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Store brands and retail grocery competition

Store brands and retail grocery competition Grocery retailers rank store brands as the most important factor that differentiates them from their competitors. Retailer competition should have a stronger impact on the more substitutable national brands than the more differentiated store brands. However, the literature has not studied the impacts empirically. In this paper, I quantify the different impacts of retailer competition on national brands and store brands using the scanner data of a U.S. chain retailer. I estimate a structural demand and supply model that incorporates the differentiation effect and retailer competition. The results show that national brand consumers are more likely to switch stores than store brands consumers. By analyzing two counterfactual cases, I find that 1) if the retailer did not sell store brands, its profit would decrease, and the loss would be greater in markets with more competitors; and 2) if the retailer competition had increased, then the national brands' retail prices would decrease more than the store brands' prices. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economics & Management Strategy Wiley

Store brands and retail grocery competition

Luo, Rong
Journal of Economics & Management Strategy , Volume 27 (4) – Oct 1, 2018
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References (41)

Publisher
Wiley
Copyright
© 2018 Wiley Periodicals, Inc.
ISSN
1058-6407
eISSN
1530-9134
DOI
10.1111/jems.12254
Publisher site
See Article on Publisher Site

Abstract

Grocery retailers rank store brands as the most important factor that differentiates them from their competitors. Retailer competition should have a stronger impact on the more substitutable national brands than the more differentiated store brands. However, the literature has not studied the impacts empirically. In this paper, I quantify the different impacts of retailer competition on national brands and store brands using the scanner data of a U.S. chain retailer. I estimate a structural demand and supply model that incorporates the differentiation effect and retailer competition. The results show that national brand consumers are more likely to switch stores than store brands consumers. By analyzing two counterfactual cases, I find that 1) if the retailer did not sell store brands, its profit would decrease, and the loss would be greater in markets with more competitors; and 2) if the retailer competition had increased, then the national brands' retail prices would decrease more than the store brands' prices.

Journal

Journal of Economics & Management Strategy – Wiley

Published: Oct 1, 2018

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