Browse > Article

Retailer's Store Brand Product Line Design and Product Assortment Decision in the Vertically Differentiated Product Category  

Chung, Hwan (중앙대학교 경영경제대학)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.36, no.3, 2011 , pp. 107-120 More about this Journal
Abstract
The increased availability of store brand suppliers now provides retailers with opportunities to create their own lines of vertically differentiated multiple store brands within a product category. As the number of store brands increase, the retailer's shelf space becomes more crowded, which may force the retailer to consider dropping some national brands from its assortment. Despite these trends, the problem of product line design in a vertically differentiated product category has been analyzed mainly from a manufacturer's perspective in the marketing literature and it is not known to what extent the findings of the existing product line design literature provide applicable strategic guidelines for the new problem faced by retailers. In this study, we address this deficiency in the literature and conduct an in-depth study of the retailer's strategic design of a line of store brands and its assortment decision within the context of retail category management. We analyze the retailer's decision about not only how to design a line of store brands but also which national brand to drop from its assortment. The results of our analysis are as follows. First, if the retailer has to drop one of national brands from its assortment, it is the best for the retailer to drop the low-quality national brand rather than the high-quality national brand. Second, the retailer has to position the high-quality store brand relatively close to the high-quality national brand, remained on its shelf, in terms of quality so as to maximize the size of retail margin from the national brand. On the other hand, the retailer should set the quality of the low-quality store brand at a lower level than that of the low-quality national brand to increase the total category demand by attracting more price sensitive consumers. By doing so, the retailer can also minimize cannibalization between two store brands. Lastly, our analysis shows that the introduction of a line of store brands improves consumer welfare by increasing real values of all products on the shelf.
Keywords
Game Theory; Store Brand; Distribution Channels; Product Line Design; Product Assortment;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Yoo, W.S. and E. Lee, "Internet Channel Entry : A Strategic Analysis of Mixed Channel Structures," Marketing Science, Vol.30, No.1(2011), pp.29-41.   DOI   ScienceOn
2 Moorthy, K.S., "Product and Price Competition in a Duopoly," Marketing Science, Vol.7, No.2(1988), pp.141-168.   DOI   ScienceOn
3 Netessine, S. and T.A. Taylor, "Product Line Design and Production Technology," Marketing Science, Vol.26, No.1(2007), pp.101-117.   DOI   ScienceOn
4 Passariello, C., "Carrefour puts stores on diet- French retailer cuts food choices in effort to make hypermarkets more appealing to shoppers," Wall Street Journal, (Jun., 2010), p.18.
5 Raju, J.S., R. Sethuraman, and S.K. Dhar, "The Introduction and Performance of Store Brands," Management Science, Vol.41, No.6 (1995), pp.957-978.   DOI   ScienceOn
6 Raut, S., S. Swami, E. Lee, and C. Weinberg, "How Complex Do Movie Channel Contracts Need to Be?," Marketing Science, Vol.27, No.4(2008), pp.627-647.   DOI   ScienceOn
7 Retail, W., "Kmart to expand own-brand portforlio with the introduction of new range," London, Oct., 2010.
8 Sayman, S., S.J. Hoch, and J.S. Raju, "Positioning of Store Brands," Marketing Science, Vol.21, No.4(2002), pp.378-397.   DOI   ScienceOn
9 Du, R., E. Lee, and R. Staelin, "Bridge, Focus, Attack, or Stimulate : Retail Category Management Strategies with a Store Brand," Quantitative Marketing and Economics, Vol.3, No.4 (2005), pp.393-418.   DOI   ScienceOn
10 김미자, "국내 유통업체의 프라이빗 브랜드(PB) 현황 및 브랜드 전략", 브랜드디자인학연구, 제7권, 제2호(2009), pp.26-34.
11 정환, "소매상의 스토어 브랜드 품질결정에 관한 연구", 마케팅 연구, 제26권, 제2호(2011), pp.45-65.
12 Lehmann-Grube, U., "Strategic Choice of Quality When Quality Is Costly : The Persistence of the High-Quality Advantage," The Rand Journal of Economics, Vol.28, No.2(1997), pp. 372-384.   DOI   ScienceOn
13 Sayman, S. and J.S. Raju, "How Category Characteristics Affect the Number of Store Brands Offered by the Retailer : A Model and Empirical Analysis," Journal of Retailing, Vol.80, No.4(2004), pp.279-287.   DOI   ScienceOn
14 Slade, M.E., "Product Rivalry and Multiple Strategic Weapons : An Analysis of Price and Advertising Competition," Journal of Economics and Management Strategy, Vol.4, No.3 (1995), pp.445-476.   DOI
15 Huffman, C. and B.E. Kahn, "Variety for Sale : Mass Customization or Mass Confusion," Journal of Retailing, Vol.74, No.4(1998), pp.491-513.   DOI   ScienceOn
16 Iyengar, S.S. and M.R. Lepper, "When choice is demotivating : Can one desire too much of a good thing?," Journal of Personality and Social Psychology, Vol.79, No.6(2000), pp.995- 1006.   DOI
17 Lee, E. and R. Staelin, "Vertical Strategic Interaction : Implications for Channel Pricing Strategy," Marketing Science, Vol.16, No.3 (1997), pp.185-207.   DOI   ScienceOn
18 McGuire, T.W. and R. Staelin, "An Industry Equilibrium Analysis of Downstream Vertical Integration," Marketing Science, Vol.2, No.2(1983), pp.161-191.   DOI   ScienceOn
19 Gajanan, S., S. Basuroy, and S. Beldona, "Category management, product assortment, and consumer welfare," Marketing Letters, Vol.18, No.3(2007), pp.135-148.   DOI   ScienceOn
20 Moorthy, K.S., "Market Segmentation, Self- Selection, and Product Line Design," Marketing Science, Vol.3, No.4(1984), pp.288-307.   DOI   ScienceOn
21 Geyskens, I., K. Gielens, and E. Gijsbrechts, "Proliferating Private-Label Portfolios : How Introducing Economy and Premium Private Labels Influences Brand Choice," Journal of Marketing Research, Vol.47, No.5(2010), pp. 791-807.   DOI   ScienceOn
22 Halstead, D. and C.B. Ward, "Assessing the Vulnerability of Private Label Brands," Journal of Product and Brand Management, Vol.4, No.3(1995), pp.38-49.   DOI   ScienceOn
23 Villas-Boas, J.M., "Product Line Design for a Distribution Channel," Marketing Science, Vol.17, No.2(1998), pp.156-169.   DOI   ScienceOn
24 Sudhir, K., "Structural Analysis of Manufacturer Pricing in the Presence of a Strategic Retailer," Marketing Science, Vol.20, No.3 (2001), pp.244-264.   DOI   ScienceOn
25 Tirole, J., The Theory of Industrial Organization, MIT Press, Cambridge, MA, 1988.
26 Vilcassim, N., V. Kadiyali, and P. Chintagunta, "Investigating Dynamic Multifirm Market Interactions in Price and Advertising : A Conjectural Variations Approach," Management Science, Vol.45, No.10(1999), pp.499-518.   DOI
27 Walters, R. and S. MacKenzie, "A Structural Equations Analysis of the Impact of Price Promotions on Store Performance," Journal of Marketing Research, Vol.25, No.1(1988), pp.51-63.   DOI   ScienceOn
28 Desai, P., "Quality Segmentation in Spatial Markets : When Does Cannibalization Affect Product Line Design?," Marketing Science, Vol.20, No.3(2001), pp.265-283.   DOI   ScienceOn
29 Choi, S.C. and A.T. Coughlan, "Private Label Positioning : Quality versus Feature Differentiation from the National Brand," Journal of Retailing, Vol.82, No.2(2006), pp.79-93.   DOI   ScienceOn
30 Chung, H. and E. Lee, "Store Brand Quality and Retailer's Product Line Design," Working paper, Chung-Ang University, 2010.
31 Choi, S.C., "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, Vol.10, No.4(1991), pp.271-296.   DOI   ScienceOn
32 Besanko, D., S. Gupta, and D. Jain, "Logit Demand Estimation under Competitive Pricing Behavior : An Equilibrium Framework," Management Science, Vol.44, No.1(1998), pp. 1533-1547.   DOI   ScienceOn