand, Warby Parker, for example, maneuvered around
the price-quality notion by establishing the brand as a trendy
alternative providing the same, if not higher, quality at good
Tools of technology can enable retailers to better support
their smart PL. Sethuraman and Parasuraman (2005) presented
a taxonomy of retail technology by classifying it as primarily cost-saving or service-enhancing, while also acknowledging
that cost-saving technologies can increase, decrease, or have
no effect on customer service, just as service-enhancing technologies can increase, decrease, or have no effect on product
costs or prices. Accordingly, those authors propose six types
of retail technologies and provide one example of each type
of technology including self-checkout, cross-docking, Radio
Frequency Identification – RFID. Even e-commerce was considered a new retail technology at the time of that study. In just
104
K. Gielens et al.
the last 20 years (2000–2020), growth in retail technology has
exploded. Online retail, webrooming, digital payment systems,
and mobile shopping have become the norm; additional, novel
options are growing in number and familiarity too. Technological developments in retail seem likely to accelerate in 2020
and beyond, involving expanded applications of artificial intelligence, machine learning, virtual reality, big data, and mobile
apps. These retail technologies can help customers navigate
through all facets of their journey. Roggeveen and Sethuraman
(2020b) call them customer-interfacing retail (CIR) technologies and list 40 types of retail technologies introduced in just the
last 20 years that can help at different stages of customer journey.
At each stage of the journey, the retailer can use the technology
both to understand what customers want and to recommend and
promote the appropriate PL to those consumers. For example, in
the search stage, they can work with social media platforms to
inform, promote, and sell their PL products, as Albertson’s grocery chain has done on Pinterest. In the purchase stage, Amazon
might program Alexa voice assistants to place orders for its own
branded products.
Data Driver
Tools of technology not only enable retailers to reach their
consumers more effectively with their PL offerings, but they
also help retailers to collect and analyze data to develop and
promote their PL. In the pre-purchase stage, retailers can assess
needs using web cookies, data mining, and algorithms, and
detect needs unmet by the current competitor offerings, and
develop new ideas that they can test and co-develop with their
existing customer base. They can also predict what customers
want and when they want it, using consumer search data. In an
example that went viral, Target predicted a teenage customer’s
pregnancy based on her browsing data and sent related products
and coupons to her home, even before she had shared the information with her family (Hill 2012). Furthermore, retailers can
gauge after-purchase satisfaction by analyzing returns and repeat
purchase patterns, allowing them to continuously fine tune and
tweak their PL offering. While all these data leveraging steps can
be implemented to promote national brands and private labels,
retailers may have a vested interest and unique capability and
opportunity to harness technology to drive the development and
marketing of their own smart PL.
The online retail giant Amazon offers a good case in point.
According to some reports by former employees, Amazon relies
not only on massive data involving third-party sales made
through its website but also snoops and uses information about
competitors’ sales to determine how to design and price its own
private-label products (Mattioli 2020). Even as Amazon denies
these allegations, the idea reflects the tremendous potential for
online platforms to draw from their vast data to understand
customers’ needs and design new and private-label products.
Thus, companies such as Amazon as well as Netflix and Airbnb
likely can predict, with a high degree of accuracy, what customers want, sometimes even before they realize they want it.
In summary, with the onset of new consumer engagement tools
and touchpoints, new communication and product development
Journal of Retailing 97 (1, 2021) 99–115
options have become available to retailers that may help them
support their private brands in a more fine-grained and targeted
way, without significantly increasing the cost of the PL program
or its marketing investment.
Smart PL Strategy – Implementation
In the case of smart PLs, target segments are wide-open by
design. On the one hand, retailers should not abandon their base
consumers who recognize the value of PL in terms of price and
quality and have patronized them in the past. On the other hand,
they should reach out to a wider group of consumers who earlier felt that the PLs did not match up to the NBs in terms of
imagery or novelty or authenticity or other experiential/societal
attributes. Furthermore, the multi-tiered nature of PL calls for
multi-tiered target segments where each type of PL can focus
on catering to a specific group of consumers, not necessarily
defined by their demographics, with less potential for cannibalization. Exactly what the nature of those multi-tiered PL, and
what their target segments should be in each category, are ripe
areas for future research.
Below, we discuss some future evolutions in product, pricing,
place, and promotion/communication strategies for smart private
labels that are highly inter-linked and leverage new technologies
and touchpoints.
Product Strategy
Conducive categories
What categories are conducive for PL introduction in the
smart PL strategy? In the economy strategy, PL participation was
primarily confined to commodity products with high volume,
purchase frequency, and penetration. In the value strategy, the
scope of PL participation expanded to a wider range of products
where retailers can offer an alternative that is credible and comparable in quality to NB, but at a lower price. The scope expands
even further in the smart PL strategy. In fact, any category is
fair game for introducing and even investing in smart PL so
long as it enhances retailer image, store traffic, and/or incremental profits. Concepts such as data-based thinking, new product
innovation niche strategy (Dargahi and Namin 2020), sustainable/social marketing, or product social preferences (Dargahi,
Namin, and Ketron 2020) that were once in the exclusive realm
of manufacturers have become strategies of choice for retailers
when introducing and marketing smart PLs. Private labels will
penetrate many more categories in this strategy. Such categories
include bio products, organics, health and beauty items, products with sustainable packaging, and even electronic goods such
as computers and tablets, as detailed below.
Innovation and new product development
Innovation is a key pillar of every successful brand. Until
recently, innovation was considered mainly the prerogative of
the national brand (Gielens 2012), but this is quickly changing. On the consumer electronics front, for example, Walmart
launched two types of computer tablets under its ONN private
label brand to provide a lower cost alternative to major play105
K. Gielens et al.
ers such as Apple and Samsung. Walmart has been expanding
its PL presence in key categories to gain greater control of its
product mix, increase its profit margin, and squeeze competitors. To do so, it is looking at gaps in the market, in this case
the sluggish tablet market that is a result of shoppers buying
tablets less frequently than smartphones. To that extent, retailers have the advantage of customer data from transactions and
loyalty programs, which gives them a powerful database they
can analyze to better understand customers, something most
consumer brands cannot match. In addition, retailers face lower
costs for marketing and distribution to end-consumers, and they
can leverage physical stores to give their PLs prominent shelf
and display space. To that extent, retailers like Carrefour, Tesco,
and Asda, for example, have used input from loyal consumers to
test, fine-tune, and choose the right products for their store brand
selection. Asda then went on to market the products as ‘Chosen
by You,’ thereby fully exploiting their consumer engagement
potential. In doing so, retailers hope to go beyond pure catching up strategies and create excitement for their private labels
by offering truly new solutions, benefits, and usage opportunities. These new ways of ‘crowdsourcing’ the customer base can
indeed offer viable inroads to successful innovation strategies
for retailers. More research is, however, needed in order to see
when and to what extent these crowdsource-like activities can
be implemented successfully in PL portfolios.
Still, successful innovation is and will always be a risky and
expensive strategy, regardless of whether it is undertaken by
a NB or a PL. Over 85% of all new products fail within the
first year (Emmer 2018). For retailers, such flops may have
widespread implications, as they may jeopardize the perceived
quality of their PLs in almost every aisle. Moreover, with the
increasing importance of speed with which social media penetrate the world, every mistake potentially becomes salient to
the entire world and goes beyond the current customer base. For
example, blogs like “I tried seven of the weirdest products at
Trader Joe’s so you don’t have to” dissing a PL popcorn may
have wider implications than simply displeasing some popcorn
shoppers at Trader Joe’s. This possibility begs the question of
whether retailers can build sustainable and profitable innovation strategies around their entire PL program, which covers all
aisles of the store. Retailers may have to prioritize and select
categories where they can be relatively more successful with
their innovation efforts. This strategy may require a balancing of
new product assessment, ease of implementation, and spillover
potential to other categories and the entire store. Indeed, creating a potentially successful new product may not be an easy feat
in less-commoditized categories, where PLs tend to be weaker
to begin with. More insights are, therefore, required to help
retailers successfully innovate outside the confines of typical
PL ‘stronghold’ categories.
Convenience/service infusion
In their search for more unique tailored PL offerings, retailers
are exploring how they can offer fully integrated convenience
solutions to their shoppers. As more and more firms are infusing
service in their product offering (Kowalkowski, Gebauer, and
Oliva 2017), retailers may indeed explore the options of com-
Journal of Retailing 97 (1, 2021) 99–115
bining retail convenience and service, both of which are fully
under their control. Specifically, as the multi-faceted nature of
retail convenience is changing, retailers are trying to infuse their
products with solutions to address unmet service needs. Amazon, for example, is bringing back home milk delivery with its
Happy Belly brand milk (Brown 2019). Happy Belly food products are available for regular delivery via Amazon’s website,
with its residential milk delivery trucks. Amazon is thus attempting to restore the old-fashioned convenience of in-home delivery
into its PL program for a daily used staple through its AmazonFresh delivery, though the service only operates in nine major
metropolitan areas. In a similar vein, Albertsons acquired Plated,
a subscription-based meal kit provider, and is turning it into a
private brand going beyond a dinner-based solution and into a
comprehensive in-house ‘culinary’ brand. In doing so, Albertson provides a broader scope of PL offerings, “solving customer
demands around convenience, lifestyle and cooking experience,
while adding yet another layer of interest to our in-store journey”
(Wilcox 2020).
Development through acquisition
To face the new online competitive threat head on, physical
retailers are increasingly mimicking branded manufacturers, and
they are on the lookout to acquire and integrate de novo directto-consumer (D2C) players into their PL programs or offer them
exclusively in the brick-and-mortar space. By stocking digitally
native or emerging brands, retailers aim to create more exclusive assortments and address new needs in the market. Having
these unique, buzz-creating products on the shelves can lead
to increased store traffic by tapping into a new digitally savvy
consumer segment, while generating a positive spill-over effect
when consumers also buy other products in the store (Gielens,
Gijsbrechts, and Dekimpe 2014). In the USA, Target is leading the way selling several formerly online-only brands such as
Casper, Quip, and Flamingo in its stores to create excitement. In
the UK, Sainsbury’s has a similar approach through its “Future
Brands” program, where it is nurturing emerging brands, such as
the online shaving brand Harry’s, through exclusive listings and
a dedicated discovery section across its website and stores. In the
Netherlands, Ahold’s Albert Heijn introduced a start-up shelf in
its stores to give new brands visibility on a rotating basis. These
D2C brands offer retailers a way to build appeal amongst digitally savvy millennials and Gen Z’s, locking in shoppers through
subscription models, without having to invest themselves in the
required digital engagement tools and data systems. At the same
time, these de novo brands benefit from the local brick and mortar
presence, which increases overall demand and efficiency (Bell,
Gallino, and Moreno 2015, 2018).
Taking it one step further, these digital natives can be integrated into the PL program and offered as part of the retailer’s
private brand assortment, as Target has done by offering an
extensive range of exclusive PL brands through partnerships or
acquisitions of digitally native brands such as Quip. Leading
pharmaceutical retailer CVS has also enhanced its PL offerings
and customer experience by entering into partnerships with third
parties through store-within-store formats and in-store health
clinics.
106
K. Gielens et al.
Still, questions arise as to whether moving from online direct
distribution to store-based indirect distribution will add to the
overall cost structure of these de novo brands and whether their
(lower) price levels can be maintained. A related question for
retailers is whether these de novo brands will stay true to their
promise, and to what extent they can be incorporated in the
retailers’ PL program. More insights are needed on how both
exclusivity arrangements and integration affect retailers, their
PL programs, and de novo D2C players.
National brand collaborations
In a similar vein, retailers may tie their smart PLs to established NBs. In the case of economy and value PLs, retailers’
“collaboration” with NB manufacturers was confined mainly to
dual branding – that is, NB manufacturers producing PLs to be
marketed by retailers.
In the case of smart PL, collaboration with NB manufacturers can take on many forms, with the goal of creating a
Win–Win–Win situation for the retailer, manufacturer, and consumer. One avenue for collaboration is product innovation.
Retailers can provide data and local market knowledge about
consumer behavior and emerging segments. NB manufacturers can leverage their product knowhow to tap into these new
segments for incremental gains. Recently, health and beauty
retailer AS Watson partnered with premium cosmetics brand
Shiseido to co-create an exclusive skincare range. These types
of collaborations allow both the retailer and the brand to share
marketing costs and cross-promotional activity, while allowing
both to reach new customer segments. Ter Braak et al. (2013)
showed that NB manufacturers are willing to work with retailers
in order to generate goodwill in the form of shelf space for their
NB products.
However, there is very little empirical research that looks at
these supply-side issues, mainly because the procurement strategy is generally a well-kept secret in the business. Needless
to say, more research is needed to explore how retailers and
traditional NB manufacturers or digital native manufacturers
collaborate; to what extent and to whom the benefits or costs may
accrue; whether these outcomes accrue symmetrically or not;
and whether these national brand-private label collaborations
may have a negative effect on consumer welfare.
Sustainable marketing
When tapping into consumers’ belief systems or stepping
onto the wider sustainability and social responsibility platform,
retailers, just like branded manufacturers, run the risk of being
accused of appropriation, green-washing, or monetizing shoppers’ social concerns and fears. Nevertheless, retailers may be
in a better position to incorporate new, less- tangible benefits
than brand manufacturers in their product offering. In 2019,
Target, for example, launched a new household essentials SB
designed with sustainability in mind, featuring more than 70
items that include bio-based/recycled materials or natural fibers.
Christina Hennington, Vice President and Chief Merchandising Officer, called the initiative a great example of how “we’re
listening—and responding—to the evolving needs of our guests
Journal of Retailing 97 (1, 2021) 99–115
in a way that’s uniquely Target [. . .] offer[ing] guests another
compelling reason to stock up at Target.”
Based on nearly 3,000 product introductions, Olsen,
Slotegraaf, and Chandukala (2014) find that stronger, more
established brands may have a harder time incorporating new
claims and benefits in their existing brand set. Whereas these
brands can rely on a set of strong brand associations supporting
the brand position, these same strong associations may prevent
the brand from incorporating new, unrelated associations and
beliefs successfully. Weaker brands, however, are not inhibited by these strong brand associations. Translating to private
branding, context, this finding implies that retailers may be in a
better position to incorporate new beliefs with respect to health,
sustainability, and other social concerns in their private brand
products. More research is required to test this proposition and
explore how it can be successfully implemented.
Positioning and packaging
Smart PLs should be positioned as “right-for-you” brands,
implying that the need for copycat “as-good-as-NB” positioning
with their counterpart, which was considered optimal in the value
phase, becomes less relevant.
Packaging has always been an important quality cue for any
brand and product (Underwood, Klein, and Burke 2001). PLs
have consistently (ab)used the quality transfer potential through
packaging by presenting their store brands with a design that
is similar to NBs, called imitation packaging (Van der Bel, van
Hoorn, and Pieters 2013). Moving toward smart PL implies moving away from copycatting strategies, that is, transition from
imitation packaging to exclusive packaging. This change not
only applies to the typical higher-price premium retailers, but
also to low-cost discounters, especially in the case of online
retailing. For example, in the case of Uniquely J, the jet.com
and Walmart-owned brand, substantial freedom was given to the
designer to create an online experience that goes way beyond
the physical shelf. The goal was to eliminate the tradeoffs consumers face as each product is intended to offer the options
of quality, style, and value. In a similar vein, German harddiscounter Lidl, in combination with a supporting social media
campaign, decided for its own brand peanut butter to feature
a customer’s picture as part of an autism awareness campaign.
In doing so, retailers are venturing into partially unknown territory. Whereas packaging was mainly used to indicate acceptable
quality at a low price point, packaging cues are now deliberately
moving away from these two PL strongholds. It remains to be
seen how private brands can pursue this strategy without jeopardizing their intended price positioning, which, especially for
low-cost retailers, may entail substantial risks.
Pricing Strategy
Managing the price gap has always been one of the marketing mix decisions tightly scrutinized by retailers when it comes
to their private labels. Maintaining a comfortable price gap was
believed to be essential to safeguard PL’s long-term viability
(Barsky et al. 2003). By using additional price-quality tier PLs
in the category, additional consumer segments could be served,
107
K. Gielens et al.
without diluting the value promise of the standard (most popular)
lines. Nevertheless, with the increasing importance of innovation and consumer engagement, maintaining those price gaps
may be a difficult task to accomplish. Not only may the cost
structure of the PL product increase and net margins decline, a
low price point may not easily generate the required trust needed
to convince consumers of the quality and innovative nature of
the private brands. An increase in price to make up for increased
costs may, however, leave room for new entrants in the market. Especially given that the physical shelf no longer constrains
new entrants who can reach potential consumers through D2C
or online third-party platforms, retailers may find themselves
vulnerable from a pricing standpoint. In sum, retailers must
avoid a catch-22 situation where higher price has the potential of PL reneging on its value promise and where lower price
is cost-prohibitive, through deft handling of innovation, product
development, cost control, and marketing of their smart PL.
Technology, however, adds a new layer of opportunity to the
pricing of smart PL. As omni-channel retailers can obtain and
combine online and offline information about what consumers
do and do not purchase after browsing, they can dynamically
personalize the price of their PL to steer shoppers toward their
brands. Taking it one step further, retailers like Safeway are
exploring how they can move towards individualized pricing,
whereby consumers in the same location at the same time can
be offered special prices. Although these practices and tools
present substantial avenues for micro-targeting and individualization, private brand positioning and managing the price gap
may become even more complex. How far can retailers allow
dynamic pricing to deviate from the intended price gap? Is personalized pricing always truly beneficial, especially in the long
run?
Promotion/Communication Strategy
Advertising, typically one of the tools to create and preserve brand equity, has for a long time been the main bastion
for NBs (Karray and Martín-Herrán 2009). Beyond shelf displays and features, value PLs rarely advertised their products.
Whereas retailers could only come up with campaigns for broad
ranges, national brands can specialize and communicate about
their products’ specific benefits and features that go well beyond
general value claims. Still, changes in communication media
and technology have yielded new opportunities to retailers for
promoting their smart PL. Although paid-media have been
considered the traditional means of generating awareness and
demand, that model is changing rapidly (Brennan 2017). Traditional advertising media (TV, Print, Radio) now share that
role with so-called non-traditional ad media, such as digital
banners and social media platforms (Namin, Hamilton, and
Rohm 2020). In addition, a combination of different technologies allows retailers to communicate more directly and flexibly
with consumers while they are shopping, both on the brick-andmortar store floor and online. Below, we elaborate on some of
these new options available for retailers to communicate to shop-
Journal of Retailing 97 (1, 2021) 99–115
pers about their smart private brands to a wide audience without
incurring the excessive costs associated with traditional media.
Communication in the brick and mortar environment
Retailers increasingly implement beacon technology to track
customers’ in-store movements and to help them find their way
around the store (Dekimpe, Geyskens, and Gielens 2019). In
combination with smartphone applications, this beacon technology offers retailers unprecedented opportunities to raise
awareness of their smart private brand programs while consumers are walking through the store aisles. Kroger’s app, for
example, simplifies the shopping experience by displaying the
exact aisle location of products, while Target uses beacon technology to dynamically re-sort shopping lists as the user moves
through the store, similar to how smartphone navigation apps reroute drivers when veering off course. Smartphone applications
thus turn into shopping management devices, and the number
of consumer touchpoints multiplies. While transparency and
choice expand for consumers, for the retailer this implies that
traditional levels of shopper brand loyalty can be undermined.
Indeed, smartphone and connected devices create vast amounts
of shopper data, which retailers can leverage to inform consumers in real time about their private brand products and send
personalized and targeted push messages to drive consumers
toward the private label options. At this point in time, little
research has been conducted to guide retailers on how to use
these new real-time communication devices to influence private
brand choice. What type of messages work best? Do price incentives (still) have to be included? Do these messages work better
for NBs or for PLs? In addition, how can these applications be
used without negatively interfering and interrupting consumers
in their shopping experience? Can retailers overstep and ultimately push consumers to opt out of the real-time application or
abandon smart PL alternatives?
In addition to smartphone applications, augmented/mixed
reality (AR/MR) – which integrates physical and virtual experiences – offers potential to showcase and virtually try a wider
range of private brand products in a physical store environment
(Gilliland 2019). Sephora, for example, offers “magic mirrors”
in its stores to help consumers visualize different make-up treatments. In addition, L’Oréal and YouTube offer AR platforms for
trying on cosmetic items without having access to the physical
product. Home interior design activities can also be done virtually through Dulux Visualiser and Ikea Place. In the apparel
world, Asos uses AR to enable consumers to experience a virtual
“catwalk,” VF (owner of Timberland and Vans) uses virtual mannequins to showcase its products, and Gucci and Adidas utilize
AR technology for consumers to virtually try on their branded
shoe products. Use of this technology has even been extended to
the car industry; Toyota offers a fully AR-based “vehicle demo”
and provides an immersive driving experience to anywhere, such
as sports events and festivities. Not only do these technologies
create frictionless experiences (Gilliland 2019), but they also
allow consumers to easily experiment with products they are less
familiar with, once again offering retailers avenues to promote
and “sample” their PL products virtually.
108
K. Gielens et al.
Finally, as retailers are rethinking the store floor in order to
motivate consumers to shop brick and mortar rather than online,
shelf space for stock inventory is trading places for dedicated
experiential space (Kahn 2018). Once again, retailers may tap
into the growing importance of store experiences to showcase
and integrate their private brand program. Walgreens, for example, hosted a “house party” to highlight how its wide assortment
of private brand items can fit into a shopper’s home and everyday life (Loza 2019). Brands such as Nice!, Sleek MakeUp, and
Pet Shoppe were used to demonstrate the quality and breadth of
the portfolio. Typically, these dedicated areas are co-developed
with national brands such as Mars or Apple, who can rely on substantial marketing and merchandising experience to build in an
entertainment and experience factor. The question arises whether
smart PLs can be equally successful in this realm. More research
is required to gain insight into how PLs can use and build experiential elements in the store to generate more awareness and
enhance store brand equity.
Communication in the online environment
Online retailers can track and monitor every move consumers make as they search and navigate through the digital
store (Gerstner 2017), giving them unlimited opportunities to
influence consumers’ choice decisions. In the USA Amazon,
for example, tested a pop-up feature to suggest its PL products
to customers searching on branded product pages. Amazon was
even so aggressive as to force consumers to close the pop-up
feature before they could continue their shopping trip, thereby
surreptitiously guiding them to the PL page. Nevertheless, in
employing this strategy, online retailers walk a tightrope. Not
only do they run the risk of frustrating consumers, they also risk
alienating consumers from their PLs. Moreover, NB manufacturers may interpret these moves as anticompetitive and alert
anti-trust authorities (Soltani 2015), which in the end, may limit
their practices and opportunities to support their private brands.
Voice applications are a natural extension of existing digital
interfaces, playing an ever-increasing role in all future digital
ecosystems and customer engagement. The spread of voice technology can make routine replenishment purchases extremely fast
and convenient. Above all, it allows the retailer to impact the
discovery and search stage of the shopping journey, limiting the
number of easily discoverable items per search term, even to
the extent that voice-supported technology may diminish brand
visibility and virtually turn brands invisible on the digital shelf
(Gielens and Steenkamp 2019). In contrast, retailers can easily
integrate voice capabilities into their ecommerce offerings, in
order to amplify visibility and top placements in search rankings of their private labels across all relevant search terms. For
example, someone who would ask Amazon’s Alexa to buy batteries could very well accept whatever it selects at a given price.
Retailers can try to leverage these voice command devices, and
even install them at specific points in their stores, to guide consumer shopping depending on what search queries consumers
use. For example, in certain product categories such as beauty
products, consumers search more by ingredient (e.g., Retinol)
Journal of Retailing 97 (1, 2021) 99–115
than by brand name (e.g., Olay). Retailers can offer a solution to
this query on their voice device by saying their PL has Retinol.
Social media environment
Going outside the confines of their stores, digital or brick
and mortar, retailers are increasingly supporting their PLs with
messaging on social media platforms like Facebook, Instagram,
and YouTube, often with the help of popular influencers. Albertsons, for example, has enlisted Pinterest to highlight its range
of PL products, thereby leveraging the Pinterest Trends tool
that provides insights in the top US search terms on Pinterest
in the previous 12 months (Newsroom 2019). This arrangement allowed Albertsons to, for example, glean more insight
on holiday food and beverage trends and develop a Pinterest
campaign to spur in-store sales for relevant own brand products.
Trader Joe’s, on the other hand, has more than a dozen professional influencers on Instagram alone, highlighting favorite (PL)
products rolled out by the retailer. Kroger works together with
bloggers, inviting them to corporate events, in an effort to create
a community around Kroger. Once again, not much information
is available about the effectiveness of social media campaigns
in this context. Whereas the Return on Investment (ROI) of
social media is sometimes questioned even in branded goods
settings (Barnhart 2018), even less is known about such media’s
impact on PL sales. What type of platforms are most effective?
Can influencers become reliable private brand ambassadors?
What are the potential dark sides of social media campaigns?
As retailers take a more aggressive approach to innovation in
product development and communication to gain a larger share
of consumers’ wallet, more research is needed to answer these
questions.
Place–Distribution Strategies
Whereas exclusivity was one of the main reasons to pursue
strong PL lines, smart PLs are venturing beyond these traditional limits. First, both traditional and pure play retailers are
actively offering and pushing their private brands online. In addition, retailers are exploring the opportunities to take their PLs to
both the digital and store shelves of other retailers, thereby truly
turning the private label into a brand in its own right. Finally,
with retailers becoming more and more international in nature,
it remains to be seen where they can be successful with this strategy as substantial heterogeneity still exists with regards to global
private label penetration. In sum, the “P” of Place is becoming
a true strategic differentiator for private brands.
Digitizing the store brand
By 2024, ecommerce will account for 30% of global chain
retail sales. E-commerce will add more sales (USD 1.7 Trillion)
to the global economy by 2024, highlighting just how big the
prize is for retailers and brands investing in this channel. From a
private branding perspective, it is paramount to know how PLs
can be built and managed on digital shelves.
Prior research suggests that the digital shelves may not offer
the most nurturing environment for retailers to support their
PL programs. As a matter of fact, online environments may be
109
K. Gielens et al.
more beneficial to stronger (national) brands than to weaker
brands (Ho-Dac, Carson, and Moore 2013), even more so than
in traditional channels (Degeratu, Rangaswamy, and Wu 2000).
In online settings, any touch-and-feel opportunity, which is an
important source of information disappears, especially for PLs
that have not been established. Online consumers only have
access to product descriptions and can view the products but cannot interact with them physically or try them out. The intangible
nature of this search and purchase process forces consumers to
pay more attention to other cues of product performance. Therefore, the role of the brand name and reputation should become
more relevant to compensate for the absence of physical contact
(González-Benito, Martos-Partal, and San Martín 2015) and thus
brand loyalty may be higher (Chu et al. 2010; Danaher, Wilson,
and Davis 2003).
Does this imply that online retailers are limited in building
successful PL programs? Many consumer goods categories contain relatively few search attributes, and thus, physical inspection
does not provide much information. For such products, private brands can make the online selection process simple and
smart, especially when they already trust the retailer (Gielens
and Steenkamp 2019). If consumers already trust the retailer
they are patronizing, they may extend their trust to the retailer’s
own brands (Ailawadi, Pauwels, and Steenkamp 2008). Interestingly, a pure play retailer like Amazon got high marks for
meeting customer expectations, quality, joy, satisfaction, and
trust on the National Most Trustworthy Brand Survey from The
Values Institute (Howland 2017), thereby offering a platform to
launch private brands. In addition, online retailers can exploit
their knowledge, generated by optimizing word-search algorithms, analyzing sales data, and customer-review networks, to
steer shoppers towards their private labels. Furthermore, as consumers may adopt voice technology, the playing field becomes
even more tilted. For instance, if you were to ask Amazon’s Echo
to buy batteries, Echo will suggest (at least at the time of this
writing) Amazon Basic Batteries even though plenty of other
brands are selling on the site.
Interestingly, pure play retailers are expanding private brands
well beyond the typical set of commoditized categories. The
likes of Amazon, for example, are testing the water in luxury, consumer electronics, furniture, and virtually any consumer
goods category imaginable. However, how far can online retailers stretch this strategy? What categories, segments, and benefits
can realistically be conquered while at the same time managing
the credibility of the overall program? Moreover, whereas trust
can be high for the individual retailer, trust in the quality cues
and information provided online may be harder to manage and
control. With serious concerns raised regarding the authenticity
of reviews and the provenance of certain products, generating
trust for PLs may be harder to pull off than hoped for. If private brands are indeed a priority for these online juggernauts,
the assortment clutter of the digital shelf and the heterogeneity in quality offered by third-party suppliers may jeopardize
their long-term success. If private branding really is a priority,
this may require a re-thinking of the entire endless assortment
strategy, which necessitates the inclusion of as many brands and
suppliers as possible, mostly obtained through (independent)
Journal of Retailing 97 (1, 2021) 99–115
third-party providers. Many even question whether Amazon and
others may come to regret building private brands (Marketplace
Pulse 2019). Currently the jury is still out and more research
is warranted on the long-term sustainability of online private
labels.
Taking the private brand to other retailers
Increasingly, retailers are exploring opportunities to sell their
private brand products at other retailers. Often these moves
involve a cross-border component. Walmart Canada, for example, introduced a range of PL products from Coop Italia, covering
diverse categories ranging from pasta, sauces, cheese, wine,
pickles, olive oil, and many others. UK drugstore retailer Boots
has long sold its cosmetics line No. 7 at other retailers including
US-based Target. The general idea behind these types of partnerships is to help the supplying retailer to increase its sales volumes
and scale and hence improve its cost structure. The receiving
retailer, on the other hand, gains an exclusive range and can stand
out from the competition. Interestingly, these arrangements
extend beyond the typical store-based retail sphere. For example,
Swiss retailer Migros’s private brand line, M-Industry, supplies
private labels for Amazon in several categories. Whether or not
these partnerships truly can be Win-Win arrangements remains
to be seen. The risk of information appropriation, especially
when working with juggernauts like Amazon, is substantial.
Given that most retailers, both digital and brick and mortar, are
actively expanding their footprint outside their traditional markets, this strategy may come at the risk of creating strong future
competitors abusing the knowledge acquired through private
branding arrangements.
Taking the private brand global
Within the consumer packaged goods (CPG) market, PL
brands in the USA reached a value share of 14.9% and a unit
share of 17.7% as of 2018 (IRI Special Report 2018). Still, one
can wonder if these numbers truly capture a global market. For
example, shares currently observed in most developing countries hardly exceed the five percent mark. Sethuraman (2018)
calls consumers in these developing markets simply too enamored of brands like Kellogg and Coca-Cola to ever care much
about PLs in the categories in which these brands operate. The
question remains, however, whether this will truly remain the
case as emerging markets mature. Especially as many retail conglomerates such as Amazon and Walmart build and expand their
presence in these markets, private brands may gain ground. More
insights are, therefore, required on what markets are bound to
become private-brand-prone.
Is Smart PL just Another National Brand?
It is true that as private labels are elevated to sophisticated
levels, there is a tendency to believe they are becoming more
like a national brand. To some extent, this is true, but the goals,
opportunities, and challenges faced for a private label by the
retailer managing multiple categories are different from those
faced for a national brand by the manufacturer managing a single
or just a few categories. As a result, there are some common110
K. Gielens et al.
alities and several differences between a national brand and
a sophisticated private label. With respect to commonalities,
our paper suggests that retailers should target niche segments,
engage in product innovation, emphasize attributes beyond price
and quality, enhance brand image, and leverage technology just
as a national brand manager would. In essence they must treat
their PL as a “brand” as opposed to a value alternative for a
NB and must care about its brand equity. However, while the
manufacturer generally applies its brand strategy to one category, it has more resources and more avenues for promoting
its brand including mass advertising, social media campaigns,
couponing, sampling, so forth, that are appropriate and exclusive for the category and brand in question. In contrast, a retailer
will be marketing the private label across multiple categories,
even across retail formats, and across consumer segments but
with limited budget. The retailer’s goal is to maximize store
differentiation, foster store loyalty, and increase category and
overall profits. Therefore, the retailer first has to make a major
decision about whether to umbrella brand or not, and if so,
how it should open the umbrella – across tiers, across segments, or market all private labels under one banner. Once it
decides, then the retailer can resort to specialized marketing
focused on gaining the trust of consumers and developing brand
image – through unique, identifiable packaging across categories, feature advertising and special displays, and sampling
that promotes the PL portfolio rather than a single item. Several
innovative techniques have been described in this paper, with
examples.
At the same time, as PLs increase in sophistication, retailers should decide how they compete with other manufacturers’
brands. Again, the temptation is to replace major brands with
their smart PL. We do not advocate such a strategy. Attempts to
force just the PL on the consumers at the expense of national
brands have not borne fruit for the retailer. For example, Walmart experimented with a reduced assortment structure with only
one leader brand and their own Great Value brand. The company
faced customer resistance and sales loss, and they were forced to
revert to their original assortment composition (Dass and Kumar
2012). Spanish chain Mercadona delisted hundreds of national
brands with a store-brand-only assortment in many categories,
but had to relist some of the delisted national brands to prevent
increased consumer boycotts and damage to their store image
(Gázquez-Abad et al. 2015). In the consumer durable goods
market, the ascent and fall of Sears during the mid to late 20th
century may also be partly blamed on its failed over-emphasis on
its private labels such as Kenmore appliances, Craftsman tools,
and Diehard batteries and trying to market them as any other
NB. At one point, Kenmore was the largest appliance brand in
the USA. But consumers abandoned Sears because there was no
alternative NB to consider (Isidore 2018).
In fact, smart PL strategy calls for sophisticated joint
marketing of NB and PL in the spirit of coopetition (competition + cooperation) to create Win–Win–Win situations for
consumer, retailer, and manufacturer. These strategies include
collaborative product innovation, joint promot…
Purchase answer to see full
attachment

  
error: Content is protected !!