Our objective in this paper is to explain across-retailer variation in
private label performance. Although retailers have lots to gain by be
tter understanding the determinants of successful store brand programs
, this knowledge also is very valuable to manufacturers, Lessons learn
ed from competing with other national brands may not transfer one-to-o
ne to the store brand case because, quite simply, a popular private la
bel program changes the status of the retailer from being solely a cus
tomer to also a competitor. When customers are competitors, standard p
redatory tactics may not be appropriate; instead there is a premium on
creating a successful basis for coexistence. Our findings from this s
tudy are therefore expected to have a broad based appeal both to pract
itioners and academics working in the evolving area of store brands. S
tore brands are the only brand for which the retailer must take on all
responsibility-from development, sourcing, and warehousing to merchan
dising and marketing. Unlike decisions retailers take about national b
rands, which in large measure are driven by the manufacturer's actions
, the retailer plays a more determinant role in the success or failure
of its own label. Based on data from 34 food categories for 106 major
supermarket chains operating in the largest 50 retail markets in the
U.S., we use regression-based analyses to show that variation in store
brand performance across retailers is systematically related to under
lying consumer, retailer, and manufacturer factors. The key insights p
rovided by our analysis are as follows: (1) Overall chain strategy in
terms of commitment to quality, breadth of private label offerings, us
e of own name for private label, a premium brand offering, and number
of stores consistently enhance the retailer's store brand performance
in all categories. Also, the extent to which the retailer serves a cus
tomer base containing less wealthy anti more elderly households and op
erates in less competitive markets improves the performance of the sto
re brand. (2) The everyday low price (EDLP) positioning benefits the s
tore brand but only in lower quality categories where the value positi
oning of the store may be better aligned with the price advantage of t
he store brand. (3) Supporting recent statements in the popular press,
our analysis suggests that retailer promotional support can significa
ntly enhance private label performance. (4) Retailers often use nation
al brands to draw customers to their stores. Retailers who pursue this
traffic building strategy usually carry more national brands, deeper
assortments, and offer better everyday (lower price gap) and promotion
al prices on national brands. Each of these actions works against the
retailer's own brands, highlighting the important balancing act the re
tailer must perform to profitably manage the sales revenue and margin
mix In each of their categories. At the same time, adding a higher qua
lity premium store brand program may mitigate this tradeoff. (5) Unlik
e cross-category studies, our within-category across-retailer analysis
shows that the national brand-private label price differential exerts
an important positive influence on store brand performance. (6) When
retailers obtain more than their fair share of a category (high catego
ry development index), they also do much better with private labels. (
7) From the national brand's perspective, encouraging the retailer to
carry more brands and deeper assortments may be the most effective way
to keep store brands in check. The importance of these variables, how
ever, may depend on the national brand's market position. For example,
a category leader may be glad to see a rise in store brand share if i
t comes at the expense of one of its secondary national brand competit
ors. (8) The exact impact of most of the variables depends on the unde
rlying quality of store brands in a category. When store brand quality
is high, competition at the retail and brand level is more important,
as are variables capturing economies of scale and scope enjoyed by th
e retailer. In contrast, demographics associated with consumer price s
ensitivity and EDLP pricing matter more in low quality categories. (9)
Finally, premium store brands offer the retailer an avenue for respon
ding to the national brand's ability to cater to heterogeneous prefere
nces. This appears more likely in categories where store brands alread
y offer high quality comparable to the national brands. We argue that
private labels threaten national brands most in categories when there
is high variance in share across categories (as opposed to high averag
e share per se). In high variance categories, store brand share could
increase dramatically if the poor performing retailers imitate best pr
aci tices. Future research can extend this work in several ways both o
n the substantive and methodological fronts.